Case Law Details
Bunty Kumar Vs ACIT (ITAT Amritsar)
ITAT Amritsar held that excess stock found during the survey only be treated as income under the head business income and not as deemed income under section 69B of the Income Tax Act.
Facts- The present appeal is filed by the assessee against the order of the CIT(A) for Assessment Year: 2018-2019 challenging therein confirmation of the treatment of income amount to Rs.18,85,319/- out of total surrendered income of Rs. 40 lacs on account of excess stock as unexplained stock u/s 69B and invoking the provisions of section 115BBE of the Income Tax Act, 1961.
Conclusion- Held that since, the excess stock found during the survey primarily pertains to the business carried out by the assessee, and secondly surrendered as business income during survey as accepted by the AO and hence, the excess stock would only be treated as income under the head business income and not as deemed income. In our view, the ld. CIT(A) was wrong in confirming the action of the AO regarding the applicability of the provisions of section 115BBE in case of the excess stock which was not separate or part of another lot of stock. Accordingly, the value of article/stock of the impugned investment was being fully disclosed in the books of account, being regularized by way of surrender of business income as accepted by the AO, would certainly not fall in the mischief of section 69B of the Act.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The captioned appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 02.06.2023 for Assessment Year: 2018-2019 challenging therein confirmation of the treatment of income amount to Rs.18,85,319/- out of total surrendered income of Rs. 40 lacs on account of excess stock as unexplained stock u/s 69B and invoking the provisions of section 115BBE of the Income Tax Act, 1961.
2. At the outset, the ld. counsel for the assessee submitted that the ld. CIT(A) has confirmed the addition ignoring the fact that the assessee has earned business income as per the undisclosed income during survey from sale/purchase of goods and material from regular business activities and that the AO has not been able to prove that the assessee was found involved in activities other than the business activities. The ld. AR argued that during scrutiny assessment proceedings, the AO has accepted the business income declared by the appellant in return of income on account of excess stock during survey proceedings but tax the same u/s 69B, however, the tax same at higher rate u/s 115BBE.
3. In appeal, the ld. CIT(A) has restricted the addition made on account of excess stock found during the course of survey of at Rs.18,85,319/- as against Rs. 40 lacs, surrendered by the assessee. However, ld. CIT(A) has taxed the addition confirmed u/s 69B r.w.s. 115BBE.
4. The ld. counsel for the appellant assessee argued that the excess stock found during the survey was nothing but income earned out of business carried by the assessee which was not declared in the books of account. Since, there was an excess of stock found during the survey pertaining to the business carried out by the assessee, and thus, the excess stock being surrendered would only be treated as income under the head business income and not as deemed income. The counsel has submitted that ld. CIT(A) was wrong in confirming the action of the AO regarding the applicability of the provisions of section 115BBE in case of the excess stock which is not separate and is part of another lot of stock. The ld. CIT(A) thus, erred in not appreciating the fact that the value of article in the light of the fact that impugned investment was fully disclosed in the books of account would not fall in the mischief of section 69B of the Act. In support, he placed reliance in the latest judgment delivered by Hon’ble Supreme Court in the case of M/s D. N. Singh v. CIT, Central, Patna and Another 150 taxmann.com 301 (SC) where it was held vide para 12 is as under:
“12. That the excess stock found during the survey is part of the total stock and entire lot of stock of the assessee, part of which is recorded in the books of account and part of the same was not found recorded and therefore, treated as excess stock at the time of survey and consequently surrendered by the assessee and also offered to tax in the return of income then the excess stock cannot be as investment in specified asset or the assessee is owner of any bullion, jewellery or other valuable articles as per the provisions of section 69B of the Act. An identical issue has been considered and decided by Hon’ble High Court as well as this Tribunal in series of cases some of these are reproduced above. Accordingly in the facts of the case the excess stock would not fall in the mischief of section 69B of the Act. The question also arises whether the excess stock found during the search which is not separate from the entire lot of stock of the assessee can be treated as other valuable articles though certainly not in the nature of bullion and jewellery. This question has been considered by the Hon’ble Supreme Court in the latest judgment in case of M/s D.N. Singh vs. CIT, Central, Patna and Another 150 taxmann.com 301 (SC).”
5. The AR also rely on the Hon’ble ITAT Indore Bench in the case of M/s Supremo India Pvt. Ltd. v. ACIT, Central -3, Indore in ITA No. 29/Ind/2023 dated 07.06.2023 [2023] (7) TMI 733- ITAT Indore where it was held as under:
“Whether the excess stock found during the search which is not separate from the entire lot of stock of the assessee can be treated as other valuable articles though certainly not in the nature of bullion and jewellery? -The Hon’ble Apex Court in M/s D.N. Singh [2023 (5) TMI 746 – SUPREME COURT has analyzed the provision of section 69, 69A & 69B and particularly the term other valuable articles as employed in the provision of section 69B – In the light of the Doctrine of ejusdem generis & noscitur a sociis it is held that other valuable articles as provided in section 69A & 69B of the Act must be read ejusdem generis and statutory interpretation would be that a generic word receives a limited interpretation by reason of its context and take its meaning from the specific term used in the provision.
Therefore, the term other valuable articles would draw the meaning from the specific terms used in the provision of section 69B which is bullion and jewellery. Hence the other valuable articles shall be in the nature of the valuable article like bullion and jewellery and therefore, it must be a substitute of money like bullion and jewellery which has the liquidity and negotiability like money/currency.
Therefore the excess stock found during the course of search which is not separable from the whole lot of stock of the assessee generated as a result of business activity of the assessee company and the same cannot be brought into mischief of provision of section 69B of the Act – Appeal of assessee is allowed.”
6. Per contra, the ld. DR relied on the impugned order. However, he failed to controvert the contention raised by the appellant.
7. Heard the rival contention, perused the material on record, the impugned order and case laws cited before us. Admittedly, the CIT appeal has restricted the addition made on account of excess stock found during survey of at Rs.18,85,319/- as against Rs. 40 lacs, surrendered by the assessee but taxed u/s 69B r.w.s. 115BBE of the Act. The ld. counsel contended that the excess stock found during the survey was business income out of business carried out by the assessee but not declared in the books of account. Since, the excess stock found during the survey primarily pertains to the business carried out by the assessee, and secondly surrendered as business income during survey as accepted by the AO and hence, the excess stock would only be treated as income under the head business income and not as deemed income. In our view, the ld. CIT(A) was wrong in confirming the action of the AO regarding the applicability of the provisions of section 115BBE in case of the excess stock which was not separate or part of another lot of stock. Accordingly, the value of article/stock of the impugned investment was being fully disclosed in the books of account, being regularized by way of surrender of business income as accepted by the AO, would certainly not fall in the mischief of section 69B of the Act.
8. Respectfully following Hon’ble Apex Court judgment in the case of M/s D. N. Singh v. CIT, Central (Supra) we hold that in the given facts of the present case, the excess stock would not fall in the mischief of section 69B of the Act. Accordingly, the impugned order of ld. CIT(A) is held to be infirm and perverse and as such, the addition is deleted.
9. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 12.09.2023
Author Bio
