Undisclosed Investments in Unaccounted Stock should be Taxed Separately: ITAT [Read Order]

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that, the undisclosed investments in the unaccounted stocks of the assessee should be taxed separately.

The assessee, Saitawadekar Jewellers, was in the business of Manufacturing, trading of Gold & Silver Ornaments declared undisclosed stock during the survey procedures. He further submitted that the said stock had been shown in the Profit and Loss Account by the assessee as the assessee had time to file the return of Income for AY 2015-16.

This fact had been explained to the AO during the scrutiny assessment. The PCIT made an addition on account of purchases from Unregistered Dealers and unexplained stock. Pramod Shingte, on behalf of the assessee submitted that the assessee had explained the AO regarding the survey declaration and how the assessee had shown it in the P&L account.

Sardar Singh Meena, on behalf of the revenue submitted that excess stock was found during the survey. The partner has accepted this fact that the excess stock found during the survey was not recorded in the books of the firm. 

He further submitted that excess stock, found means the assessee had invested his unaccounted money in purchase of the said excess stock which was admittedly not recorded in the regular books. This means, the impugned ‘excess stock’ found during the survey was ‘unexplained money, bullion, jewellery’ as mentioned in the Section 69A and 69B of the Income Tax Act.

The two member Bench of S.S.Godara, (Judicial Member) and Dipak P. Ripote, (Accountant Member) upheld the revision order, observing that, “In this case the AO has failed to apply proper and correct section of Income Tax Act to the “Investment in the Undisclosed Stock”. The undisclosed investment in the unaccounted stock needs to be taxed separately as Income of the assessee as per the deeming provision of the Act.”

The Bench further held that Sections 69B, 69A and 69 of the Income Tax Act, 1961 had introduced a deeming provision and the AO had failed to verify this aspect of the impugned excess stock declared during the survey.

Therefore, the assessment order was erroneous and prejudicial to the interest of the revenue.

To Read the full text of the Order CLICK HERE

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