The ACIT Ratlam, Ratlam V. Shri Rajendra Kumar Surana, Ratlam

ITA 645/Ind/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3676 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-08-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 28-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEB JAIN
• Keywords: Business income; Income from undisclosed sources
• Section: 69; 11; 143(3); 142(1); 133A; 69B; 143(2); 13; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE RAJPAL YADAV, VICE PRESIDENT AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING ITA NO.644/IND/2019 ASSESSMENT YEAR: 2015-16 ACIT RATLAM : APPELLANT V/S VIJAY KUMAR SURANA MANDSAUR : RESPONDENT PAN:AVCPS7476B ITA NO.645/IND/2019 ASSESSMENT YEAR: 2015-16 ACIT RATLAM : APPELLANT V/S RAJENDRA KUMAR SURANA MANDSAUR : RESPONDENT PAN:AMOPS1290C REVENUE BY SHRI RAJEEB JAIN, CIT-DR RESPONDENT BY SHRI S.S. DESHPANDE, AR DATE OF HEARING 03.08.2021 DATE OF PRONOUNCEMENT 30.09.2021 VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 2 O R D E R PER MANISH BORAD, A.M THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCE OF THE REVENUE FOR ASSESSMENT YEAR 2015-16 & ARE DIRECTE D AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEAL S) (IN SHORT LD. CIT], UJJAIN DATED 07.01.2019 WHICH ARE ARISIN G OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHO RT THE ACT) DATED 27.12.2017 FRAMED BY ACIT, RATLAM. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN ITANO.644/IND/2019: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS JUSTIFIED IN TREATING THE UNEX PLAINED EXCESS STOCK FOUND AND SURRENDERED DURING THE COURS E OF SURVEY AS BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT THE EXCESS STOCK OF RS. 3,90,15,2001-, SURREND ERED DURING THE COURSE OF SURVEY, WAS INCOME FROM UNDISC LOSED SOURCES AND NOT RECORDED IN THE REGULAR BOOKS OF AC COUNTS? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN TREATING THE EXCE SS CASH FOUND AND SURRENDERED DURING THE COURSE OF SURVEY A S BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT THE EXCESS CASH OF RS. 9,84,843/-, SURRENDERED DURING T HE COURSE OF SURVEY, WAS INCOME FROM UNDISCLOSED SOURC ES AND THE SAME WAS NOT RECORDED IN THE REGULAR BOOKS OF A CCOUNTS? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 115BBE OF THE LT. ACT, 1961 W OULD NOT BE APPLICABLE IN THE ASSESSEE'S CASE AS THE PROVISI ONS OF SUB- VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 3 SECTION (2) PROHIBIT THE ASSESSEE FROM CLAIMING ANY DEDUCTION IN RESPECT OF EXPENDITURE OR ALLOWANCE. THESE PROVI SIONS ARE EFFECTIVE FROM 01.04.2013. THE FURTHER AMENDED PROV ISION WAS INSERTED ONLY IN RESPECT OF 'SET OFF OF ANY LOS S' WITH EFFECT FROM 01.04.2017? THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN ITANO.645/IND/2019: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS JUSTIFIED IN TREATING THE UNEX PLAINED EXCESS STOCK FOUND AND SURRENDERED DURING THE COURS E OF SURVEY AS BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT THE EXCESS STOCK OF RS. 3,41,51,000/-, SURREND ERED DURING THE COURSE OF SURVEY, WAS INCOME FROM UNDISC LOSED SOURCES AND NOT RECORDED IN THE REGULAR BOOKS OF AC COUNTS? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN TREATING THE EXCE SS CASH FOUND AND SURRENDERED DURING THE COURSE OF SURVEY A S BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT THE EXCESS CASH OF RS. 8,55,607/-, SURRENDERED DURING T HE COURSE OF SURVEY, WAS INCOME FROM UNDISCLOSED SOURC ES AND THE SAME WAS NOT RECORDED IN THE REGULAR BOOKS OF A CCOUNTS? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 115BBE OF THE LT. ACT, 1961 W OULD NOT BE APPLICABLE IN THE ASSESSEE'S CASE AS THE PROVISI ONS OF SUB- SECTION (2) PROHIBIT THE ASSESSEE FROM CLAIMING ANY DEDUCTION IN RESPECT OF EXPENDITURE OR ALLOWANCE. THESE PROVI SIONS ARE EFFECTIVE FROM 01.04.2013. THE FURTHER AMENDED PROV ISION WAS INSERTED ONLY IN RESPECT OF 'SET OFF OF ANY LOS S' WITH EFFECT FROM 01.04.2017? 2. AS THE ISSUES RAISED IN THESE APPEALS ARE COMMON AND RELATE TO ASSESSEES OF SAME GROUP, AT THE REQUEST OF ALL THE VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 4 PARTIES THESE APPEALS WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER FOR SAKE OF CONVEN IENCE AND BREVITY. 3. BRIEF FACTS AS CULLED OUT FROM THE RECORDS ARE T HAT THERE ARE TWO ASSESSEES NAMELY VIJAY KUMAR SURANA & RAJENDRA KUMA R SURANA WHO ARE INDIVIDUALS AND CARRYING ON THE BUSI NESS OF DAL & BESAN MILL. VIJAY KUMAR SURANA IS PROPRIETOR OF M /S PANKAJ DAL & BESAN MILL, DALAUDA AND RAJENDRA KUMAR SURANA IS ASOLE PROPRIETOR OF M/S PANKAJ FOOD PRODUCT DALAUDA. SURV EY ACTION U/S 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF BOTH THE ASSESSEES. IN THE CASE OF ASSESSEE NAMELY VIJAY KUMAR SURANA THE REVENUE AUTHORITIES ON VERIFICATION OF S TOCK AND CASH IN HAND AVAILABLE PHYSICALLY VIZ-A-VIZ AVAILABLE IN THE BOOKS FOUND THAT THE STOCK WAS EXCESS AT RS.3,90,15,200/- AND C ASH WAS EXCESS AT RS.9,84,843/- WHEREAS IN THE CASE OF RAJE NDRA KUMAR SURANA EXCESS STOCK WAS CALCULATED AT RS. 3,41,51,0 00/- AND EXCESS CASH AT RS.855607/-. THE GROUNDS RAISED BY T HE REVENUE IN THE INSTANT TWO APPEALS REVOLVE AROUND THE ISSUE OF EXCESS STOCK FOUND AT THE BUSINESS PREMISES OF BOTH THE AS SESSEES. AS THE FACTS OF BOTH THE APPEALS ARE SAME AND SO ARE T HE ISSUES RAISED BEFORE US, WE WILL ADJUDICATE THE COM MON VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 5 ISSUE RAISED IN THE INSTANT TWO APPEALS ON THE BASI S OF FACTS IN THE CASE OF VIJAY KUMAR SURANA IN ITANO.644/IND/2019 AND OUR DECISION IN THIS APPEAL SHALL APPLY MUTATIS MUTANDIS ON THE REVENUES APPEAL IN THE CASE OF ANOTHER ASSESSEE NAMELY RAJENDRA KUMAR SURA NA IN ITANO.645/IND/2019. 5. PERUSAL OF RECORD SHOWS THAT THE ASSESSEE NAMELY VIJAY KUMAR SURANA FILED THE RETURN OF INCOME FOR A.Y. 20 15-16 ON 30 TH SEPTEMBER 2015 DECLARING TOTAL INCOME OF RS.2,19,71,920/-. CASE WAS SELECTED FOR SCRUTINY FO LLOWED BY SERVING OF NOTICES U/S 143(2) AND 142(1) OF THE ACT. LD. ASSESSING OFFICER CALLED FOR THE DETAILS TO VERIFY AS TO WHETHER THE ASSESSEE HAD OFFERED UNDISCLOSED EXCESS STOCK AND EXCESS CASH IN THE RETURN OF INCOME. IN REPLY T HE ASSESSEE SUBMITTED THAT THE ALLEGED EXCESS STOCK AN D EXCESS CASH TOTALLING TO RS.4,00,00,043/- ( EXCESS CASH OF RS.9,84,843/- + EXCESS STOCK OF RS.3,90,15,200/-) A RE PART OF THE BUSINESS INCOME AND HAVE BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31 ST MARCH 2015. IT WAS ALSO SUBMITTED THAT THE EXCESS STOCK I N HAND HAS ALSO BEEN SHOWN IN THE TRADING ACCOUNT ON THE D EBIT VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 6 SIDE BELOW THE PURCHASER SO AS TO BRING THE STOCK O FFERED TO TAX IN THE REGULAR BOOKS FOR SUBSEQUENT SALES. I T WAS ALSO SUBMITTED THAT THE STOCK IN HANDS ALSO INCLUDE S THE UNSOLD STOCK OUT OF THE EXCESS STOCK DECLARED AT TH E TIME OF INCOME TAX SURVEY. HOWEVER, LD. ASSESSING OFFICE R WAS NOT CONVINCED WITH THE WAY OF DISCLOSING THE EXCESS STOCK IN BOOKS. HE WAS OF THE VIEW THAT THE ENTRY OF EXCE SS STOCK IN THE TRADING ACCOUNT AND CREDIT ENTRY SHOWING UNDISCLOSED INCOME APPEARING IN THE PROFIT AND LOSS ACCOUNT SHOULD BE REMOVED AS IT IS NOT A BUSINESS I NCOME AND THE ALLEGED AMOUNT SHOULD BE DIRECTLY ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. HE ALSO OBSERVED THAT BY MAKING THESE CHA NGES IN THE TRADING ACCOUNT THE NET PROFIT FROM THE BUSI NESS WILL COMES TO RS. 2,11,37,081/- AND THE INCOME FROM OTHE R SOURCES WOULD BE RS.4,00,00,043/- AND AFTER ALLOWIN G THE DEDUCTION UNDER CHAPTER VIA AT RS.1,50,000/- THE LD . ASSESSING OFFICER ASSESSED THE INCOME AT RS.6,09,87 ,124/- . 6. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) WHO AFTER EXAMINING THE FACTS AND THE JUDICI AL VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 7 PRONOUNCEMENTS CONCLUDED THAT THE LD. ASSESSING OFF ICER HAS NOT REJECTED BOOKS OF ACCOUNTS AND THE ASSESSEE HAS RIGHTLY DISCLOSED THE EXCESS STOCK AND EXCESS CASH IN HANDS IN THE BOOKS AS IS GENERALLY DONE BY OTHER ASSESSEES SUBSEQUENT TO THE SURVEY OPERATIONS. LD. CIT(A) ACCORDINGLY ACCEPTED THE BOOK RESULTS OF THE ASSESS EE AND DELETED THE ADDITION MADE BY THE LD. ASSESSING OFFI CER. NOW REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 7. LD. DEPARTMENTAL REPRESENTATIVE (DR) VEHEMENTLY ARGUED SUPPORTING THE ORDER OF LD. AO AND ALSO SUBMITTED T HAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF EXCESS STO CK AND EXCESS CASH AND ALSO FAILED TO PROVE THAT THEY ARE PART OF THE BUSINESS INCOME AND THEREFORE THE SAME SHOULD BE TREATED AS INCOME FROM OTHER SOURCES. LD. DR ALSO SUBMITTED THAT THE ASSESSEE HAS MANAGED THE FIGURES TO SHOW GROSS LOSS IN THE TRAD ING ACCOUNT. 8. PER CONTRA LD. COUNSEL FOR THE ASSESSEE VEHEMENT LY ARGUED REFERRING TO THE WRITTEN SUBMISSIONS FILED BEFORE L D. CIT(A) AND ALSO RELIED ON THE FINDING OF LD. CIT(A) DELETING T HE ADDITION MADE BY THE LD. AO. FURTHER LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT:- VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 8 THE ASSESSEE HAS DEBITED TRADING A/C BY RS.3901520 0/- FOR EXCESS STOCK FOUND AND RS.984843/- EXCESS CASH FOUN D AND CREDITED P & L ACCOUNT 40000043/- TO BRING OUT ALL THE DISCREPANCIES IN TO REGULAR COURSE OF BUSINESS. THE LD. AO DISALLOWED THE EXCESS STOCK DEBITED AND INCOME DECLARED UNDER SURVEY WHICH HAVE BEEN OFFERED IN TR ADING A/C THE LD. AO ONE SIDE DISALLOWED THE PURCHASES(WH ICH HAS BEEN INCLUDED FOR EXCESS STOCK) AND WITHDRAW THE CR EDIT SIDE THE P & L A/C AND ASSUMED THAT BY DISALLOWED BOTH T HE ENTRY THERE IS NO IMPACT ON THE P & L A/C THE AO ERRED BY NOT TAKING THE VALUE OF CLOSING STOCK AT LESSER PRICE A S SURVEY DECLARATION ADDED AS PURCHASES WITH QUANTITY HENCE SAME HAS INCREASE THE QUANTITY OF THE CLOSING STOCK. 3. SO WITHOUT ADJUSTING THE VALUE OF CLOSING STOCK THE AO APPLIED SECTION 115BBE SO IT IS THE CASE OF DOUBLE ADDITION ONE SIDED INCOME IS ASSESSED U/S 115BBE AND OTHER S IDE CLOSING STOCK IS THE PART OF TRADING & PROFIT & LOS S A/C SO THE INCOME ALREADY DECLARED IN P&L A/C. IF ADDITION U/S 115BBE IS CONFIRM THEN DECREASE IN THE CLOSING STOCK ALSO RS.39015200/- AND INCOME FROM BUSINESS IS RS.211370 81/- (I) 39015200/- RESULT INCOME RS.17878119/-(LOSS). 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE REVENUE HAS RAISED THREE GROU NDS OF APPEAL FIRSTLY CHALLENGING THE DELETION OF ADDITION FOR EX CESS STOCK OF RS.3,90,15,200/- SECONDLY, DELETION OF ADDITION FOR EXCESS CASH OF RS.9,84,843/- AND ALSO HAS CHALLENGED THE FINDING O F LD. CIT(A) HOLDING THAT PROVISION OF SECTION 115BBE OF THE ACT ARE NOT APPLICABLE. 10. WE OBSERVE THAT SURVEY ACTION U/S 133A OF THE A CT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSE E ON VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 9 02.03.2015 AND EXCESS CASH OF RS. 9,84,843/- AND EX CESS STOCK OF RS.3,90,15,200/- WAS FOUND BY THE SURVEY TEAM. A PART FROM THE EXCESS CASH AND EXCESS STOCK NO OTHER INCRIMINA TING MATERIAL WAS FOUND. THE EXCESS STOCK WAS PART OF THE TOTAL S TOCK KEPT AT THE ASSESSEES PREMISES AND IS ENTERED IN THE BOOKS AND SHOWN ON DEBIT SIDE THE TRADING ACCOUNT. THE TOTAL OF EXC ESS STOCK AND EXCESS CASH IS RS.4,00,00,043/- AND HAS BEEN SHOWN ON CREDIT SIDE IN THE PROFIT AND LOSS A/C. THE ASSESSEE HAS I NCURRED LOSS DURING THE YEAR AND THE GROSS LOSS IS RS.9,30,341/- . THE CLOSING STOCK AS ON 31 ST MARCH, 2015 IS SHOWN AT RS.8,31,42,600/- WHICH ALSO INCLUDES THE UNSOLD STOCK OUT OF THE EXCESS ST OCK DECLARED AT THE TIME OF INCOME TAX SURVEY. LD. AO HAS QUESTIONE D THE MANNER OF DISCLOSING THE UNDISCLOSED INCOME. LD. AO HAS TR EATED THE TOTAL UNDISCLOSED INCOME AS INCOME FROM OTHER SOURCES LIA BLE TO BE TAXED SEPARATELY AND COMPUTED THE BUSINESS INCOME A T RS.2,11,37,081/-. WE FURTHER FIND THAT LD. CIT(A) D EALT THE ISSUE AFTER EXAMINING THE FACTS OF THE CASE AND ALSO SETT LED JUDICIAL PRECEDENTS OBSERVING AS FOLLOWS: 4.0 THESE, GROUNDS OF APPEAL ARE WITH REGARD TO MAKING ADDITION OF RS 4,00,00,043 U/S 1L5BBE OF IT ACT, 19 61. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS SUBMISSION OF THE APPELLANT IN THIS REGARD. 4.1 THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/ S 133A VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 10 WAS CONDUCTED AT THE APPELLANT'S PREMISES. DURING T HE COURSE OF SURVEY PROCEEDINGS, EXCESS STOCK OF RS 3,90,15,2 00/- AND EXCESS CASH OF RS 9,84,843 WAS FOUND. THE AO HAD AS KED THE APPELLANT TO SUBMIT THE EXPLANATION REGARDING THE; SAID EXCESS STOCK AND EXCESS CASH SO FOUND BY THE, SURVEY TEAM, THE APPELLANT HAD SUBMITTED ITS REPLY BEFORE THE AO BUT THE AO WAS NOT SATISFIED WITH THE REPLY. THE AO HAD ADDED AN AMOUNT OF RS 4,00,00,043/- TO THE APPELLANT'S INCOM E UNDER THE HEAD OF INCOME FROM OTHER SOURCES. THE APPELLANT HAS STATED THAT HE HAD CREDITED' THE ENTERED AMOUNT IN ITS; BOOKS OF ACCOUNT AS BUSINESS INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE APPELLANT HAD SUBMITTED THE BOOKS OF ACCOUNTS SUCH AS CASH BOOK, LEDGER, JOURNAL, PURCHASE BILLS AND VOUC HERS OF EXPENSES AND OTHER DOCUMENTS IN SUPPORT OF ITS BUSI NESS ACTIVITIES. THE AO HAD MADE ADDITION IN THE HEAD OF INCOME FROM OTHER SOURCES. THE AO HAD MADE ADDITION IN THE HEAD OF INCOME FROM OTHER SOURCES. BUT HE HAD N OT BROUGHT ANY EVIDENCE ON RECORD TO ESTABLISH THAT TH E APPELLANT WAS ENGAGED IN THE ANY OTHER ACTIVITIES. 4.3 THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE CI T VS BAJARGANTRADERS DB IT NO 25~/2017 DATED 12.09.2017 HAD HELD ASUNDER:- '2.10.' WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE MATERIAL ASSAILABLE ON .RECORD. DURING THE COURSE OF SURVEY, THE ASSESSEE HAS SURRENDERED AN AMOUNT OF 'RS 7,004 814 TOWARDS INVESTMENT IN STOCK OF RICE WHICH HAD NOT B EEN RECORDED IN THE BOOKS OF ACCOUNTS. SUBSEQUENTLY IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAS INCORPORATED TH IS TRANSACTION BY DEBITING THE 'PURCHASE ACCOUNT: AND CREDITING THE INCOME FROM UNDISCLOSED SOURCES ACCOUNTS, THE PURCHASE OF RS 7004814 WERE FINALLY REFLECTED AS PA RT OF TOTAL PURCHASES AMOUNTING TO RS 331719058 IN THE. PROFIT AND LOSS ACCOUNT AND THE SAME ALSO FOUND INCLUDED A S PART OF THE CLOSING STOCK AMOUNT TO RS 19442569 IN THE PROFIT/LOSS: ACCOUNT: SINCE THE SAID STOCK OF RICE WAS NOT SOLEI OUT. IN ADDITION ITA 142 TO 146/JODH/2018 VASU SINGHALVS ITO WITH 4 ORS CASES TO THE PURCHASE AND THE CLOSING STOCK, THE AMOUNT OF RS7004814 ALSO FOUND C RE4IT~D IN THE PROFIT AND LOSS ACCOUNT AS INCOME FROM UNDI SCLOSED SOURCES THE NET EFFECT: OF THIS DOUBLE ENTRY ACCOUNTING TREATMENT IS THAT FIRSTLY THE UNRECORDED STOCK OF RICE HAS BEEN BROUGHT ON THE BOOKS AND NOW FORMS PART: OF TH E RECORDED STOCK WHICH CAN BE SUBSEQUENTLY SOLD OUT AND PROFIT/LOSS THEREFROM WOULD BE SUBJECT TO TAX AS ANY OTHER NORMAL BUSINESS TR ANSACTION. VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 11 SECONDLY, THE UNRECORDED INVESTMENT: WHICH HAS GONE IN PURCHASE OF SUCH UNRECORDED STOCK OF RICE HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT AND OFFERED TO TAX BY CREDITING THE FILED AMOUNT IN THE PROFIT AND LOSS ACCOUNT. HAD THIS INVESTMENT BEEN MADE OUT OF KNOWN SOURCE, THERE WAS NO NECESSITY FOR ASSESSEE TO CREDIT THE PROFIT/LOSS ACCOUNT AND OFFER THE SAME TO TAX. ACCORDINGLY, WE DO NOT: SEE ANY INFIRMITY IN ASSESSES BRINGING SUCH TRANSACTION IN ITS' BOOKS OF ACCOUNTS AND THE ACCOUNTING TREATMENT THEREOF SO TO REGULARIZE ITS BOOKS OF ACCOUNTS. IN FACT, THE SAME PROVIDES A CREDIBLE BASE FOR REVENUE TO BRING TO TAX SUBSEQUENT PROFIT/LOSS ON SALE D. SUCH. STOCK OF-RICE IN FUTURE. 2.11 HAVING SAID THAT, THE NEXT ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE AMOUNT SURRENDERED BY WAY OF INVESTMENT IN THE UNRECORDED. STOCK OF RICE HAS TO BE BROUGHT TO TAX UNDER THE . HEAD 'BUSINESS INCOME' OR 'INCOME FROM TO HER SOURCES'. IN THE PRESENT CASE, THE ASSESSEE IS DEALING IN SALE OF FOOD GRAINS RICE AND OIL SEEDS AND THE EXCESS STOCK WHICH HAS BEENFOURUI DURING THE COURSE OF SURVEY IS STOCK OF RICE. THEREFORE, THE INVESTMENT IN PROCUREMENT OF SUCH STOCK OF RICE IS CLEARLY IDENTIFIABLE AND RELATED TO THE REGULAR BUSINESS STOCK OF THE ASSESSEE. ' 4.4 IT IS CLEAR FROM THE FINDINGS OF THE HON 'BLE HIGH COURT OF RAJASTHAN THAT THE SURRENDERED INCOME SO DISCLOSED BY THE ASSESSEE WAS P T OF THE BUSINESS ACTIVITY AS NO OTH ER ACTIVITY WAS DONE BY THE APPELLANT DURING THE YEAR AND NO CORROBORATIVE EVIDENCE HAS BEEN BROUGHT ON RECORD B Y THE AO TO PROVE THAT THE INVESTMENT SO FOUND REFLECT ANY OTHE R ACTIVITIES OTHER THAN REGULAR BUSINESS ACTIVITY; IN SUCH A SIT UATION, NO ADDITION CAN BE MADE UNDER THE HEAD INCOME FROM OTH ER SOURCES. 4.5 IN THE INSTANT CASE, THE QUESTION WHICH ARISES FOR THE DETERMINATION IS THAT UNDER WHICH HEAD OF INCOME TH E EXCESS. STOCK/ INVESTMENT FOUND IN SURVEY AND OFFERED BY TH E APPELLANT FOR TAX IS TO BE ASSESSED. ACCORDING TO THE APPELLA NT, SUCH EXCESS STOCK/INVESTMENT WAS A BUSINESS STOCK WHICH HAD ARISEN OUT OF THE UNRECORDED BUSINESS ACTIVITY OF T HE ASSESSEE AND THEREFORE, THE SAME NEEDS TO BE ASSESSED UNDER THE HEAD OF PROFIT AND GAIN OF BUSINESS. DURING THE SURVEY P ROCEEDINGS, THE SURVEY TEAM HAD FOUND UNRECORDED STOCK OF DAL S O FOUND AT APPELLANT'S PREMISES THAT THE APPELLANT WAS ENGAGED IN ITS REGULAR BUSINESS ACTIVITY ONLY. THIS STOCK SO FOUND WAS ,CLEARLY IDENTIFIABLE AND WAS THUS RELATED TO THE REGULAR BU SINESS STOCK OF THE APPELLANT. THE FACTS OF THIS CASE ARE IDENTI CAL WITH THE DECISION OF HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. BAJARGAN TRADERS(SUPRA) SO DISCUSSED ABOVE. THE SAME VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 12 VIEW WAS TAKEN BY THE HON'BLE I.T.A.T. BENCH JAIPUR IN THE CASE OF VASU SINGHAL VS. ITO WITH 4 ORS. THE HON'BL E BENCH OF I.T.A.T. BENCH JAIPUR HAD GIVEN THEIR VERDICT RELYI NG ON THE JUDICIAL DECISION OF HON'BLE AHMADABAD I.T.A.T. BEN CH IN THE CASE OF CHOKSHI HIRALAL MAGANLAL VS. DCIT 141 TTJ ( AHD) 1 DATED 21.01.2011 ON THE SAME ISSUE. THE RELEVANT EX TRACT OF THE DECISION OF HON'BLE AHMADABAD BENCH OF I.T.A.T . IS REPRODUCED HEREUNDER:- EXCESS STOCK FOUND DURING THE COURSE OF SURVEY IS NOT SEPARATE AND CLEARLY IDENTIFIABLE BUT IS PART OF MIXED LOTS FOUND AT THE PREMISES WHICH INCLUDED DECLARED STOCK AS PER BOOKS AND ALSO THE EXCESS STOCK AS COMPUTED BY THE SURVEY OFFICERS , THE PROVISIONS OF SECTION 69B CANNOT BE MADE APPLICABLE AS PRIMARY CONDITION FOR INVOKING THE PROVISIONS OF SECTION 69 A 69B IS THAT THE ASSET SHOULD BE SEPARATELY IDENTIFIABLE AND IT SHOULD HAVE INDEPENDENT PHYSICAL EXISTENCE OF ITS OWN. SINCE EX CESS STOCK IS A RESULT OF SUPPRESSION OF PROFIT FROM BUSINESS OVER THE YEARS AND HAS NOT BEEN KEPT IDENTIFIABLE SEPARATELY BUT IS TH E PART OF OVERALL PHYSICAL STOCK FOUND, THE INVESTMENT IN THE EXCESS STOCK HAS TO BE TREATED AS BUSINESS INCOME AS PER DETAILED REASONS GIVEN IN THE CASE OF FASHION WORLD VS. ACIT ITANO.1634/AHD/2006 4.6 THE APPELLANT HAS SUBMITTED THAT THE AO HAD MAD E THE ADDITION AFTERAPPLYING SECTION 115BBE IN THE APPELLANTS CAS E, DURING THE SURVEY PROCEEDINGS, THE APPELLANT HAD OFFERED ADDITIONAL I NCOME FROM ITS REGULAR BUSINESS ACTIVITY ONLY BEFORE THE SURVEY PA RTY, HENCE, THE APPELLANT HAS FURTHER STATED THAT THE SECTION 115BB E OF THE ACT WOULD NOT BE APPLICABLE IN THE INSTANT CASE. DURING THE C OURSE OF SURVEY PROCEEDINGS, THE EXCESS UNACCOUNTED STOCK OF CHANNA AND CHANA DAL WAS FOUND AND THE ASSESSEE WAS DEALING IN THESE ITE MS ONLY IN ITS REGULAR COURSE OF BUSINESS. THIS CLEARLY SHOWS THAT THE APPELLANT WAS ENGAGED IN ITS REGULAR BUSINESS ACTIVITY ONLY. 4.7 THE APPELLANT HAS FURTHER RELIED ON THE DECISIO N OF JURISDICTIONAL BENCH OF HON'BLE I.T.A.T., INDORE IN THE CASE OF M /S PUMARTH PROPERTIES & HOLDING VS. THE DCIT INCOME-TAX ACT, 1961. NO.954 /IND/2016 A.Y. 2013-14. AS PER THE DECISION OF THE HON'BLE I.T.A.T ., INDORE, THE AMENDMENT IN SECTION 115BBE OF THE ACT WAS EFFECTED FROM 1 ST APRIL, 2017 AND THIS SECTION THUS WOULD BE APPLICABLE FROM THE A.Y.20017-18 AND SUBSEQUENT ASSESSMENT YEARS. THE APPELLANTS CA SE IS PERTAINING TO A.Y. 2015-16, HENCE AS PER THE DECISION OF JURIS DICTIONAL BENCH OF HON'BLE I.T.A.T., INDORE, THE SAID SECTION WOULD NO T APPLY IN THE APPELLANTS. CASE. THE SAME VIEW WAS TAKEN BY THE HO N'BLE SUPREME COURT IN THE CASE OF CIT, MUMBAI VS. M/S. WALFORT S HARE & STOCK BROKERS P. LTD. IN CIVIL APPEAL NO.4927 OF 2010. 4.8 IN THIS CASE, THE AO HAD DEBITED TRADING ACCOUN T BY RS.39015200 FOR EXCESS STOCK FOUND AND RS.984843 FOR EXCESS CAS H FOUND. THE APPELLANT HAS CREDITED THE SAME IN P&L A/C OF RS.40 0000043. THE ENTRIES SO MADE BY THE APPELLANT ARE CORRECT FROM B OTH THE ACCOUNTING AND LEGAL POINT OF VIEW. THIS WAY OF ENTRY BY DEBIT ING THE PURCHASE VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 13 ACCOUNT BY EXCESS STOCK SO FOUND DURING THE COURSE OF SURVEY AND CREDITING THE P & L ACCOUNT IS TO REGULARIZED THE B OOKS OF ACCOUNT AND INTRODUCE THE UNRECORDED SOCK IN THE REGULAR COURSE OF BUSINESS WHILE AT THE SAME TIME, P & L ACCOUNT IS CREDITED BY THE INC OME SO DECLARED REPRESENTING THE EXCESS STOCK. THIS VIEW AND METHOD OF MAKING ENTRY IS ALSO SUPPORTED BY HON'BLE HIGH COURT OF RAJASTHAN I N THE CASE OF CIT VS. BAJARGAN TRADERS D.B. (SUPRA). THE AO HAD DISAL LOWED BOTH THE ENTRIES WHILE PASSING ASSESSMENT ORDER, WHICH WAS T ECHNICALLY WRONG. HENCE, IN VIEW OF THE ABOVE FACTS AND JUDICIAL DECI SION SO DISCUSSED ABOVE, IT IS CLEAR THAT THE APPELLANT WAS MAINLY EN GAGED IN ITS REGULAR BUSINESS ACTIVITIES I.E. OF CHANA & CHANA DAL AND N O OTHER BUSINESS WAS CARRIED OUT BY HIM. FURTHER, THE AO HAD NOT BRO UGHT ANY COGENT EVIDENCE AND FACTS TO PROVE THAT THE APPELLANT HAD EARNED INCOME FROM OTHER SOURCES. THE AO HAD MADE THE DOUBLE ADDITION TO THE APPELLANTS INCOME BY DISALLOWING DEBIT BALANCE OF TRADING ACCO UNT AND CREDIT BALANCE OF PROFIT AND LOSS ACCOUNT. HENCE, IN LIGHT OF THE ABOVE FACTS AND ESPECIALLY THE DECISION OF JURISDICTIONAL BENCH OF HON'BLE I.T.A.T. BENCH, INDORE, THE ADDITION SO MADE BY THE AO IS HE REBY DELETED AND ACCORDINGLY, THESE GROUNDS OF APPEAL ARE ALLOWED. 11. ON PERUSAL OF THE ABOVE FINDING OF LD. CIT(A) A ND THE DECISIONS REFERRED THEREIN WE OBSERVE THAT THE REVE NUE AUTHORITIES HAVE NOT DISPUTED THE FACT THAT THE ASSESSEES ONLY SOURCE OF INCOME IS FROM DAL & BASEN MILL. NO OTHER INCRIMINA TING MATERIAL OR DOCUMENT WAS FOUND DURING THE COURSE OF SURVEY W HICH COULD INDICATE THAT THE ASSESSEE HAS ANY OTHER SOURCE OF INCOME. IT CAN THUS BE CONCLUDED THAT THE ALLEGED EXCESS STOCK IS PART OF THE BUSINESS INCOME OF THE ASSESSEE. IT IS ALSO DISCERN ABLE FROM THE RECORDS THAT WHEN THE STATEMENT WAS TAKEN DURING TH E COURSE OF SURVEY, SON OF THE ASSESSEE NAMELY MAYUR KUMAR SURA NA GAVE REPLY TO VARIOUS QUESTIONS ASKED BY THE SURVEY TEAM . AT PAGES 34 TO 38 OF THE PAPER BOOK DATED 17.12.2020 SHOWS VARI OUS VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 14 QUESTIONS ASKED TO MR. MAYUR KUMAR SURANA AS REGARD S THE ISSUE OF EXCESS STOCK. HE GAVE REPLY THAT PRICE PER QUINTAL OF CHANA IS RS.3,000/- AND PRICE PER QUINTAL TO CHANA DAL IS RS.42000/-. HE WAS ALSO VERY MUCH AWARE ABOUT THE C OST OF STOCK AND ITS LOCATION. HE ALSO STATED THAT SAME STOCK OF THE BOOKS KEPT IN THE FACTORY PREMISES IS OF LOWER QUALITY AND THE ONE KEPT IN THE WHEREHOUSE IS A FINE QUALITY. HE ALSO STATED THAT T HOUGH THE PHYSICAL STOCK SHEET HAS BEEN PREPARED BEFORE HIM B UT STILL THERE SEEMS TO BE SOMETHING MISSING IN THE BOOKS MADE BY THE COMPUTER FOR WHICH HE STATED THAT AT THE POINT OF T IME GIVING STATEMENT HE WAS UNABLE TO RECONCILE. THE CRUX OF T HE STATEMENT GIVEN DURING THE COURSE OF SURVEY ON THE FACTS THAT THE ALLEGED STOCK WAS NOT ACCEPTED TO BE UNDISCLOSED INCOME FRO M OTHER SOURCES BUT WAS A PART OF THE BUSINESS INCOME WHICH REQUIRED SOME RECONCILIATION AS BOOKS OF ACCOUNT WERE NOT CO MPLETED AT THE TIME OF SURVEY PROCEEDINGS. WE ARE OF THE VIEW THAT SINCE THE INCOME ALLEGED EXCESS STOCK AND EXCESS CASH FOUND D URING THE COURSE OF SURVEY IS PART OF THE BUSINESS INCOME, TH E PROVISIONS OF SECTION 115BBE OF THE ACT WOULD NOT BE APPLICABLE A S RIGHTLY HELD BY THE LD. CIT(A) AND ALSO IN VIEW OF THE FACTS THA T THERE WAS AN AMENDMENT IN THE PROVISIONS OF SECTION 115BBE W.E.F . 1 ST APRIL VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 15 2017 AND THE ASSESSEES CASE IS PERTAINING TO A.Y. 2015-16, THUS, IT IS NOT BE APPLICABLE ON THE CASE OF ASSESSEE. 12. AS THE EXCESS STOCK AND EXCESS CASH ARE PART OF THE BUSINESS INCOME WE FURTHER FIND THAT THE MANNER OF DISCLOSIN G THE EXCESS STOCK IN THE TRADING ACCOUNT IS CORRECT. AS IT IS T HE ONLY WAY THROUGH WHICH THE EXCESS STOCK CAN BE BROUGHT INTO THE REGULAR BOOKS. IF THE LD. AO WAS NOT SATISFIED WITH THE BOO K RESULTS HE OUGHT TO HAVE FIRST REJECTED THE BOOKS RESULTS AND THEN ESTIMATED THE PROFITS. THE FOLLOWING FINDING OF THE LD. AO OF TREATING THE UNDISCLOSED INCOME AS INCOME FROM OTHER SOURCES AT RS.4,00,00,043/- AND CALCULATING THE BUSINESS INCOM E OF RS. 2,11,37,081/- IS NEITHER HERE NOR THERE:- ON VERIFICATION OF THE TRADING ACCOUNT OF THE ASS ESSEE AS REPRODUCED ON PAGE 4, IT IS CLEAR THAT THE ASSESSEE PASSED JO URNAL ENTRY IN THE BOOKS OF ACCOUNT DEBITING THE AMOUNT OF RS.3,90,15, 200/-. THIS ENTRY HAS BEEN PASSED WITHOUT ANY BASIS I.E. COPY OF PURC HASE BILLS/VOUCHERS AND PAYMENT MADE FOR THIS PURCHASES. THE EXCESS STO CK FOUND DURING THE COURSE OF SURVEY IS ASSESSABLE AS INCOME FROM O THER SOURCES AND NOT BUSINESS INCOME. IF THIS ENTRY IS REMOVED FROM THE TRADING ACCOUNT, THERE WILL BE GROSS PROFIT OF RS.3,80,84,859/-. SIM ILARLY, THE AMOUNT OF RS.4,00,00,043/- CREDITED IN THE P & L ACCOUNT IS A LSO REQUIRED TO BE REMOVED AND TO BE ADDED IN THE TOTAL INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. IN THAT CASE THE INCOME OF THE ASSESSEE FROM BUSINESS COMES TO RS.2,11,37,081/-. 13. THE ABOVE OBSERVATION OF THE LD. AO CLEARLY IND ICATES THAT HE IS NOT AWARE HOW TO DISCLOSE THE UNDISCLOSED INCOME IN THE BOOKS OF ACCOUNT. IN CASE HE WAS NOT SATISFIED WITH THE B OOK RESULTS, HE VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 16 HAS TO FIRST FIND ERROR/MISTAKE IN THE BOOKS OF ACC OUNT, GIVE DETAILED FINDING ON IT, AND THEN SHOULD HAVE RE-CAS TED THE TRADING ACCOUNT. THE MANNER IN WHICH THE LD. AO HAS MADE AD DITION IS NOT JUSTIFIED AND THUS LD. CIT(A) HAS RIGHTLY DELET ED THE ADDITION BY ACCEPTING BOOK RESULTS SHOWN BY THE ASSESSEE. LD . AO HAS ALSO NOT GIVEN WEIGHTAGE TO THE FACT THAT ONCE THE EXCES S STOCK HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT THEN TH E UNSOLD STOCK AS ON 31 ST MARCH 2015 ALSO FORMS PART OF THE CLOSING STOCK WHICH IS TO BE VALUED AS PER THE METHOD REGULARLY A DOPTED BY THE ASSESSEE. 14. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE, FIND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) DELETING THE IMPUGNED ADDITION MADE BY THE LD. AO A ND HAS ALSO HOLDING THAT THE PROVISIONS OF SECTION 115BBE OF TH E ACT ARE NOT APPLICABLE ON THE ASSESSEE SINCE THE INCOME DECLARE D DURING THE COURSE OF SURVEY IS A BUSINESS INCOME. ACCORDINGL Y ALL THREE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISS ED. 15. NOW WE TAKE UP REVENUE APPEAL IN ITANO.645/IND/ 2019 IN THE CASE OF RAJENDRA KUMAR SURANA RAISING SIMILAR G ROUNDS OF APPEAL AS WERE RAISED IN THE CASE OF VIJAY KUMAR SU RANA (SUPRA) WITH THE ONLY DIFFERENCE OF FIGURE OF EXCESS STOCK AND EXCESS CASH VIJAY KUMAR SURANA & RAJENDRA KUMAR SURANA ITANOS.644 & 645/IND/2019 17 WHICH IN THIS CASE THE EXCESS STOCK IS RS. 3,41,51, 000/- AND EXCESS CASH IS RS. 8,55,607/- AND TOTAL SURRENDERED INCOME IS RS. 3,50,06,607/-. THE ACTION OF THE LD. AO AND FIN DING OF LD. CIT(A) ARE VERBATIM SIMILAR TO ONE GIVEN IN THE CAS E OF ASSESSEE, VIJAY KUMAR SURANA IN ITANO.644/IND/2019 IN ITANO.644/IND/2019(SUPRA). SINCE WE HAVE ALREADY AD JUDICATED THERE ISSUE IN THE CASE OF VIJAY KUMAR SURANA (SUPRA), WE APPLY OUR DECISION MUTATIS MUTANDIS IN THE CASE OF RAJENDRA KUMAR SURANA AND CONFIRM THE FINDING OF LD CIT(A) AND THE REFORE, GROUNDS 1 TO 3 RAISED BY THE REVENUE ARE DISMISSED. 16 . IN THE RESULT, REVENUES APPEALS IN ITANO.644 & 645/IND/2019 ARE DISMISSED. THE ORDER PRONOUNCED AS PER RULE 34 OF ITAT RULES, 1963 ON 30.09.2021. SD/- SD/- (RAJPAL YADAV) (MANISH BORAD) VICE PRESIDENT ACCOUNTANT ME MBER / DATED : 30.09.2021 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE