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TMI Blog2024 (9) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to tax at normal rates. As such the appeal of the assessee is allowed. - Dr. M. L. Meena, Accountant Member And Sh. Udayan Das Gupta, Judicial Member For the Appellant : Sh.Tarun Bansal, Adv For the Respondent : Smt. Priyanka Patel, Sr. DR ORDER PER: UDAYAN DAS GUPTA, JM This appeal is preferred by the assessee against the order of the Ld. CIT (A) -5, Ludhiana, dated 27/03/2024, passed u/s 250(6) of the Act 61, which has arisen out of the order of the ACIT, Central Circle, Amritsar, passed u/s 143(3) of the Act 61 dated 17/09/2021. 2. The grounds of appeal taken by the assessee are as follows: 1. That revenue wrongly applied sec. 69 and taxed excess stock found during survey = Rs. 55 lacs u/s 115BBE, in the shop only without bringing any evidence on record for applying the said section. 2. That the revenue wrongly ignored all the documents available on record including survey and applied section 69 and 115BBE. 3. That excess business stock found during survey cannot be taxed u/s 115BBE vis-a-vis section 69 cannot be applied on that. 3. All the three grounds relates to one single issue, in the matter of excess stock being found during survey at the business premises of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that some of the cosmetics are old stocks which are not fast moving and are no more considered as attractive items and the same has also been valued at current rates by the survey team and the assessee accepted the said valuation without any dispute to buy peace of mind. 7.1 Subsequently, the case was under scrutiny before central circle, Amritsar, and in proceedings u/s 143(3) of the Act 61, all books of accounts, including cash book and ledger, has been furnished before the AO, supported by all bills invoices and vouchers and no defect has been found and there are no adverse findings, as such. 7.2 In specific reply to queries regarding applicability of provisions of section 115BBE of the Act 61, it has been clarified by the assessee that, the physical stocks found at the shop premises has been counted and inventorised and the nature and description of the stock is classified as Cosmetics which includes cosmetics and allied products, and it is the same goods which are traded by the assessee in usual course of business activity. The assessee is doing the same business since more than last 30 years, and the old stocks are also brought forward from earlier years, and business p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) As per para 10 of the Tax Audit Report, the nature of the business of the appellant is Sector Wholesale and Retail Trade Subsector: Retail sale of other products Code 09028 Thus the exact nature of business activity was not mentioned. When the appellant has not mentioned exact nature of the business activity, then the legal obligation is cast upon the appellant to prove that the excess stock found is part of the regular business activity. The appellant has failed to do so. (ii) As per para 10 of the Tax Audit Report, books maintained were Ledger, Cash book and Day Book'. This indicates that no stock register was maintained. (iii) As per appellant s own submission also, it has not been maintaining any stock register. Therefore, in absence of stock register, the appellant has not given any other data to identify as to what exactly were the items which were forming part of disclosed business activity. It is an undisputed fact that there were discrepancies in the stock physically found and stock as per books of account. However, the appellant has not been able to bring anything on record to prove that the difference is due to stock belonging to the same business. (iv) Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case, and it is very difficult to identify as to what were the items that formed part of the business stock. 11.1 He further submitted that apart from cosmetics various types of oil were also found in the business premises and the same has been listed as part of the stock in the inventory. 11.2 As such, he prayed that in this case, the provisions of section 69 is applicable and tax rate should be calculated as per provisions of section 115BBE of the Act. 12. We have heard the arguments of both the parties, and considered the materials available on record and the synopsis filed by the assessee. During the course of survey, a statement of the partner was recorded by the survey team regarding the business carried out by the firm, and question was asked related to discrepancy of stock: Q. No. 11: Have you maintained books of account and where are the books of account lying and whether the books of account have been written upto date? Ans: I have maintained cash book, ledger, day book, and these are lying in the office of the auditor and the books of account has been written upto 31.01.2019. Q. No. 14: There is discrepancies in this stock found amounting to Rs. 55 lacs during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there has been no physical distinction between the accounted stock and unaccounted stock and no such physical distinction has been found by the revenue. 13. Regarding the issues raised by the ld. CIT(A) in the matter of the nature of business stated in audit report, it is concluded that the survey team has actually visited the place and has conducted physical verification and taken the physical stock of goods which are all cosmetics and allied products including hair oil. The stock that existed inside the business premises of the assessee has been physically counted and inventorised by the survey team and they are stocks of cosmetics and allied product only and nothing else has been found. 13.1 As stated above, no undisclosed asset other than cosmetics has been found and what is not declared to the department are receipts from the business and not any investment and cannot be correlated with any specific asset. 13.2 At this stage, we would like to rely on the judgment of the Coordinate Bench of ITAT Chandigarh in the case of A.P. Knit Fab ITA 732/Chd/2022 order dated 15.02.2024 and also on the decision of the Hon ble Rajasthan High Court in the case of PCIT vs. Bajargan Traders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon ble Gujarat High Court in the case of Fakir Mohd. Jajihasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT(A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found. 2.10. We have heard the rival contentions and perused the material availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head business income and not under the head income from other sources . In the result, ground No. 1 of the assessee is allowed. 14. Similarly, on an identical issue, the view expressed by the Coordinate Chandigarh Bench in case of M/s A.P. Knit Fab Vs. DCIT in ITA No. 732./Chd/2022, dated 15.02.2024 are as follows; relevant portion is reproduced below: 8.12. In the instant case as well, there is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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