The Pune Bench of Income Tax Appellate Tribunal (ITAT) held that the Commissioner of Income Tax (Appeals) [CIT(A)] was not justified in confirming the order of Assessing Officer (AO) in excluding the alleged additional income offered during the course of survey as business income and attracting the provisions under Section 69B of the Income Tax Act, 1961 consequently the charging, under Section 115BBE of the Income Tax Act.
The assessee Vijay Shriram Gundale is an individual engaged in the business of comprising sale of readymade garments, hosiery items, shirting and suiting items, etc. The assessee conducts its business under the name and style as “M/s. Gundale Saree Center”. A survey action under Section 133A of the Income Tax Act was conducted and books of accounts and other documents were impounded.
The assessee filed return of income declaring a total income of Rs.62,90,290/-. The AO show caused the assessee as to why the excess stock of Rs.37,00,000/- should not be treated as income under Section 69B of the Income Tax Act. The AO concluded that the income disclosed by the assessee during the course of survey on account of excess stock to an extent of Rs.37,00,000/- is liable to be assessed under Section 69B of the Income Tax Act and charged the tax under Section 115BBE of the Income Tax Act.
Aggrieved by the order the assessee filed an appeal before the first appellate authority, which confirmed the order of AO by holding the nature of income regarding the excess stock remained unexplained.
Further aggrieved the assessee filed an appeal before the Tribunal. Hari Krishan, the Authorised Representative of the assessee submitted that during the course of assessment proceedings the assessee explained the nature and source of alleged excess stock is derived and part and parcel of regular business income and requires to be charged under income from business under the normal provisions rates of tax.
Further, he submitted that the assessee has no other business except family business engaged in clothing and vehemently argued the deeming provisions under Section 69B of the Income Tax Act is not applicable to the facts on hand as excess stock was offered and credited to the profit and loss account.
The Departmental Representative (DR) Shri Ajay Kumar Kesari relied on the order of CIT(A).
The Bench comprising of R.S. Syal, Vice President and S.S. Viswanethra Ravi, Judicial Member observed that the assessee had explained the difference of Rs.37,00,000/- as stock purchased on high demand during the marriage seasons and bills will be received late. Therefore, it was concluded that the excess stock as found during the course of survey is nothing but business income flowing from assessee’s regular business.
The Tribunal referred the decision of High Court of Rajasthan in the case of Bajargan Traders where it was held that the investment in excess stock has to be brought to tax under the head “business income” but not under the head “income from other sources”. It also relied on the decision of the Jodhpur Benches of the Tribunal in the case of Lovish Singhal where it was held that excess stock/cash found during the course of survey is taxable under the business and no provision under Section 115BBE of the Income Tax Act is attracted.
The Bench held that the CIT (A) was not justified in confirming the order of AO in excluding the alleged additional income offered during the course of survey as business income and attracting the provisions under Section 69B of the Income Tax Act, consequently, the charging under Section 115BBE of the Income Tax Act was dropped.
Hence, the appeal of assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
