Case Law Details
DCIT Vs Shri Krishna Kumar Verma (ITAT Indore)
Sections 68,69,69A,69B,69C and 69D may be called as Section 68 & 69 Family. However, they differ in as far as Burden of Proof is concerned. In sec 68, the onus is wholly upon the Assessee to explain the source of the entry. But in cases falling under sec 69, 69A, 69B and 69C, the words used show that before any of these sections are invoked, the condition precedent as to existence of investment, expenditure, etc. must be conclusively established by material on record/ evidence.
Section 101 of The Indian Evidence Act, 1872 specifies that Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.
In Mad HC in N Swamy 241 ITR 363 relied by Chennai ITAT in Omega Estates and Chd ITAT in Dr. R.L.Narang, it was held that The burden of showing that the assessee had undisclosed income is on the revenue.
In ITO vs. Mrs. Deepali Sehgal (ITAT Delhi), ITA No. 5660/Del/2012, the AO noted that assessee had withdrawn huge cash from bank account and the same amount had been deposited to the same account after lapse of substantial time. The AO rejected the explanation and held that the assessee hadcash deposit of Rs.24,38,000/- as unexplained money and the assessee found to be the owner of the money as he had not offered any acceptable and cogent explanation. AO, in his remand report could not bring out any fact that the cash withdrawn from Saving Bank Account and partnership overdraft account was used for other purpose anywhere else then, merely because there was a time gap between withdrawal of cash and its further deposit to the bank account, the amount cannot be treated as income from undisclosed sources u/s 69 of the Act in the hands of the assessee. Hence, the addition made by AO without any legal and justified reason was rightly deleted by the CIT (A).
The provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68,69,69A, 69B, 69C & 69D i.e. from residuary category w.e.f. 01/04/2017.
Where the assessee includes surrendered amount of excess stock and excess cash in the return of income filed in response to notice u/s 153A of the Act and it was accepted, no further addition u/s 69A or 69B of the Act can be made against the assessee.
In the case of ACIT vs. Shri Anoop Neema, reported as 2022 (1) TMI 683-ITAT Indore, the alleged excess stock was admitted as a part of the total business stock found at the assessee’s business premises. It was considered as sufficient to indicate that the alleged investment in excess stock is part of the business income and that allege excess stock accepted by the assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during the search proceedings and, thus, the same cannot be treated as income from undisclosed source of income and the Ld. CIT(A) was right in holding that the provisions of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing found during the course of search.
Where the assessee has successfully explained that the excess stock & excess cash was nothing but business income of assessee and The CIT(DR) could not dislodge the contention and observations that the surrendered amount was pertaining to excess stock & excess cash which was business income of the assessee, the impugned income will not be entangled in the clutches of Section 69/69A/69B of the Act and therefore do not warrant application of Section 115BBE of the Act at all. The same was held in the case of DCIT(CENTRAL)-2 INDORE Vs SHRI KRISHNA KUMAR VERMA [2023-VIL-283-ITAT-IND]
FULL TEXT OF THE ORDER OF ITAT INDORE
This appeal has been filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-3, Bhopal [“Ld. CIT(A)”, for short], dated 31/01/2020 for Assessment Year 2017-18.
2. The sole ground raised by the Revenue which read as follows:
” On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in law in allowing the assessee’s appeal on the chargeability of tax as per normal rates instead of the amended provisions of section 115BBE of the Act applicable w.e.f.1.04.2017 relevant to AY 2017-18 which are clearly attracted in the case of the assessee, in respect of the surrendered income of Rs.4,53,43,587/- determined u/s 69B of the Act which was offered for taxation in the return of income filed for the A.Y.2017-18.
3. The Ld. Senior Departmental Representative (“Sr. DR” for short) supporting the action of the Assessing Officer (“AO” for short) on the issue of chargeability of tax u/s 115BBE of the Income Tax Act, 1961 (for short ‘the Act’) submitted that the Ld. CIT(A) in the facts and circumstances of the case, was not justified in law allowing the assessee’s appeal on the chargeability of tax as per normal rates instead of the amended provisions of section 115BBE of the Act, which is applicable from 01/04/2017 relevant to A.Y. 2017-18. The Ld.Sr. DR for the Revenue submitted that the said provisions is clearly attracted to the present case of the assessee in respect of the surrendered income determined u/s 69B of the Act which was offered for taxation in the return of income filed by the assessee for A.Y. 2017- 18.
3.1 Further drew our attention towards relevant part of the assessment order. The Ld. Sr. DR submitted that the income surrendered by the assessee that during the course of search action in reply to question No.16 to 17 by the statement of the assessee recorded on 29/09/2016, the assessee himself admitted the facts that the excess stock and excess cash found pertains to Adat/dalali business of bullion, gems & property, which was recorded in the books of account. Therefore, the AO was right in calculating the chargeability of taxas per amended provisions of section 115BBE of the Act. He further submitted that the total amount surrendered on account of excess cash and excess stock was treated by the AO as unexplained money u/s 69A of the Act and unaccounted investment u/s 69B of the Act respectively and was rightly taxed u/s 115BBE of the Act. The Ld. Sr. DR placed vehemently reliance on the judgment of Hon’ble Punjab & Haryana High Court in the case of Kim Pharma (P.) Ltd. vs. Commissioner of Income Tax reported as [2013] 35 taxamann.com 456 (P&H)submitted that where the amount surrendered during the survey was not reflected in books of account and no source from where it was derived was declared by assessee, it was assessable as deemed income of assessee under section 69A and not business income of the assessee u/s 69A of the Act and not as business income. The Ld. Sr. DR finally submitted that in the facts and circumstances of the case the Ld. First Appellate Authority has granted relief to the assessee without justifying any reason and basis, therefore, the impugned first appellate order may kindly be set aside by restoring the order of the AO.
4. Reply to the above, the Ld. Assesees Representative (“AR” for short) drew our attention towards assessment order and submitted that the assessee including surrendered amount of excess stock and excess cash in the return of income filed in response to notice u/s 153A of the Act and the Assessing Officer has accepted the return income shown in the return filed u/s 139 (1) of the Act as assessed income of the assessee. He further explained that no further addition u/s 69A or 69B of the Act has been made against the assessee in the assessment order.
4.1 Further drawing our attention towards relevant operative part of the first appellate order. The Ld. AR submitted that the assessee has been trading in the business of Jewellery and the excess stock found during the course of search and survey was accumulated from transaction of metal of bullion carried out in the forward commodity trading and mediation. He further submitted that the surrendered amount was pertaining to excess stock and excess cash which was business income of the assessee and the additional income offered was nothing but business income of the appellant and therefore, liable to be taxed under the head of income from business and profession only and the AO without making any addition u/s 69A or 69B of the Act accepted the surrendered amount as income from business and profession. He vehemently pointed out that the AO has not bring on record any other evidence suggesting that the additional income was not earned by the declared business activity of the appellant. He also pointed out that the provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68,69,69A, 69B, 69C & 69D i.e. from residuary category w.e.f. 01/04/2017. He further explaining that in the present case the additional income was offered during search and survey operation carried out on 28/09/2016 and the same has been taken into consideration while filing regular return of income u/s 139(1) of the Act and when the assessment has been framed and completed at returned income without making any fresh addition then the AO was not justified in charging tax u/s 115BBE of the Act on the surrendered amount. The Ld. AR, vehemently supporting the first appellate order, submitted that the proposition rendered by the Hon’ble Punjab & Haryana High Court in the case of Kim Pharma (P.) Ltd. vs. CIT (supra) does not apply to the present case as the assessee has sucessfully explained the source of surrendered excess cash and excess stock as has been derived from business of the assessee trading into Bullion and commodity stock market, Adat/dalali therefore, peculiar facts and circumstances of the present case, the Ld. CIT(A) was right in dismissing the stand of AO on chargeability of tax u/s 115BBE of the Act.
4.2 Further placing reliance on the order of Co-ordinate Bench of ITAT, Chandigarh in the case of Famina Knit Fabs vs. ACIT, reported as [2019] 104 taxmann.com 306 (Chandigarh-Trib.) submitted that amendment made to section 115BBE w.e.f. 01/04/2017 made by Finance Act, 2016 is prospective in nature, and Revenue could not claim the same to be either clarificatory in nature or retrospective in operation. The Ld. AR pointed out that in this order, it was categorically held that if during the search operation, the assessee surrendered additional income on account of unaccounted receivables which were partly assessable as deemed business income and partly assessable as deemed income under sections 68 to 69Cas the part of business income then amended provisions of section 115BBE of the Act is not applicable.
4.3 Further placing reliance on the another judgment of the ITAT, Indore Bench in the case of ACIT vs. Shri Anoop Neema, reported as 2022 (1) TMI 683-ITAT Indore, the Ld. AR submitted that the Ld. CIT(A) find that the alleged excess stock was part of the total business stock found at the assessee’s business premises are sufficient to indicate that the alleged investment in excess stock is part of the business income and that allege excess stock accepted by the assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during the search proceedings and thus, the same cannot be treated as income from undisclosed source of income and the Ld. CIT(A) was right in holding that the provisions of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing found during the course of search.
5. On careful consideration on rival submissions, first of all from the first appellate order, we have noted that the Ld. CIT(A) has granted relief to the assessee by following observations and findings:
4.1 Ground No. 1 to 5:- Through this ground of appeal, the appellant has challenged the chargeability of tax rate under amended provisions of section 115BBE of the Act. During the course of search on 28.09.2016 excess stock in the form of jewellery and silver utensils worth Rs.1,28,48,827/- were found and cash amounting to Rs.1,57,01,227/- was found from residential premises of the appellant. Further, during the course of survey excess stock of jewelleries amounting to Rs.1,67,93,53/- was also found. Statement of appellant was recorded u/s 132(4) & 133A of the Act and appellant made voluntary disclosure of sum of Rs.4,53,43,587/- on account of excess stock and cash found during the course of search and survey. The appellant also stated that the excess stock was acquired out of income earned from forward commodity trading transaction and mediation carried out by the appellant. The appellant filed return of income u/s 139(1) on 31.10.2017 declaring total income of Rs.5,30,55,260/- including additional income of Rs.4,53,43,587/- voluntary declared during the course of search and survey. However, as per AO, the details and evidences furnished by the assessee are nothing but an afterthought and therefore, subsequent addition was made in the income of the appellant by applying tax rate as per amended provisions of section 115BBE of the Act.
4.1.1 First of all let me discuss whether the provisions of section 115BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017 (from FY 2017-18 onwads). However, the AO has applied amended provisions in FY 2016-17 applying retrospective effect of the said amendment. Hon’ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC): (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that “An amendment made to the taxing statute can be said to be intended to remove ‘hardships’ only of the assessee, not of the department-on the contrary, imposing a retrospective levy on the assessee would have caused undue hardship. Hon’ble ITAT Indore in the case of Priyadharshani Construction vs. ITO (2012) 19 ITJ 276 (Trib-Indore) has held that “Substantive law shall be understood to be applicable prospectively unless made specifically retrospective. Similar view was taken in following judgments by various courts and tribunals:-
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- Hon’ble Rajasthan High Court in the case of CIT vs Bajargan Traders [Appeal No 258/ 2017 dt 12-092017];
- Hon’ble Ahmedabad bench of ITAT in the case of ChokshiHiralalMaganlal vs DCIT as reported in 141 TTJ 001;
- Hon’ble Jodhpur bench of ITAT in the case of Lovish Singhal & Others vs ITO [Appeal No 143/ Jodh/ 2018];
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- Hon’ble Jaipur bench of ITAT in the case of DCIT vs RamnarayanBorla [Appeal No 482/ JP/ 2015 dt 3009-2016];
- Hon’ble Supreme Court in the case of Lakhmichand Baijnath Vs CIT as reported in 35 ITR 416;
- Hon’ble Apex Court in the case of Nalini Kant Ambalal Mody vs SAL Narayan Row as reported in 61 ITR 428.
Therefore, firstly the AO erred in totality by applying amended provisions of section 115BBE in the case of appellant. Furthermore, search and survey action in the case of appellant were carried out on 28.09.2016 and the appellant made voluntary disclosure during the course of search and survey. The amendment was inserted on 15.12.2016 which is subsequent to the date of search, therefore, the amended provisions are clearly not applicable to the case of appellant.
4.1.2 Before parting it is most appropriate to refer to the relevant provision of sec 115BBE of the Act as existed before amendment and after amendment w.e.f01.04.2017:
Old Provisions before Amendment:
“115BBE(1). Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of—
(a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and
(b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). ”
New Provisions after Amendment:
115BBE(1). Where the total income of an assessee,—
(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or
(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a),the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent.; and
(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).
In nutshell, the provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68, 69, 69A, 69B, 69C and 69D i.e. from residuary category w.e.f 01.04.2017. However, in the present case search u/s 132 and survey u/s 133 of the Act took place on 28.09.2016. The appellant during the course of search made voluntary disclosure of additional income of Rs. 4,53,43,587/- on account of excess stock.
It is a settled law that additional income declared on account of excess stock is business income of the assessee. This proposition finds support from the following case laws:-
(a) Bajrang Traders Vs. ACIT (Circle)-2, Alwar (ITA No. 137/Jp/17 dated 17.03.2017). In this case, it is held as under:-
2.11 Having said that, the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head “business income” or “income from other sources”. In the present case, the assessee is dealing in sale of food grains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice.Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Coordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head “business income” and not under the head income from other sources”. In the result, ground No.l of the assessee is allowed.
(b) DCIT (Central), Ajmer Vs. Ramnarayan Birla (ITA No. 482/Jp/2015 dated 30.09.2016) In this case, it is held as under:-
4.3. We have heard rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that the assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and silver jewellery. The Coordinate Bench in the case of ChokshiHiralalMaganlal vs. DCIT, 131 TTJ (Ahd.) 1 has held that in a cases where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon’ble Gujarat High Court in the case of Fakir Mohd. HajiHasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon’ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the Id. CIT (A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found.
(c) Fashion World Vs. ACIT (Cirecle)-12, Ahemdabad (ITA No. 1634/Ahd/2016 dated 12.02.2010) In this case, it is held as under:-
12. Thus the important aspect that emerges from the entire discussion is that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable asset or expenditure. In the present case we find that entire physical stock of Rs.25,14,306/- was part of the same business. Both kind of stock i.e. what is recorded in the books and what was found over and above the stock recorded in the books, were held and dealt uniformly by the assessee. There was no physical distinction between the accounted stock or unaccounted stock. No such physical distinction was found by the Revenue either. The assessee has repeatedly claimed that unaccounted business income is invested in stock and there is no amount separately taxable under section 69. The department has ignored this claim of the assessee and sought to tax the difference between book-stock and physical-stock as unaccounted investment under section 69 without considering the claim of the assessee that first the business receipt has to be considered and then investment should be treated as coming out of such unaccounted income. The difference in stock so worked out by the authorities below had no independent identity of its own and it is part and parcel of entire lot of stock. The difference between declared stock in the books and what is physically found would only be a mathematical expression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that there is an undisclosed asset existed independently. Once this is so then 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.
14. To conclude sum of Rs.8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head ‘business’. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only.
15. In view of the above, AO is directed to consider the sum of Rs.8,10,011/- as undisclosed business income assessable under the head ‘business’ and other two sums under section 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO.
(d) ChokshiHiralalMaganlal Vs. DCIT, Ahemadabad (ITA No. 3281/Ahd/2009 dated 05.08.2011) In this case, it is held as under:-
9. Since in the present case excess stack found during the survey is not separately and clearly identifiable but is part of mixed lots of stack found at the premises which included declared stock as per books and also the excess stock as computed by the survey officers, the provisions of section 69B cannot be made applicable as primary condition for invoking the provisions of section 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own. Since excess stock is a result of suppression of profit from business other the years and has not been kept identifiable separately but i.e. the part of over all physical stock found, the investment in the excess stock ’has to be treated as business income as per detailed reasons given in the case of Fashion World (supra). Once excess stock is treated as business income then assessee is entitled for higher remuneration to the partners as per section 40(b). As a result, this ground -of assessee is allowed.
(e) Shri Lovish Singhal Vs. ITO, Ward-2, Sriganganagar (ITA No.143/Jodh/2018 dated 25.05.2018). In this case, it is held as under:-
I have heard the rival contentions and record perused. I have also carefully gone through the orders of the authorities below. I have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the Id AR during the course of hearing before the ITAT in the context of factual matrix of the case. From 18 ITA 142 to 146/Jodh/2018 Vasu Singhal Vs ITO with 4 Ors. cases the record, I find that during the course of survey income was surrendered by the assessee on account of stock, excess cash found out of sale of stock and also in respect of incriminating documents. As per judicial pronouncements cited by the Id. AR and also the decision of Hon’ble Rajasthan high court in the case of Bajrang Traders in Income Tax Appeal No. 258/2017 dated 12/09/20171 observe that the Hon’ble High Court in respect of excess stock found during the course of survey and surrender made thereof was found to be taxable under the head business and profession’. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act. Thus, there is no justification for taxing such income U/s 115BBE of the Act.
(f) ACIT Vs. Sanjay Bairathi Gems Ltd – 189 TTJ 487/492 (Jp). In this case, it is held as under:-
From the above, it is seen that the excess stock found during the search operation is not separately and clearly identifiable but is part of mixed lots of stock found at the premises which included declared stock as per books and also the excess stock as computed by the authorized officers during the search operation at the premise. Since excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but is the part of overall physical stock found, the investment in the excess stock has to be treated as business income. Further, the excess stock so found is part of the regular business, therefore, following decision of Hon’ble Tribunal Bench Jaipur in case of Ramnarayan Birla (cited supra), the same has to be taxed under the business income. Otherwise even if the same is taxed under s. 115BBE of the Act, the provisions of not allowing the set off has come into effect from1st April, 2017.
(g) Md Serajuddin& Brothers vs CIT- 24 com 46 (Cal): 210 Taxmann 84 (Cal).
(h) SurekhJewellers vs DCIT ITA No 18/PN/2016 dated12.06.2016.
(i) M/s Solanki Jewellers vs DCIT ITA No 858PN72016 dated 18.11.2016.
Considering the submission made and decisions referred, it is undisputed that the appellant has been trading in jewellery and the excess stock found during the course of search and survey was accumulated from transaction carried out of forward commodity trading in bullion and mediation. Therefore, I am of the opinion that additional income offered and addition made was on account of business income of the appellant and is therefore liable to be taxed under the head of income from business and profession only. The AO has also failed to bring on record any other evidence suggesting that the additional income was not earned by the declared business activity of the appellant. The provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68, 69, 69A, 69B, 69C and 69D i.e. from residuary category w.e.f 01.04.2017. However, in the present case in hand, additional income was offered during search & survey and the same has been taken into consideration while filing regular return, of income u/s 139(1) of the Act. The assessment was completed at returned income and no fresh addition was made by the AO. Since, the search and survey in the case of appellant was carried out on 28.09.2016, therefore, the assessing officer was not justified in stating that provisions u/s 115BBE were invoked by the appellant which in fact was applicable from 01.04.2017 and not from 28.09.2016 (date of search & survey). Thus, the assessing officer is hereby directed to calculate tax as per normal rate applicable in the case of the appellant. Therefore, appeal on these grounds is Allowed.
6. On careful consideration of rival submission we note some glaring undisputed facts from the order of authorities below which are list below:-
(i) A search & survey operation was carried out on business premises of appellant. During the said operation additional income was offered on account of excess stock/excess cash found during the course of search & survey operation.
(ii) The assessee found additional income during the course of search & survey operation and same was taken into consideration while filing regular return of income u/s. 139(1) of the Act.
(iii) The Assessing Officer completed assessment at the return income and no fresh addition was made by the AO.
(iv) From the careful perusal assessment order it is also clearly observed that the Assessing Officer has not made any addition to the return of income of assessee and has accepted return income filed by the assessee inclusive of amount of excess stock and excess cash found and offered for taxation during the course of search & survey operation.
(v) The assessee has successfully explained that the excess stock & excess cash was nothing but business income of assessee.
7. After considering the above factual matrix of the case now we proceed to consider the proposition relied by learned representative of both the sides. The Ld. Senior DR has relied on the judgment of Punjab & Haryana High Court in the case of Kim Pharma (P.) Ltd. vs. CIT(supra) to submit that where the amount surrendered during survey was not reflected in the books of accounts and no source from where it was derived was declared by the assessee, then it is assessable as deemed income of assessee u/s. 69A of the Act and not as business income. In this case the Assessing Officer made addition of surrendered amount u/s. 69 of the Act as the assessee could not explain the source from where it was derived by the assessee. In the present case undisputedly the Assessing Officer has not made any addition u/s. 69 or any provision of the Act and has accepted return income of the assessee. In the present case we are in agreement with the contention of the learned AR that the orders of the authorities below clearly reveal that the amount of excess stock & excess cash found during the course of survey was business income of the assessee as the assessee is in the business of trading in jewellery, metal of bullion and the excess stock found during the search & survey was accumulated from transaction of metal of bullion carried out in the forward community trading and mediation and the same was surrendered as excess stock and offered to taxation as business of the assessee. The Ld. CIT(DR) could not dislodge the contention and observations of the Ld. CIT(A) that the surrendered amount was pertaining to excess stock & excess cash which was business income of the assessee and such additional income offered by the assessee for taxation was nothing but business income of the assessee. Therefore it was offered for taxation under the head income from business and profession. In the present case since the assessee in his statement recorded during the course of search & survey explained that the source of excess stock was the income earned during the relevant financial period from the trading of bullion, jewellery etc. and income from Adat/dalali and regarding excess cash found in his business premises the assessee also explained that though it was not recorded in the books of accounts but it was accrued to him on account of sale of jewellery in cash and the same pertains to his business activity of trading in business of jewellery. Therefore in the present case the assessee has successfully explained the source of excess stock and excess cash found during the course of search & survey operation and surrendered during the said operation. The Ld. CIT(DR) has not disputed or controverted very factual position that the assessee filed return of income including the surrendered amount and which was accepted by the Assessing Officer without any dispute and without making any further addition in the hands of assessee u/s. 69A or any other section of the Act. In view of above as the assessee has successfully explained and established the source of excess stock and excess cash as his business activity and of trading in jewellery and gems and activity of Adat/dalali thus the benefit of proposition rendered by Hon’ble Punjab & Haryana High Court in the case Kim Pharma (P.) Ltd. vs. Commissioner of Income Tax (supra) is not available for the department in the present case.
8. In view of forgoing discussion we reach to a logical conclusion that the Assessing Officer without making any addition u/s. 69A or any other provision of the Act has accepted returned income of the assessee wherein the assessee has included surrendered amount on account of excess stock and excess cash as business income and has successfully explained the source from where the said surrendered excess stock and excess cash was earned, which was business activity of assessee of trading in jewellery & gems and Adat/dalali in the same field. The coordinate bench of the Tribunal in the various orders including order in the case of Shri Lovish Singhal v/s. ITO (supra) by following the judgment of Hon’ble Rajasthan High Court in the case of Bajrang Traders (supra) observed that the excess stock found during the course of survey and surrendered made thereof was found to be taxable as business income under the head “Income from business & profession”. Identical facts and circumstances as noted above have been found to be existing in the present case then the Ld. CIT(A) was correct and justified in dismissing the contention of the AO and holding that the AO was not right in observing that the assessee is liable to be taxed as per provision of section 115BBE. Therefore, we too have no hesitation in concluding that the facts of present case do not bring the impugned income in the clutches of section 69/69A/69B and therefore do not warrant application of section 115BBE at all. We conclude so and dismiss the ground raised by revenue being devoid of merit.
9. In the result, appeal of the revenue is dismissed.
Order pronounced as per Rule 34 of ITAT Rules, 1963 on 10.02.2023.
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