M/s. Suresh Aluminium, Bhopal V. ACIT, Central Circle-1, Bhopal

ITA 62/Ind/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5150 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-08-2024
• Assessment Year: misc
• Appeal Filed On: 22-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S YASH KUKREJA
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 69; 142(1); 133A; 69B; 69A

Judgement Text

आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE SMC BENCH, INDORE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA No.62/Ind/2024 (Assessment Year: 2019-20) M/s Suresh Aluminium, 10, Jyoti Shoping Compex, Zone-I, MP Nagar, Bhopal Vs. ACIT Central Circle-1, Bhopal (Appellant / Assessee) (Respondent/ Revenue) PAN: ABEFS0206M Assessee by S/Shri Yash Kukreja and H. Chimnani, ARs Revenue by Shri Ashish Porwal, Sr.DR Date of Hearing 06.08.2024 Date of Pronouncement 09.08.2024 O R D E R This appeal by the assesse is directed against the order dated 16.11.2023 of the Commissioner of Income Tax (Appeals)-3, Bhopal for A.Y.2019-20 which is arising from the assessment order u/s 143(3) of the Act dated 03.06.2021 framed by ACIT(Central)-1, Bhopal. 2. Assessee has raised following grounds of appeal: ITA No.62/Ind/2024 M/s Suresh Aluminium 2 “1. That on the facts and circumstances of the case and in law, the Hon'ble CIT-(A) erred in upholding the decision of the Ld. AO to tax the excess stock found during the survey under u/s 115BBE without properly appreciating the facts of the case and the submissions made before him. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT-(A) erred not considering the affidavit filed by the partners of the assessee firm and not considering the fact that the sole source of income of the partnership business is simply the business income. 3.The appellant craves leave to add, amend, modify, or withdraw any of the grounds of appeals at the time of hearing.” 3. Brief facts of the case is that the assessee is a partnership firm engaged in the business of trading in aluminium items. Survey operation u/s 133A of the Act carried out on 27.02.2019 at the business premises of the firm and during the course of survey operation physical stock was taken by the survey team and the assessee surrendered excess stock amounting to Rs.52,25,297/-. Thereafter the assessee filed return of income on 11.09.2019 declaring income of Rs.33,90,310/-. Case selected for compulsory scrutiny followed by validly serving notices u/s 1432) and 142(1) of the Act. During the course of assessment proceedings Ld. A.O observed that the assessee had included the excess stock amounting to Rs.52,25,297/- and paid taxes thereon as per the normal provisions of Income Tax Act. Ld. A.O further observed that ITA No.62/Ind/2024 M/s Suresh Aluminium 3 the income surrendered by the assessee is in the nature of deemed income u/s 69 of the Act as the assessee did not given any explanation about the surrendered income and therefore provisions of Section 115BBE of the Act needs to be invoked. Though it was claimed by the assessee that the surrendered income of the assessee was part of the business income and there being no other business activity carried out by the assessee firm therefore surrendered stock should be taxed as per the normal provisions. The observation of the Ld. A.O of invoking provisions of Section 115BBE of the Act was taken up at the fag end of the conclusion of the assessment proceedings. Finally along with the minor disallowance of Rs.3912/- Ld. A.O assessed the income at Rs.33,94,220/- and applied the provisions of Section 115BBE of the Act so as to calculate the tax on surrendered income at Rs.52,25,297/-. 3.1 Aggrieved assessee preferred appeal before Ld. CIT(A) and made detailed submission referring to plethora of decisions claiming that the surrendered income is purely a business income and also no other incriminating material found during the course of ITA No.62/Ind/2024 M/s Suresh Aluminium 4 survey indicating any other undisclosed sources of income earned by the assessee firm. But Ld. CIT(A) was not satisfied with this submission and he concluded the appellate proceedings observing that the additional income offered by the assessee during the survey is not on account of business income and is therefore liable to be taxed as income from other sources only. 3.2 Dissatisfied with the finding of Ld. CIT(A) now the assessee is in appeal before this Tribunal. 4. Ld. Counsel for the assessee referring to the paper book containing 39 pages which includes audited financial statement, computation of income, statement of the partner recorded during the course of survey proceedings, inventory of stock prepared during the survey proceedings and copy of affidavit of the partner Shri Inder Guwalani dated 10.11.2023 which was filed before Ld. CIT(A) at the first time through which the previous statement given during the course of survey u/s 133A of the Act was modified stating that surrendered stock was not undisclosed investment and the same was earned from suppression of profit from the business ITA No.62/Ind/2024 M/s Suresh Aluminium 5 in the past. Ld. Counsel for the assessee also submitted that the assessee firm is not maintaining quantitative records and calculates the opening and closing stock on estimate basis based on the method of “cost or market rate whichever is less”. He also submitted that on the date of survey, revenue authorities on the basis of their own calculations estimated the cost as per the books and then valued with the physical stock and calculated the excess stock figure. There is no finding of the survey authorities that any excess quantity of stock was found at the assessee’s premises. He thus stated that this is not a case of any undisclosed investment or any other undisclosed income from other source other than the business activity carried by the assessee and is purely business income and therefore provisions of Section 115BBE of the Act should not be applied. Ld. Counsel for the assessee placed reliance on following decisions:- i) ACIT (Central), Ujjain V. M/s Italian Edibles Pvt. Ltd, Indore [(2023) 34ITJ Online 246 (Trib. Indore)] ii) DCIT (Central)-2 Indore Vs. Shri Krishna Kumar Verma, ITAT Indore (185/Ind/2020) ITA No.62/Ind/2024 M/s Suresh Aluminium 6 iii) Shahnai Shriram Market Vs. Income Tax Officer (2018) 5 ITJ Online 268 (Trib. Indore) iv) Shri Premdeep Rajput Vs. ACIT (2023) 10 ITJ Online 239 (Trib.Indore) v) ACIt (Central) v/s Shri Anoop Neema, Indore (2022) 31 ITJ Online 524 (Trib. Indore). vi) Saaras Agro Industries, Khandwa and Other’s V/s ACIT, Khandwa and other’s (2022) 31 ITJ Online 473 (Trib. Indore). 5. Per contra Ld. Departmental Representative vehemently argued supporting the order of lower authorities and further referred to the statement of the partner of assessee firm during the survey proceedings where he admitted to be unable to provide any explanation about the excess stock and therefore surrendered income clearly falls under the category of income specified u/s 69 of the Act which thus attracts the provisions of Section 115BBE of the Act. 6. I have heard rival contentions and perused the record placed before me and have carefully gone through the decisions referred ITA No.62/Ind/2024 M/s Suresh Aluminium 7 and relied by both the sides. The only issue for my consideration is that whether Ld. CIT(A) erred in confirming the action of the Ld. A.O applying the provisions of Section 115BBE of the Act for taxing the surrendered income in the form of excess stock at Rs.52,25,297/- found during the course of survey u/s 133A of the Act. I observe that the assessee has accepted the excess stock and have offered it to tax and paid due taxes as per the normal provisions of Income Tax Act. Ld. A.O invoked provisions of Section 115BBE of the Act treating the surrendered income as unexplained investment and thus calculated the tax on higher rate as provided u/s 115BBE of the Act. 6.1 The question before me is whether the surrendered income is to be treated as ‘business income or as Income from other source u/s 69 of the Act’. For this the nature of surrendered income needs to be examined. Undisputedly except the physical stock taken and calculation of excess stock, no other incriminating material was found during the course of survey nor any other reference to any evidence has been made in the assessment order which could indicate that the assessee carries out any other activity or has ITA No.62/Ind/2024 M/s Suresh Aluminium 8 income from any other source. Now coming to the surrender of excess stock, I note that on the day of survey physical stock was taken and as per the inventory of stock sheet placed at page 37 of paper book 6 items are mentioned and after taking the quantity and applying the rate, value of physical stock calculated at Rs.79,84,723/-. Now for calculating the excess stock, survey team has to take note of the value of stock shown in the books of accounts. Now the assessee admittedly is not maintaining the stock records. This fact is proved firstly, at the time of survey no stock record was found and secondly even in the tax audit report, auditor has not mentioned about any stock records being maintained by the assessee nor any quantitative details is appearing in Form 3CD annexed to Form 3CB. The assessee admits to be calculated the closing stock on an estimated basis applied the method cost or market value, whichever is less and taking gross profit rate into consideration. In other words the closing stock is estimated by the assessee. Now on the date of survey when the survey team noticed that assessee is not maintaining any stock records then they based on the records of opening and closing stock as well as gross turnover calculated the ITA No.62/Ind/2024 M/s Suresh Aluminium 9 stock in hand as per books as on 27.02.2019 at Rs.27,59,426/- and same is referred in Question-18 in the statement recorded during the survey proceedings (copy placed at page-35 of the paper book). I find that there is no calculation by the survey team as to how they arrived at the book stock of Rs.27,59,426/-. It itself proves that survey team has estimated the stock in hand and then calculated the excess stock after reducing the value of physical stock calculated by them. Now the Ld. A.O has invoked the provisions of Section 69 of the Act which provides that “where in the financial year immediately preceding the assessment year, the assessee has made investment which are not recorded in the books of accounts, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of investment or explanation offered by him, is not in the information of the A.O, satisfactory the value of the investments may be deemed to be the income of the assessee of such financial year’. So far as the contentions of the Ld. Counsel for the assessee, it has been claimed through out the proceedings and further supported by the affidavit placed before Ld. CIT(A) that there is no unexplained investment but it is purely business income which accumulated from past ITA No.62/Ind/2024 M/s Suresh Aluminium 10 period and now offered to tax. Now provisions of Section 69 of the Act comes into play when there are certain investment which are not recorded in the books of accounts but in the case of the assessee since the stock records are not maintained and they are merely estimated there is no concrete evidence of any unaccounted investment in stock. Had there been the stock records available at the time of survey and the quantitative details of the same was available in the stock records and then during the course of survey if the excess stock in quantitative form had been found then the case of the revenue could have been more stronger. 6.2 But in the instant case I observe that the assessee estimated the stock at the year end and even the revenue authority have estimated the stock in hand on survey date at Rs.27,59,426/-. But the method applied by survey team for calculating such stock and whether it was actually the stock as per books is nowhere discernable from the records. Further it is also noted that no other incriminating material was found during the survey proceedings. So in all it is purely an exercise based on estimation and there is no concrete evidence put-forth by the revenue authorities which could ITA No.62/Ind/2024 M/s Suresh Aluminium 11 support their action of treating the alleged surrender as Income from other sources and not business Income for invoking Section 115BBE of the Act. 6.3 Under these given facts and circumstances I find that the alleged sum surrendered by the assessee was only to buy peace of mind and it was admittedly business income which has been offered to tax and by no canon can be treated as unexplained investment u/s 69 of the Act. Ld. CIT(A) thus erred in confirming the addition of Ld. A.O of taxing the excess income as per the provisions of Section 115BBE of the Act. Though plethora of decisions have been referred by Ld. Counsel for the assessee which supports the view taken by me, however I would like to first refer and rely to the finding of this Tribunal in the case of Italian Edibles Pvt. Ltd (supra) wherein the Tribunal referring to plethora of decisions held as under: “11. Therefore, once the facts emerging from record shows that the excess stock found during survey was a part of entire lot of stock of assessee, part of which is recorded in books of account and part of the same was not found recorded and therefore, treated as excess stock at the time of survey and consequently surrendered by the assessee and also offered to tax in the return of income then the excess stock cannot be treated as deemed income u/s 69 or 69B of the act in view of the judgment of Hon'ble Rajasthan High Court and Coordinate Bench of this Tribunal cited above. Accordingly, this issue is decided in favour of the assessee and against ITA No.62/Ind/2024 M/s Suresh Aluminium 12 the revenue. The orders of the authorities below qua this issue is set aside. The assessee succeeds to this extent. Accordingly in the facts and circumstances of the case and by following the decision of this tribunal in M/s Brij Mohandas Devi Prasad (supra), we do not find any error or illegality in the impugned order of the CIT(A) same is upheld.” 6.4 Further reliance is placed on the following finding given in the decision of this Tribunal in the case of DCIT V/s Krishna Kumar Verma (supra) as under: “7. After considering the above factual matrix of the case now we proceed to consider the proposition relied by learned representative of both the sides. The Ld. Senior DR has relied on the judgment of Punjab & Haryana High Court in the case of Kim Pharma (P.) Ltd. vs. CIT(supra) to submit that where the amount surrendered during survey was not reflected in the books of accounts and no source from where it was derived was declared by the assessee, then it is assessable as deemed income of assessee u/s. 69A of the Act and not as business income. In this case the Assessing Officer made addition of surrendered amount u/s. 69 of the Act as the assessee could not explain the source from where it was derived by the assessee. In the present case undisputedly the Assessing Officer has not made any addition u/s. 69 or any provision of the Act and has accepted return income of the assessee. In the present case we are in agreement with the contention of the learned AR that the orders of the authorities below clearly reveal that the amount of excess stock & excess cash found during the course of survey business income of the assessee as the assessee is in the business of trading in jewellery, metal of bullion and the excess stock found during the search & survey was accumulated from transaction of metal of bullion carried out in the forward community trading and mediation and the same was surrendered as excess stock and offered to taxation as business of the assessee. The Ld. CIT(DR) could not dislodge the contention and observations of the Ld. CIT(A) that the surrendered amount was pertaining to excess stock & excess cash which was business income of the assessee and such additional income offered by the assessee for taxation was nothing but business income of the assessee. Therefore it was offered for taxation under the head income from business and profession. In the present case since the assessee in his statement recorded during the course of search & survey explained that the source of excess stock was the income earned during the relevant ITA No.62/Ind/2024 M/s Suresh Aluminium 13 financial period from the trading of bullion, jewellery etc. and income from Adat/dalali and regarding excess cash found in his business premises the assessee also explained that though it was not recorded in the books of accounts but it was accrued to him on account of sale of jewellery in cash and the same pertains to his business activity of trading in business of jewellery. Therefore in the present case the assessee has successfully explained the source of excess stock and excess cash found during the course of search & survey operation and surrendered during the said operation. The Ld. CIT(DR) has not disputed or controverted very factual position that the assessee filed return of income including the surrendered amount and which was acceptedby the Assessing Officer without any dispute and without making any further addition in the hands of assessee u/s. 69A or any other section of the Act. In view of above as the assessee has successfully explained and established the source of excess stock and excess cash as his business activity and of trading in jewellery and gems and activity of Adat/dalali thus the benefit of proposition rendered by Hon'ble Punjab & Haryana High Court in the case Kim Pharma (P.) Ltd. vs. Commissioner of Income Tax (supra) is not available for the department in the present case. 8. In view of forgoing discussion we reach to a logical conclusion that the Assessing Officer without making any addition u/s. 69A or any other provision of the Act has accepted returned income of the assessee wherein the assessee has included surrendered amount on account of excess stock and excess cash as business income and has successfully explained the source from where the said surrendered excess stock and excess cash was earned, which was business activity of assessee of trading in jewellery & gems and Adat/dalali in the same field. The coordinate bench of the Tribunal in the various orders including order in the case of Shri Lovish Singhal v/s. ITO (supra) by following the judgment of Hon'ble Rajasthan High Court in the case of Bajrang Traders (supra) observed that the excess stock found during the course of survey and surrendered made thereof was found to be taxable as business income under the head "Income from business & profession". Identical facts and circumstances as noted above have been found to be existing in the present case then the Ld. CIT(A) was correct and justified in dismissing the contention of the AO and holding that the AO was not right in observing that the assessee is liable to be taxed as per provision of section 115BBE. Therefore, we too have no hesitation in concluding that the facts of present case do nothing the impugned income in the clutches of section 69/69A/69B and therefore do not warrant application of section 115BBE at all. We conclude so and dismiss the ground raised by revenue being devoid of merit.” ITA No.62/Ind/2024 M/s Suresh Aluminium 14 6.5 Reliance is further placed on the decision of this Tribunal in the case of ACIT V/s Anoop Neema (supra) wherein this Tribunal observed as under: “8. We on perusal of the above finding and the various judgments and decisions referred hereinabove by Ld. CIT(A) find that the alleged excess stock was not kept separately at any other place and was part of the total business tock found at the assessee's business premises are sufficient enough to indicate that the alleged investment in excess stock is part of the business income we also find that alleged excess stock was duly accepted by assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during search proceedings and therefore is not an undisclosed income as held by the L.d. AO. We, therefore, find no infirmity in the finding of Ld. CIT(A) rightly holding that the provision of Section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing at Rs. 1,41,75,568/-found during the course of search. Thus, grounds no. 1 to 3 raised by the revenue are dismissed”. 6.6 On examining the facts of the instant case and in the light of the above decisions I find that the ratio laid down in these decision is applicable on the facts placed before me and therefore respectfully following the same and also considering the fact that the alleged excess stock was found at the business premises and related to the same business which is carried out by the assessee and more importantly there is no case of difference in quantity of excess stock being found at the business premises and lastly the excess stock has been calculated by the survey team on estimated ITA No.62/Ind/2024 M/s Suresh Aluminium 15 basis only, I reverse the finding of Ld. CIT(A) and Ld. A.O is directed to calculate the tax on the surrendered stock under normal provisions of I.T. Act and not to apply the provisions of Section 115BBE of the Act. In the result Ground No.1 & 2 raised by the assessee are allowed. Ground No.3 being general in nature which needs no adjudication. 7. In the result appeal of the assessee is allowed. Order pronounced in the open court on 09.08.2024. Sd/- (MANISH BORAD) Accountant Member Indore, 09.08.2024 Dev/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore