Nagal Jewellers, Delhi V. ACIT, New Delhi

ITA 3336/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58903 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: K SAMPATH
• Keywords: Business income
• Section: 69; 2; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A.NO.3336/DEL/2010 ASSESSMENT YEAR : 2007-08 M/S. NAGAL JEWELLERS, ADDL. COMMISSIONER OF INCOM E-TAX, 692, BARA TOOTI, SADAR BAZAR, VS. RANGE-39, NEW DE LHI. DELHI-110006. PAN: AAAFN7370G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SAMPATH, ADVOCATE. RESPONDENT BY : SHRI R. S. NEGI, S R. DR O R D E R PER K.D. RANJAN, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 7-08 ARISES OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-XVIII, NEW DELHI. THE SOLITARY GROUND OF APPEAL RAISED BY THE ASSESSE E IS AS UNDER:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AUTHORITIES BELOW ERRED IN NOT TREATING THE SURREND ERED INCOME AS FROM BUSINESS BUT IN ASSESSING IT AS INCOME FROM OTHER SOURCES AND THEREAFTER DENYING THE DEDUCTION FROM S UCH SUM THE PARTNERS REMUNERATION AS CLAIMED. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO NOT TREATING THE SURRENDERED INCOME AS INCOME FROM BUSINESS BUT ASSESSING IT AS INCOME FROM OTHER SOURCES. FACTS OF THE CASE STATED IN BRIEF ARE THA T A SURVEY OPERATION UNDER 2 SEC. 133A OF THE ACT WAS CONDUCTED BY THE DEPARTMEN T ON 23 RD FEBRUARY, 2007 WHEREIN EXCESS STOCK OF JEWELLERY AMOUNTING TO RS.14,74,852/- AND EXCESS CASH AMOUNTING TO RS.31,048/- WAS FOUND ON T HE DATE OF SURVEY. WHEN THE ASSESSEE WAS ASKED ABOUT THE EXCESS STOCK AND EXCESS CASH, THE ASSESSEE OFFERED THE AFORESAID AMOUNTS FOR TAXATION . HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER NOTED THAT IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAS SHOWN THE SU RRENDERED SUM UNDER THE HEAD INCOME SURRENDERED. THE ASSESSING OFFICER W AS OF THE OPINION THAT WHAT WAS SURRENDERED BY THE ASSESSEE WAS INVESTMENT MADE IN UNDISCLOSED STOCK AND HENCE UNDISCLOSED STOCK AND UNDISCLOSED CASH AMOUNTING TO RS.15,05,900/- WOULD BE ASSESSED AS INCOME FROM UND ISCLOSED SOURCES UNDER SEC. 69 OF THE ACT AND NOT INCOME FROM BUSINE SS AND PROFESSION. THE ASSESSING OFFICER THEREFORE, ASSESSED THE AMOUNT SU RRENDERED AS INCOME FROM OTHER SOURCES. 3. ON APPEAL, THE LEARNED CIT(A) REJECTED THE CONTE NTION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD FAILED TO SHOW THAT THE INCOME DISCLOSED DURING SURVEY WAS EARNED FROM BUSINESS. THE ADDITI ON MADE IN ASSESSMENT ORDER WAS UNDER SEC. 69 OF THE ACT TOWARDS UNDISCLO SED INVESTMENT IN STOCK AND EXCESS CASH. THEREFORE, THIS INCOME COULD NOT BE ASSESSED UNDER THE 3 HEAD INCOME FROM BUSINESS. THE LEARNED CIT(A) AC CORDINGLY UPHELD THE STAND TAKEN BY THE ASSESSING OFFICER. 4. BEFORE US THE LEARNED AR OF THE ASSESSEE SUBMITT ED THAT AMOUNT SURRENDERED REPRESENTED THE BUSINESS INCOME. HE PL ACED RELIANCE ON THE DECISION OF ITAT IN THE CASE OF TAJ INTERNATIONAL J EWELLERS VS. ITO IN ITA NO.2522(DEL) OF 2007 FOR ASSESSMENT YEAR 2005-06, D ATED 15 TH JULY, 2009. ON THE OTHER HAND, THE LEARNED SR. DR SUPPORTED THE ORDER OF THE CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF THE ASSESSEE S URVEY UNDER SEC. 133A WAS CONDUCTED ON 23 RD FEBRUARY 2007 WHEREIN THE ASSESSEE WAS FOUND TO B E OWNER OF THE EXCESS STOCK OF RS.14,74,852/- AND EXC ESS CASH OF RS.31,048/-. BEFORE ITAT IN THE CASE OF TAJ INTERNATIONAL JEWELL ERS (SUPRA), THE ISSUE WAS WHETHER THE COMMISSION RECEIVED BY THE ASSESSEE WAS ASSESSABLE AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES. IN THE CASE O F THE ASSESSEE, THE QUESTION IS WHETHER THE EXCESS STOCK AND CASH FOUND DURING THE COURSE OF SURVEY IS INCOME FROM OTHER SOURCES OR BUSINESS INC OME. THERE IS NO DISPUTE ABOUT THE FACT THAT EXCESS STOCK WORTH RS.14,74,852 /- AND EXCESS CASH OF RS.31,048/- WAS FOUND DURING THE COURSE OF SURVEY. THIS IS NOT THE FIRST YEAR OF BUSINESS. THE ASSESSEE HAD BEEN CARRYING ON THE BUSINESS IN EARLIER YEARS ALSO. DURING THE COURSE OF SURVEY PROCEEDINGS VALU ATION OF CLOSING STOCK 4 WAS MADE AT RS.1.10,18,541/- AS AGAINST CLOSING STO CK ON THE DATE OF SURVEY AS PER BOOKS OF ACCOUNT AT RS.95,43,689/- RESULTING EXCESS STOCK OF RS.14,74,852/-. THIS FACT IS EVIDENT FROM THE STAT EMENT RECORDED DURING THE COURSE OF SURVEY AND FINDS MENTION IN ASSESSMENT OR DER. LIKEWISE EXCESS CASH OF RS.31,048/- WAS ALSO FOUND. IT IS NOT THE CASE OF REVENUE THAT THERE WAS DIFFERENCE IN THE QUANTITY. THE ASSESSEE HAS B EEN CARRYING ON BUSINESS IN EARLIER YEARS ALSO. MERELY BECAUSE EXCESS STOCK WAS FOUND WOULD NOT MEAN THAT THE AMOUNT SHOULD BE ASSESSED UNDER SEC. 69 OF THE ACT AND NOT AS BUSINESS INCOME. UNDER SEC. 69 WHEREIN FINANCIAL Y EAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINT AINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLAN ATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OF FERED 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 S UCH FINANCIAL YEAR. THE DIFFERENCE IN VALUATION OF CLOSING STOCK FOUND DURI NG THE COURSE OF SURVEY IS ON ACCOUNT OF TRADING ASSETS OF THE ASSESSEE. THE EXCESS VALUATION OF STOCK COULD BE EITHER DUE TO RATE DIFFERENCE OR DIFFERENC E IN QUANTITY. THE SURVEY PARTY HAD VALUED THE STOCK OF THE ASSESSEE AT RS.1, 10,18,541/- AS AGAINST RECORDED IN THE BOOKS OF ACCOUNT AT RS.95,43,689/-. THERE IS NOTHING ON 5 RECORD TO SHOW THAT THERE WAS DIFFERENCE IN QUANTIT Y OF THE STOCK FOUND. MERELY BECAUSE THERE WAS DIFFERENCE IN VALUATION, I T CANNOT BE ADDED AS INCOME UNDER SEC. 69 OF THE ACT. ACCORDINGLY, IN O UR CONSIDERED OPINION, THE DIFFERENCE IN VALUATION OF CLOSING STOCK IS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES OR AS I NVESTMENT U/S 69 OF THE ACT. LIKEWISE EXCESS CASH FOUND IS ALSO TO BE ASSES SED AS BUSINESS INCOME AND NOT AS INVESTMENT U/S 69 OF THE ACT. THE ASSES SING OFFICER IS THEREFORE, DIRECTED TO TREAT THE EXCESS AMOUNT OF STOCK AND CA SH AS BUSINESS INCOME. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2012. SD/- SD/- (R.P. TOLANI) (K.D. RANJAN) JUDICIAL MEMBER ACOUNTANT MEMBER DATED: 22 ND MARCH, 2012. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.