Tahoora Proteins Vs ITO (ITAT Ahmedabad)
Excess Stock Found in Survey Is Business Income—115BBE Not Applicable for AY 2015-16- Survey Disclosure Can’t Be Branded u/s 69: Set-off of Losses Allowed by ITAT
The Ahmedabad “D” Bench of the ITAT, in Tahoora Proteins vs ITO (ITA No. 1613/Ahd/2025, AY 2015-16), held that excess stock of trading goods found during survey u/s 133A constitutes business income and not unexplained investment u/s 69, and therefore tax u/s 115BBE was wrongly invoked.
During survey on 02.03.2015, excess stock of Tuver Dal and packing material valued at about ₹1.20 crore was found. The partner admitted additional income of ₹1.25 crore, which the Assessee duly credited as “Miscellaneous Income” in the P&L account and offered as business income, claiming set-off of brought-forward business loss and depreciation. The AO, however, treated the amount as unexplained investment u/s 69 and taxed it u/s 115BBE, also denying set-off. The CIT(A) confirmed the action.
The Tribunal noted that the excess stock was part and parcel of the Assessee’s trading activity, had no independent physical identity outside business, and there was no material suggesting any source other than business. Relying on the Gujarat High Court in Shilpa Dyeing & Printing Mills Ltd. and co-ordinate bench rulings, the ITAT held that income disclosed in survey must fall under one of the heads of income u/s 14 and cannot be taxed separately as deemed income. Consequently, sections 71 & 72 permit set-off of current year and brought-forward losses against such income.
The Tribunal further held that section 115BBE was not applicable for AY 2015-16 in the facts of the case. Accordingly, the ITAT directed the AO to treat the survey disclosure as business income, allow set-off of losses and depreciation, and delete tax levied u/s 115BBE. The appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
