Case Law Details
A P Knit Fab Vs DCIT (ITAT Chandigarh)
ITAT Chandigarh held that excess stock found during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Income Tax Act as the same is undeclared business income and not unexplained investment.
Facts- The assessee was engaged in the business of manufacturing and selling of Knitted Cloths, hosiery garments and dyed yarn under the name and style of M/s A.P. Knit Fab, Ludhiana. A survey action under Section 133A was carried out at the business premises of the assessee. AO observed that during the course of survey, physical stock valued at Rs. 3,34,55,282/- was found and as per Trial Balance as on the date of survey, the assessee has shown stock in its books of account at Rs. 2,34,31,000/- and therefore there was excess stock of Rs. 1,00,24,282/- which the assessee has surrendered as business income in its P&L Account.
As per the AO, the unexplained investment in excess stock falls under the provisions of Section 69B and accordingly such investment in excess stock of Rs 1,00,24,282/- was considered as unexplained investment of the assessee firm u/s 69B of the Income Tax Act. CIT(A) confirmed the action of AO. Being aggrieved, the present appeal is filed.
Conclusion- Held that the difference in stock so found out by the authorities has no independent identity and is 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 difference should thus be treated as undeclared business income.
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