Case Law Details
Ethiraj Hotel Mart Vs DCIT (ITAT Chennai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Chennai recently ruled on the case of Ethiraj Hotel Mart Vs DCIT, challenging the addition of unexplained investment in stock valuation difference. The appellant, engaged in wholesale trading, contested the Commissioner of Income Tax (Appeals)’s decision to treat excess stock as unexplained investment under section 69B of the Income Tax Act. The ITAT’s order, dated December 29, 2023, provides insights into the assessment and the legal aspects involved.
Detailed Analysis: The ITAT order outlines the background of the case, highlighting a survey conducted on the assessee’s business premises in February 2019. The assessing officer (AO) found excess stock valued at Rs.1,04,00,600 during the survey, leading to the addition of the same under section 69B of the Act. The appellant argued that the excess stock was offered as ‘business income’ and shouldn’t be treated as unexplained investment.
The Commissioner of Income Tax (Appeals) upheld the AO’s decision, relying on the Madras High Court’s precedent in the case of M/s. SVS Oils Mills. The ITAT, however, considered the appellant’s contentions and scrutinized the facts. It noted the nature of the business, the discrepancy in stock valuation, and the appellant’s explanation that the excess stock was part of regular business income.
The ITAT observed that the AO had not provided sufficient evidence to refute the appellant’s claim that the source of excess stock was from the business income. The order referred to a similar case involving Overseas Leather, where the ITAT ruled in favor of the assessee, emphasizing that excess stock found during a survey should be assessed as ‘business income’ and not as ‘unexplained investment.’
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
