S.G. & Co. Vs ACIT (ITAT Pune)
Excess Stock or Cash found in survey – Both Flow from Business: Tribunal Says Normal Tax Rate Applies -Not u/s 69A/115BBE
Assessee, a partnership firm engaged in retail & wholesale trading of paints & hardware, faced a survey u/s 133A on 10.08.2017. During survey, excess stock of ₹51,15,217/- & excess cash of ₹8,75,600/- were found & admitted. In assessment u/s 143(3), AO treated excess stock as business income but considered the excess cash as unexplained money u/s 69A, subject to tax at special rate u/s 115BBE. However, due to an error, cash was initially taxed at normal rates. AO later rectified this through proceedings u/s 154, taxing it u/s 115BBE.
CIT(A) upheld this action. Before the tribunal, Assessee argued that since both excess stock & excess cash were part of the same business operations, cash should also be treated as business income. Reliance was placed on coordinate bench rulings, including ITO vs. Nishatbegum Syed Baba Rasool Patel (ITA No.1351/PUN/2024, order dated 22.05.2025), which had held that excess stock & cash found during survey should be assessed as business income rather than unexplained investment/expenditure.
Tribunal observed that Revenue had not shown assessee engaged in any activity other than paint & hardware trading. Since excess cash was duly recorded in the final books of account along with excess stock, it was a business-related item. Respectfully following earlier coordinate bench & High Court decisions (including Bajargan Traders), ITAT held that the excess cash too must be taxed as business income at normal rates & not u/s 69A r.w.s. 115BBE.
