ACIT Vs Italian Edibles Pvt. Ltd. (ITAT Indore)
Income Tax Appellate Tribunal (ITAT), Indore Bench, has delivered a ruling affirming that additional income declared by an assessee on account of excess stock found during a survey, if linked to the assessee’s regular business activities, should be treated as business income and taxed at normal rates, rather than as undisclosed investment attracting the higher tax rates under Section 115BBE of the Income Tax Act, 1961.
The case involved Italian Edibles Pvt. Ltd., a manufacturer of confectionery items. During a survey conducted under Section 133A of the Act, the company’s director declared an additional income of Rs. 1,20,49,234/- on account of excess stock. Subsequently, the Assessing Officer (AO) invoked Section 115BBE, applying a higher tax rate, contending that the excess stock represented “undisclosed income” or “unexplained investment” falling under Section 69B of the Act. The AO argued that the director’s statement suggested undisclosed sources and that the stock was only recorded in books post-survey without proper source explanation.
CIT(A)’s Initial Decision and Revenue’s Appeal
The assessee challenged the AO’s action before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) ruled in favor of Italian Edibles Pvt. Ltd., holding that the income offered from excess stock was indeed business income and therefore not subject to the provisions of Section 115BBE. Aggrieved by this decision, the Revenue filed an appeal before the ITAT.
