M/s Shaha Ashokkumar G. Rathod, Gokak V. Income Tax Officer, Ward - 1, Gokak

ITA 11/PAN/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 4378 (ITAT-PANAJI)
• Duration Of Justice: 4 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: WT(D)
• Next Hearing Date: 09-10-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 24-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income; Source of fund; Deemed to accrue or arise in india
• Section: 68; 69; 69C; 40(b); 133A; 69B; 69A

Judgement Text

आयकरअपीलीयअिधकरणɊायपीठपणजी,पणजीमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH : :PANAJI [VIRTUAL HEARING AT PUNE] BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकरअपीलसं. / ITA No.11/PAN/2019 िनधाᭅरणवषᭅ / Assessment Year : 2015-16 M/s. Shaha Ashok kumar Ganeshmal Rathod, No.2684, Raviwar-Peth, Gokak, Karnataka – 591307. PAN: AACF7071F Vs The Income Tax Officer, Ward-1, Gokak. Appellant/ Assessee Respondent/ Revenue Assessee by Shri A.S.Patil– AR Revenue by Shri N. Shrikanth – DR Date of hearing 10/10/2023 Date of pronouncement 08/01/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee against the order of ld. Commissioner of Income-tax (Appeal), Belagavi dated 05.12.2018 emanating from assessment order under section 143(3) dated 11.12.2017 for AY 2015-2016. The grounds of appeal are as under : “1] That the Order of the Learned Commissioner of Income-Tax [Appeals] is against Law and facts of the case. ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 2 2] That the Learned Commissioner [Appeals] has also erred in treating Rs.1,42,67,032/- of excess Stock and Cash found in Survey U/S 133A as deemed income U/S 69-69A instead of treating the same as business income. Hence, findings of the Commissioner [Appeals] is against Law and facts of the case. 3] That the Learned Commissioner [Appeals] has erred in sustaining disallowance of Salary to Working Partners amounting to Rs.57,26,914/- made by the Income-Tax Officer ignoring the fact that excess Stock and Cash found in Survey is business income. Hence, the disallowance Sustained of Rs.57,26,914/- is liable to be deleted. 4] For these and other grounds that may be urged at the time of hearing of the appeal. The appellant Prays that the appeal be allowed.” 2. Brief Facts : The assessee firm is engaged in the retail Sale of Gold and Silver ornaments and pawning business. There was Survey u/s 133A of the Act in the case of the assessee on 13.11.2014. During the course of Survey excess stock of Gold of 5246.335 grams valuing Rs. 1,36,66,702/- and Silver 16.3793Kg valuing Rs.5,79,829/- , Cash of Rs.20501/- was found. As per the Assessment Order the Partner of the Assessee Firm declared additional income as under : Unexplained Excess Stock of Gold Rs.1,36,66,702/- Unexplained Excess Stock of Silver Rs. 5,79,829/- Unexplained Excess Cash Rs. 20,501/- ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 3 The assessee firm filed return of Income on 24/09/2015 showing total income at Rs.96,60,180/-. The Assessing Officer held that the assessee has failed to explain the investment made in the unaccounted stock. Hence the section 69 is applicable. The AO held that unexplained investment in excess stock is assessable u/s 69 of the Act and excess cash is assessable u/s 69A of the Act. The AO also held that accordingly tax is to be levied as per Section 115BBE of the Act. AO also disallowed the assessee’s claim of partners’ salary on the said excess stock. 2.1. Aggrieved by the Assessment Order the assessee filed an appeal before the Ld.Commissioner of Income tax (appeal). The Ld.CIT(A) upheld the addition. Aggrieved by the or the of the Ld.CIT(A) the assessee filed appeal before this Tribunal. Submission of ld.Authorised Representative(ld.AR) : 3. The ld.AR filed a paper book. Ld.AR explained that there was a survey in the case of assessee on 13.11.2014. During the Survey, to buy peace and avoid litigation, assessee offered Rs.1,42,67,032/- as additional business income for A.Y.2015-16, accordingly, assessee filed return of income for A.Y.2015-16 on 24.09.2015. Assessee claimed partner’s salary of Rs.76,32,000/- as per section 40(b) of the Income Tax Act. The Assessing ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 4 Officer (AO) has not allowed the salary paid to partner as deduction. The ld.AR for the assessee stated that the disclosure was related to business of the assessee. No evidence has been brought by the AO to establish that the appellant was doing any other activity other than the business in Gold & Silver for which was disclosed. When the business activity of the Appellant is proved and no other sources of Income is found, then there is no justification for disallowing the Salary paid to working partners amounting Rs.57,26,914/-. Ld.AR also submitted that assessee and its partner both are tax payers and there is no difference in the tax slab, hence, the deletion is Tax Neutral. The ld.AR relied on following case laws :  Pr.CIT Vs. Bajargan Traders DB ITA No.258-2017 for A.Y.2013-14(Rajasthan HC).  Lovish Singhal &Ors ITA No.143/JODH/2018 – A.Y.2014-15 for A.Y.2014-15.  M/s Navratan Jewellers &Compay Vs ITO, ITAT Panaji in ITA No.268/PANJI/2017 A.Y.2014-15.  CIT Vs. S.K.Srigiri& Bros (Karnataka HC) 298 ITR 13.  J.K.Choksi Vs ACIT (Gujarat HC) Appeal No.149.  Royal Sunrise Vs. ITO (ITAT Bangalore)  Deepa Agro Agencies Vs. ITO (ITAT Bangalore) ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 5  M/s.Surekha Jewellers Vs. DCIT (ITAT Pune) 4. Submission of Ld. DR : Ld. DR relied on the orders of the Lower Authorities. He vehemently supported the Assessment Order . 5. Findings and Analysis : We have heard both the parties and perused the records. 5.1. The facts in this case are that during the survey excess stock of Gold and Silver was found. The Assessee has shown the said excess stock in the closing stock in the return of income . The assessee has also submitted before the AO that the assessee has not debited any purchases on account of the impugned excess stock. No where the assessee has claimed that it was maintaining Stock Register for Gold and Silver. No stock register was produced before us. Rather as per statement of the partner it seems that no Stock Register was found during the survey. The relevant part of the statement recorded u/s 133A of the Act is reproduced hereunder : ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 6 Q9: As per trading account produced today the quantity of gold is taken at 11420.600 gms and the net comes to 9136 gms at 80% of gross . But as per the Physical stock taken by the valuer the Gold Ornaments weight is 20211.040gms and Net comes to 14382.335 gms as ascertain by the valuer. Do you confirm the same ? Ans : Yes I do confirm. Q 10: What is your explanation in respect of excess gold of 5246.335 found in your business premises ? Ans : I do not have any explanation. Hence, I offer the same for taxation for the current year i.e FY 2014-15. 5.2. Thus, it can be observed from the statement that partner of the assessee has not given any explanation for the excess stock found. Similarly, no specific explanation was provided by the assessee either before the AO or before the Ld. CIT(A). The AO had issued specific show cause notice to the assessee which is reproduced in the assessment order. The Assessee kept on saying that the stock found is its business stock hence section 69 is not applicable. Assessee claimed that assessee is doing only one business ie., Sale of gold, silver ornaments hence the excess stock is its business stock and not taxable u/s 69. ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 7 5.3. In this case the AO had specifically asked the Assessee to explain the source of investment in the impugned stock. The Assessee has not offered any explanation for the same. Admittedly the assessee has not recorded the impugned purchases in the books. Before us also the Assessee has not filed copy of any purchase register to prove that the impugned purchases were recorded in the books. Thus, the impugned purchases were not recorded in the books. It means, the investment made in the purchase of 5246.335 gms gold and 16.3793 kg Silver is not recorded in the books of account of the assessee firm.During the assessment , even before us , the assessee has not explained the source of the investment made in the purchase of 5246.335 gms gold and 16.3793 kg Silver. Thus, it is un-recorded unexplained investment. Section 69 is reproduced here under : Unexplained investments. 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 8 The requirement of Section 69 are as under :  Assessee has made investment in the Financial Year immediately preceding assessment year.  The Investment is not recorded in the books.  Assessee offers no explanation about the source of investment or explanation is not satisfactory. 5.4. Thus, when we analyze the facts of the assessee’s case with reference to requirements of Section 69 of the Act, it is observed that admittedly, the investment in the purchase of 5246.335 gms gold and 16.3793 kg Silver is not recorded in the books. The assessee has not offered any satisfactory explanation for the impugned investment. Thus the requirement of Section 69 are fulfilled in this case. Hence, we are of the opinion that the Assessing Officer has rightly invoked section 69 of the Act for the impugned investment in the purchase of 5246.335 gms gold and 16.3793 kg Silver. Therefore, we uphold invocation of section 69 of the Act by AO. Accordingly ground number 2 of the assessee regarding impugned stock is dismissed. 5.5. The assessee has not offered any specific explanation with reference to excess cash found during the survey. Therefore, we are of the opinion that the AO has rightly invoked ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 9 section 69A of the Act. Accordingly ground number 2 of the assessee is dismissed. 6. Section 115BBE as applicable for AY 2015-16 is reproduced here under : Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 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). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub- section (1). 6.1. The Section 115BBE is specifically applicable where income of the assessee includes any income under section 69, 69A of the Act. As per the Income tax Act , once income of assessee includes any income referred in section 69,69A the Tax has to be calculated as per provisions of Section 115BBE. In this case we have already held that section 69 and 69A was rightly invoked by the AO. Therefore, since income of the assessee ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 10 contains income referred u/s 69, 69A, provisions of Section 115BBE are applicable in the case of the assessee. 6.2. Sub-clause 2 of Section 115BBE specifically states that no deduction in respect of any expenditure, allowance under any provision of this act in computing income referred under subclause 1 of section 115BBE means income referred u/s 69, 69A of the Act. Therefore, the AO was right in disallowing the assessee’s claim of Partner’s Salary on the impugned unexplained investment taxed u/s 69 and 69A of the Act. Accordingly the ground of appeal number 3 0f the assessee is dismissed. 7. Discussion on Case laws relied by the Assessee: 1) Pr.CIT vs Bajargan Traders 2017 Taxpundit (DT) 4814 (Raj HC) : In this case there is a clear finding by the Hon’ble ITAT which is reproduced by Hon’ble High Court that the purchases of Rs.70,04,814/- were reflected in the Total Purchases amounting Rs.33,47,19,658/- in the profit and loss account [para-2.10]. ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 11 7.1. However in the case of the assessee M/s Shaha Ashok Kumar G Rathod , the unaccounted purchases were not entered in the books. 7.2. Hence the case law relied by the assessee distinguishable on facts. 2) Lovish Singhal vs ITO 2018-Tax-Pub-(DT)-2944- (Jodh Tribu): In this case the ITAT has followed the decision of Hon’ble Rajasthan High Court in the case of Bajrang Traders. We have already discussed in earlier para that the decision of Hon’ble High Court is distinguishable on facts. Hence this case is also distinguishable on facts. 3) CIT Vs. S.K.Srigiri& Bros (Karnataka HC) 298 ITR 13: In this case the question before the Hon’ble High Court was as under : “When the assessee has received income from other sources the remuneration claimed by the partners can be allowed as per section 40(b)(iii)of the Income tax Act” Thus the question before the Hon’ble High Court was regarding Income from Other Sources. ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 12 7.3. However, in the case of the assessee M/s Shaha Ashokkumar G Rathod, the AO has invoked provisions of Section 115BBE, and we have upheld it. There was no reference to Section 115BBE in the case relied by Assessee, hence the Case law relied by the assessee is distinguishable on facts and law. 8. Ground Number 1: We have studied the order of the CIT(A). We do not find it to be against the law or facts of the case. Assessee has not made any specific pleading with reference to ground number 1. Accordingly, the ground number 1 raised by the assessee is dismissed. 9. Ground number 4 is general in nature and does not need any adjudication. 10. Accordingly, appeal of the Assessee is dismissed. Order pronounced in the open Court on 08 th January, 2024. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 08 th Jan, 2024/ SGR* ITA No.11/PAN/2019 M/s.Shaha Ashokkumar GaneshmalRathod[A] 13 आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध,आयकरअपीलीयअिधकरण,पणजीबᱶच, नागपुर/ DR, ITAT, Bench, Panaji. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT,Pune.