Shri Harkishan Narottamdas Chokshi, Jamnagar V. The Pr. CIT Jamnagar, Jamnagar

ITA 149/RJT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6669 (ITAT-RAJKOT)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-05-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 11-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMOLI GUSAI
• Keywords: Unexplained investment; Business income; Opportunity of being heard; Set aside
• Section: 69; 263; 69B; 69A; 22

Judgement Text

आयकर अपीलȣय अͬधकरण, राजकोट Ûयायपीठ, राजकोट । IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH: RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER And SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No.149/RJT/2024 (Ǔनधा[रण वष[ / Assessment Year : 2019-20) Harkishan Narottamdas Chokshi 0 Prop Preeti Jewellers Zaveri Bazar Jamkhambhaliya 361 305 Gujarat बनाम/ Vs. The Pr.CIT Jamnagar èथायी लेखा सं./जीआइआर सं./PAN/GIR No. :ABNPC 4984 D (अपीलाथȸ /Appellant) .. (Ĥ×यथȸ / Respondent) अपीलाथȸ ओर से / Appellant by : Ms. Amoli Gusai, Ld.AR Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Shramdeep Sinha, Ld.CIT-DR स ु नवाई कȧ तारȣख / Date of Hearing 02/05/2024 घोषणा कȧ तारȣख /Date of Pronouncement 04/06/2024 आदेश / O R D E R PER SHRI DINESH MONHAN SINHA, JUDICIAL MEMBER : The instant appeal has been filed by the Assessee against the order dated 22/02/2024 passed by the Pr. Commissioner of Income-tax-Jamnagar (hereinafter referred to as “PCIT”) under Section 263 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the Assessment Year (AY) 2019-20. ITA No.149/Rjt/2024 Harkishan Narottamdas Chokshi vs. PCIT Asst.Year - 2019-20 - 2 - 2. The ground of appeal raised by the Assessee is as follows:- “The learned PCIT has erred in law by invoking the revision of the assessment order under Section 263. The assessment order is not erroneous as per Section 263 of the income Tax Act and therefore the grounds taken by the Learned PCIT for invoking Section 263 may please be deleted.” 3. The brief facts of the case are that the assessee is engaged in the business related to manufacturing and trading of gold and silver jewellery. The assessee has filed his return of income for the Assessment Year 2019-20 on 30/10/2019 declaring total income at Rs.65,16,270/-. On 01/03/2019, a survey u/s.133A of the Act was conducted in the business premises of the assessee. During the course of survey proceedings, it was observed by the officer that there was total difference amounting to Rs.61,42,194/- in stock of jewellery of gold and silver as per the books and as per the physical stocks as maintained by the assessee. 3.1. The assessee provided relevant explanation that during the valuation of physical stock, some items amounting to Rs.1,81,425/- were not considered by the officer, so the total difference would be reduced by Rs.1,81,425/- and remaining amount of difference, i.e. Rs.59,81,035/- (Rs.61,42,194 – Rs.1,81,425) pertains to excess physical stock of ‘regular business activity’ only and after assessing the income from the said stock, the assessee agreed to pay advance tax by the end of March-2019. 3.2. Further, the case of the assessee was selected for scrutiny u/s.143 of the Act on 25/09/2020. Thereafter, notice u/s.143(2) of the Act was issued, wherein the assessee was asked to furnish various documents along with the explanation that why there is discrepancies amounting at Rs.61,62,460/- in value of stock as per books of accounts and in physical stock. 3.3. Accordingly, a show-cause notice was issued that why the discrepancy amount of Rs.61,62,640/- was not to be added to the income of the assessee u/s.69 of the ITA No.149/Rjt/2024 Harkishan Narottamdas Chokshi vs. PCIT Asst.Year - 2019-20 - 3 - Act and tax thereon should be refrained from calculating u/s.115BBE of the Act. In response to that, the assessee had submitted all the relevant documents along with the proper reasoning on discrepancies in stock and cash within the due date itself. On receipt of the above reply, the Ld.AO was satisfied with the documents and written submission thereof. Therefore, the returned income of the assessee was accepted while finalizing the assessment order passed u/s.143(3) of the Act, wherein the AO has taken into consideration the applicability of special rates and applied his judgement that Section 115BBE of the Act shall not be attracted with due consideration of the facts of the assessee’s case. 4. The case was initiated for Revisionary proceedings u/s.263 of the Act and show-cause notice was issued on 05/02/2024 stating that as to why the order dated 27/09/2021 passed u/s.143(3) of the Act should not be revised u/s.263 of the Act. As per the Department, the assessee was unable to provide proper explanation regarding the source of the excess stock and, therefore, Department ought to make addition u/s.69 of the Act and to be taxed u/s.115BBE of the Act considering the said difference amounting to Rs.54,34,712/- as unexplained investments. (i). In this regard, the assessee had furnished a detailed reply on 14/02/2024, wherein it was contended by the assessee’s AR that the excess stock amounting to Rs.54,34,712/- should be refrained from treating the same as unexplained investment u/s.69 of the Act since the assessee was into the business of gold and silver jewellery since last so many years which was in the nature of regular business activity and not investment. The reply was not found tenable by the Ld.PCIT and had concluded that the AO has not taken any cognizance of these facts during the course of assessment proceedings and has passed the assessment order u/s.143(3) of the Act on 27/09/2021 without verifying the same. Moreover, the AO has also not ascertained the veracity of the claims by making independent inquiries. This has rendered the assessment order passed u/s.143(3) of the Act dated 27/09/2021 ITA No.149/Rjt/2024 Harkishan Narottamdas Chokshi vs. PCIT Asst.Year - 2019-20 - 4 - erroneous which resulted in the loss of revenue, hence prejudicial to the interest of revenue. (ii) The Ld.PCIT hold that the assessment order dated 27/09/2021 passed by the AO u/s.143(3) of the Act in the case of the above mentioned assessee for the AY 2019-20 is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of section 263 of the Act and set aside the assessment order to the extent of the issues mentioned and discussed in his findings. The AO is directed to revise the assessment order after giving proper opportunity of being heard to the assessee. 5. The Ld.AR for the assessee, before us, submitted that in view of the excess stock noted during the course of survey, the assessee was duly explained vide his letter dated 22/09/2023, which are in the following terms:- “g. The overall considering all above omission and mistakes. Thus, excess to be declared as stock difference during survey will be as under: Particulars Excess to be declared in rupees Gold Ornaments 22 carat 1534.268 gram 47,39,353 Gold ornaments 18 carat 234.121 grams 6,38,565 Silver articles 1774.819 grams 56,494 Total difference of stock comes to 54,34,712 According the assessee has declared excess value of stock found during survey at Rs.54,34,713/- and the assessee has declared the same in other source of income at Rs.54,34,713/- and duly offered for tax by passing entry in the books of account and offered for tax as per survey u/s.131 of the Act.” 5.1. In addition to above submissions, the Ld.AR for the assessee has relied upon the following order(s) of the Co-ordinate Benches of Ahmedabad and Rajkot. ITA No.149/Rjt/2024 Harkishan Narottamdas Chokshi vs. PCIT Asst.Year - 2019-20 - 5 - (i) In the case of Nilaykumar & Bros.Jewellers Anand vs. The Pr.CIT- 1, Vadodara in ITA No.1546/Ahd/2022 for AY 2017-18, dated 11/01/2023. (ii) In the case of (ii) M/s.Vaidya Realities vs. The Pr.CIT in ITA No.11/Rjt/2022 for AY 2017-18, dated 19/01/2024, wherein the appeal of the assessee were allowed. 6. The Ld.DR, on the other hand, vehemently relied upon the order of the Ld.PCIT and also supported the section 69 of the Act r.w.s.115BBE of the Act. The Ld.DR further submitted that before the survey authorities, the assessee’s submission was that there is difference between weight of the goods and value of the goods. The Ld.DR also submitted that the additional stock should not be assessed as “business income” of the assessee. The Ld.DR has relied upon the decision of ITAT Delhi Bench “A” in the case of Manoj Aggarwal vs. Deputy Commissioner of Income Tax in IT(SS)A No.404/Del/2003, for block period 1991- 92 to 20/08/2000, dated 25/07/2008, wherein it has held as under:- “Conclusion In the absence of any clinching evidence to show the nature and source of the monies deposited in the bank account of the assessee, AO was justified in treating the same as assessee’s unexplained income.” 7. We have heard the Learned representatives of the parties and perused the material available on record as well as the orders of lower authorities. We note that the Ld.AO issued notice u/s.142(1) of the Act dated 08/09/2021 calling for information about the issue raised by the Ld.PCIT and the same are reproduced hereunder: “During the course of survey, certain excess stock of Rs.61,62,460/- was found, so please explain as to why the discrepancies found in stock should not be added back to your total income u/s.69/69B of the Act and the tax thereon should not be calculated u/s.115BBE.” 7.1. The assessee has replied against the show-cause notice dated 08/09/2021. The reply of the assessee is placed at page Nos.48 to 54 of the paper-book submitted ITA No.149/Rjt/2024 Harkishan Narottamdas Chokshi vs. PCIT Asst.Year - 2019-20 - 6 - by the assessee. We find that the Ld.AO has examined the issue raised by the Ld.PCIT. 7.2. On going through the facts of the instant case, we are of the considered view that this is not a fit case for revising the order passed by the Ld.AO by taking legal recourse u/s.263 of the Act. During the course of survey proceedings conducted at the business premises of the assessee, excess stock was found which was admitted by the assessee to be undisclosed income of the assessee. As per the survey team, the excess stock was mixed stock and was no separately and clearly identifiable. Therefore, we are of the considered view that undisclosed excess stock normally presumes to be “business income” of the assessee. We observe the order of the ITAT Chandigarh Bench passed in case of Veer Enterprises vs. DCIT reported at 158 taxmann.com 655 (Chandigarh Tribunal). The Tribunal held that where during course of survey, assessee surrendered excess stock, cash and receivables and offered same to tax as business income, however, AO treated said surrendered amount as unexplained investment under Sections 69A and 69B, since it emerged that source of income of assessee was from its business operations, income surrendered by assesse during survey could not be brought to tax under deeming provisions of Sections 69A and 69B of the Act. In the case of Baljinder Kumar vs. DCIT 157 taxmann.com 739 (Chandigarh Tribunal), the ITAT held that where there are unrecorded sales made by assessee during current financial year and receivables arising out of such unrecorded sales had been offered to tax as additional business income by assessee, such amount could not be brought to tax under Section 69 of the Act. In the case of Parmod Singla vs. ACIT 154 taxmann.com 347 (Chandigarh Tribunal), the ITAT held that mere fact that survey/search proceedings have been initiated at business premises of assessee does not mandate Assessing officer to automatically invoke deeming provisions of Sections 69 and 69A; said provisions can be invoked only where explanation offered by assessee is not found satisfactory; where from explanation offered by assessee it clearly emerged that source of income offered during survey was from ITA No.149/Rjt/2024 Harkishan Narottamdas Chokshi vs. PCIT Asst.Year - 2019-20 - 7 - his business operations, such income could not be taxed under Sections 69 and 69A of the Act. Accordingly, in light of the aforesaid decision cited above and the facts of the assessee's case, wherein clearly it has been found that excess business stock was found from the premises of the assessee, in our considered view, the order passed by the Assessing Officer considering the undisclosed excess stock as the business income of the assessee, is not erroneous and prejudicial to the interests of the Revenue. 7.3. We find that the Ld.AO has passed a well-reasoned order, after considering the facts and circumstances of the assessee’s case and since the assessee has already declared as “business income” and the same is duly accepted by the Ld.AO, the Ld. PCIT has erred in law by invoking the revision of the assessment order under Section 263 of the Act. Hence, the grounds taken by the Ld.PCIT for invoking Section 263 is hereby not accepted. We, thus, allow the appeal of the assessee. 8. In the result, the appeal of the Assessee is allowed. Order pronounced in the Open Court on 04 th June, 2024 at Rajkot. Sd/- Sd/- (DR. ARJUN LAL SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT; Dated 04/ 06 /2024 True Copy टȣ.सी.नायर, व.Ǔन.स./T.C. NAIR, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आय ु Èत / Concerned CIT 4. आयकर आय ु Èत(अपील) / The CIT(A)-NFAC. 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,राजोकट/DR,ITAT, Rajkot. 6. गाड[ फाईल / Guard file. आदेशान ु सार/ BY ORDER, स×याͪपत ĤǓत //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलȣय अͬधकरण, राजोकट / ITAT, Rajkot