ITO Vs Deepak Baburao Vispute (ITAT Pune)
Excess Stock in Survey = Business Income, Not 115BBE Hit – ITAT Pune Draws Clear Line
Pune ITAT held that excess stock found during survey u/s 133A, when linked to regular business, must be taxed as business income and not as unexplained investment u/s 69B r.w.s. 115BBE.
During survey, excess stock of ₹4.42 crore (gold/silver/diamond) was detected and admitted by the assessee. The AO treated it as unexplained investment and taxed it under section 115BBE, alleging lack of proper source explanation. However, the assessee had already recorded the same in books as additional business income (through sales) and offered it to tax at normal rates.
The CIT(A) deleted the addition, relying on multiple judicial precedents, holding that where excess stock arises from the same business and no other source exists, it constitutes business income. The Tribunal upheld this view, noting that the assessee was engaged solely in jewellery business and the excess stock had direct nexus with such business activity. Hence, provisions of section 69B and 115BBE were held inapplicable.
However, on other issues, the ITAT reversed relief granted by CIT(A) and restored AO’s disallowances on sales promotion, meal, and vehicle expenses due to lack of proper evidence and duplication of claims.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
