The Income Tax Appellate Tribunal (ITAT) Pune Bench while upholding the business income which surrendered after the survey proceeding and observed that excess stock and excess cash found during survey proceedings are recorder in books of account.
Ashok K. Kriplani, the taxpayer is proprietor of M/s. Mohan Dry Fruit. A survey was conducted in the business premises of M/s. Mohan Dry Fruitunder Section 133A of the Income Tax Act, 1961. The assessee filed a return of income declaring a total income of Rs.1,38,40,940/.
Subsequently, the assessee surrendered an amount of Rs.73,69,908/- on account of excess Stock and Rs.8,09,032/- on account of excess cash .
Thereafter, the assessee included the said surrendered income in the computation of income as business income and he proceeded to exclude the above said both the amounts and treating the same as unaccounted stock Under Section 69 and excess cash Under Section 69A of the Income Tax Act, charged the same Under Section 115BBE of the Income Tax Act.
The AO, without considering the submission of assessee passed an assessment order.
Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax Appeals (CIT(A)), who upheld the action of AO. Thus, the assessee filed the appeal before the tribunal.
During the appeal proceedings Deepa Khare, on behalf of assessee submitted that amounts representing excess stock and excess cash were duly recorded in the regular books of account and appeared in the financial statements.
Further, argued that investment in unrecorded business stock as well as unaccounted cash discovered during the survey action should be taxed as business income.
Ramnath P. Murkunde, the Counsel for the Revenue, supported the decision of lower authorities and argued that excess stock and excess cash found during the course of survey are not recorded in the books of account at the time of survey and attracts the provisions Under Section 69 and 69A of the Income Tax Act, therefore, both the charged Under Section 115BBE of the Income Tax Act.
Relied upon the decision of High Court of Rajasthan in the case of Bajargan Traders, the tribunal observed that the amount surrendered under unrecorded stock has to be brought to tax under the head “business income” as the excess stock which has been found during the course of survey is the investment in procurement of such stock is clearly identifiable and related to the regular business stock of the assessee.
Thus, 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”
After reviewing the facts and submission, the two member bench of the tribunal comprising Shamim Yahya (Accountant Member) and Yogesh Kumar U.S (Judicial Member) determined that that assessee offered additional income under excess stock and excess cash during the course of survey and same were entered in the books of account as on the last day of financial year ending on 31-03-2018 and offered the said amounts to tax under the business income.
Therefore, the bench allowed the appeal filed by the assessee.
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