S.G.& CO.,SOLAPUR V. ACIT, CENTRAL CIRCLE 2(2), PUNE

ITA 1611/PUN/2024

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The case involves S.G. & Co., a partnership firm engaged in the retail and wholesale trading of paints and hardware, which appealed against the order of the CIT(A) that upheld the Assessing Officer's decision to treat excess cash found during a survey as unexplained money under section 69A of the IT Act. The Tribunal considered the arguments and evidence presented, including the firm's accounting of the excess cash as business income and its inclusion in financial statements. The Tribunal referenced similar cases where excess cash and stock found during surveys were treated as business income, leading to the decision to allow the appeal and direct the Assessing Officer to tax the income at the normal rate.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716716 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 13-08-2024
• Other Referred Cases: ITO vs. Nishatbegum Syed Baba Rasool Patel, Vijay Shriram Gundale vs. ACIT, Vidyatai Vijay Gundale vs. ACIT, Rajiv Shriram Gundale vs. ACIT, Bajargan Traders vs. ACIT, Govind Godomal Lulla vs. ACIT, Shri Lovish Singhal vs. ACIT, Late Harilal Mavjibhai Patel vs. ACIT, Yash Construction Co. vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH SRIVASTVA
• Assessee Lawyers: PRATIK SANDBHOR
• Keywords: Set aside; Business income; Unexplained expenditure; Unexplained investment; Principle of natural justice; Rectification of order
• Section: 143(3); 154; 131; 69; 69C; 139; 133A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1611/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2018-19 S.G. & Co., 4157/1, Navi Peth, Pandharpur, Solapur- 413304. PAN : AASFS2260A Vs. ACIT, Central Circle- 2(2), Pune. Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 18.06.2024 passed by Ld. CIT(A), Pune-12 [‘Ld. CIT(A)’] for the assessment year 2018-19. 2. The appellant has raised the following grounds of appeal :- “1. On the facts and in the circumstances of the case and in law the Assessing Officer erred in assessing the excess cash of Rs.8,75,600/- found in the business premises of the appellant u/s 69A of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case and in law the ld CIT(A) erred in not appreciating the fact that the excess cash found in the business premises of the appellant pertains to the Assessee by : Shri Pratik Sandbhor Revenue by : Shri Akhilesh Srivastva Date of hearing : 29.07.2025 Date of pronouncement : 22.08.2025 Printed from counselvise.com ITA No.1611/PUN/2024 2 business of the appellant and the appellant has also accounted for the said cash in its financial statements and therefore the same cannot be assessed u/s 69A of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in not considering the binding judicial decision of Hon'ble ITAT Pune holding that the excess cash found at the business premises of the assessee in the course of survey needs to be assessed as business income. 4. On the facts and in the circumstances of the case and in law the Assessing Officer erred in not taking cognizance of the fact that the appellant has accounted for the cash in its books of accounts and therefore the provision of section 69A could not be invoked. 5. The above grounds of appeal may kindly be allowed to be altered, amended, modified, deleted etc in the interest of natural justice.” 3. Facts of the case, in brief, are, that the assessee is a partnership firm engaged in the business of retail and wholesale trading in Paints and Hardware. A Survey Action u/s 133A of the IT Act was carried out in the business premises of the appellant on 10.08.2017. The return of income u/s 139 was filed by the appellant on 01.10.2018 declaring total income at Rs.62,23,460/- (including undisclosed income of Rs.60,00,000/-). After perusal of records and verification of books of account and other impounded documents, the Assessing Officer passed the assessment order accepting returned income. Out of above assessed income of Rs.62,23,460/- the excess cash of Rs.8,75,600/- found and admitted by the assessee during the survey action was treated as unexplained money u/s 69A of the IT Act and was ordered to be taxed at special rate as per Printed from counselvise.com ITA No.1611/PUN/2024 3 provisions of section 115BBE of the Act. Subsequently, on verification of computation of income, the Assessing Officer noticed that income of Rs.8,75,600/- had been considered as normal income instead of unexplained income u/s 69A of the IT Act, and accordingly, the said income was taxed as per normal provisions, however the same was required to be taxed as per provisions of section 115BBE of the IT Act. Considering the mistake apparent from record, notice for rectification proceedings u/s 154 r.w.s. 143(3) of the IT Act was issued and served upon the appellant. In response to the notice issued, the appellant submitted that the excess cash of Rs.8,75,600/- was found in the shop premises and same is also business income. The reply of the appellant was considered but not accepted by the Assessing Officer. Accordingly, order u/s 154 was passed and excess cash found during the survey proceedings treated as unexplained money u/s/ 69A of the IT Act and taxed as per provisions of section 115BBE of the IT Act. 4. After considering the reply of the assessee, Ld. CIT(A) dismissed the appeal filed by the assessee. 5. It is this order against which the assessee is in appeal before this Tribunal. Printed from counselvise.com ITA No.1611/PUN/2024 4 6. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that during the course of survey u/s 133A of the IT Act, excess stock of Rs.51,15,217/- and excess cash of Rs.8,75,600/- was found and admitted by the assessee and during the course of assessment proceedings u/s 143(3) of the IT Act excess stock of Rs.51,15,217/- was treated as business income and was taxed at normal rate of tax whereas the excess cash of Rs.8,75,600/- found and admitted during the survey was treated as unexplained money u/s 69A of the IT Act and was subject to taxation as per provisions of section 115BBE of the IT Act. However, in the computation of income, normal rate of tax was imposed on above additional income of Rs.8,75,600/- instead of special rate of tax as per section 115BBE of the IT Act. Therefore, the Assessing Officer in 154 rectification proceedings corrected the mistake and revised the computation of tax liability on Rs.8,75,600/-. Against the rectification order u/s 154 passed by Assessing Officer, the assessee furnished appeal before Ld. CIT(A). However, Ld. CIT(A) dismissed the appeal filed by the assessee. Before us, it was the contention of Ld. Counsel of the assessee that the excess cash found at the business premises of the assessee was Printed from counselvise.com ITA No.1611/PUN/2024 5 also result of business transactions and the same was duly recorded in the final books of accounts along with excess stock found and admitted during the course of survey u/s 133A of the IT Act. It was submitted by Ld. AR that when excess stock was treated as business income, the excess cash found and admitted during the course of survey at the business premises of the assessee should also be treated as result of business transactions. Apart from above, it was also the contention of Ld. Counsel of the assessee that coordinate bench of this Jurisdictional Tribunal in the case of ITO vs. Nishatbegum Syed Baba Rasool Patel in ITA No.1351/PUN/2024 order dated 22.05.2025 has already held that the excess stock and cash found at the business premises of the assessee in the course of survey needs to be assessed as business income by observing as under :- “13. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case a survey action u/s 133A of the Act was conducted in the business premises of the assessee during which various discrepancies were found on account of stock, cash in hand and expenditure towards furniture and fixtures. The assessee when confronted, offered the same as additional income, the details of which are as under: Sr. No. Disclosure Amount (Rs.) 1 Declaration on account of excess stock 3,20,25,540/- 2 Declaration on account of excess cash 9,55,920/- 3 Investment in furniture 19,98,263/- -------------- Total 3,49,79,723/- Printed from counselvise.com ITA No.1611/PUN/2024 6 14. We find the Assessing Officer in the assessment order rejected the explanation of the assessee that the same be assessed to tax as normal business income and brought the same to tax u/s 69 / 69C r.w.s. 115BBE of the Act. When the assessee challenged the action of the Assessing Officer in bringing to tax the additional income declared during the course of survey u/s 69 / 69C r.w.s. 115BBE of the Act as against the normal business income, the Ld. CIT(A) / NFAC allowed the appeal of the assessee by holding that the Assessing Officer has wrongly assessed the additional income offered by the assessee u/s 69 / 69C of the Act instead of assessing it as business income, the reasons of which have already been reproduced in the preceding paragraphs. 15. We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. It is an admitted fact that the assessee is engaged in footwear business on retail basis under the name and style of M/s. Patel Shoes Company. The Revenue has no other information or material that the assessee is engaged in any other activity other than the shoe business on retail basis. Under these circumstances, we have to see as to whether the income so offered during the course of survey u/s 133A has to be taxed as normal business income or unexplained investment / unexplained expenditure u/s 69 / 69C r.w.s. 115BBE of the Act. 16. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of Vijay Shriram Gundale vs. ACIT vide ITA No.79/PUN/2023, Vidyatai Vijay Gundale vs. ACIT vide ITA No.80/PUN/2023 and Rajiv Shriram Gundale vs. ACIT vide ITA No.81/PUN/2023, common order dated 03.08.2023 for assessment year 2019-20. We find the Tribunal following the decision of Hon’ble Rajasthan High Court in the case of Bajargan Traders reported in (2017) 86 taxmann.com 295 (Rajasthan) reversed the order of the Ld. CIT(A) and directed the Assessing Officer to consider the excess stock found during the course of survey as normal business income instead of attracting the provisions of section 69B r.w.s. 115BBE of the Act. The relevant observations of the Tribunal read as under: “7. Heard both the parties and perused the material available on record. There is no dispute regarding offering of additional income on account of excess stock for an amount of Rs.37,00,000/- during the course of survey. We note that as rightly pointed by the ld. AR which is not disputed by the ld. DR crediting the said additional income to profit and loss account and by including in the computation of income in the total income of the assessee which clearly demonstrate the assessee offered the same as business income. The ld. AR vehemently submitted the assessee explained the difference in valuation stock as per the books explained by the assessee through answers to Q. Nos. 10 and 11 of the statement u/s. 131 of the Act and also in Printed from counselvise.com ITA No.1611/PUN/2024 7 response to notice invoking the provisions u/s. 115BBE of the Act during the course of assessment proceedings. We note that the Q. No. 10 is reproduced by the CIT(A) at page No. 10 of the impugned order and on perusal of the same, we note that the assessee explained the difference of Rs.37,00,000/- as stock purchased on high demand during the marriage seasons and bills will be received late. Therefore, it can be fairly concluded that the excess stock as found during the course of survey is nothing but business income flowing from assessee’s regular business. 8. The Hon’ble High Court of Rajasthan in the case of Bajargan Traders reported in (2017) 86 taxmann.com 295 (Rajasthan) was pleased to observe that the amount surrendered under unrecorded stock has to be brought to tax under the head “business income” as the excess stock which has been found during the course of survey is the investment in procurement of such stock is clearly identifiable and related to the regular business stock of the assessee. The Hon’ble High Court clearly held the investment in excess stock has to be brought to tax under the head “business income” but not under the head “income from other sources”. The Mumbai Benches of the Tribunal in the case of Govind Godomal Lulla (supra) held undisclosed investment in the case of excess stock found during carrying on business and the same is generated out of business income, no provisions of section 69B of the Act would attract. Further, the Jodhpur Benches of the Tribunal in the case of Shri Lovish Singhal (supra) held the excess stock/cash found during the course of survey is taxable under the business and no provision u/s. 115BBE of the Act is attracted. In the present case as discussed above without any dispute the assessee offered additional income under excess stock during the course of survey and same was entered in the books of account as on the last day of financial year ending on 31-03-2019 and offered the said amounts to tax under the business income. Therefore, in our opinion, the ratio laid down by the Hon’ble High Court of Rajasthan in the case of Bajargan Traders (supra) which was followed by the Jodhpur Benches of Tribunal is similar and identical to the issue in the present case. Therefore, the CIT(A) is not justified in confirming the order of AO in excluding the alleged additional income offered during the course of survey and attracting the provisions u/s. 69B of the Act, consequently, the charging u/s. 115BBE of the Act. Thus, the order of CIT(A) is set aside and the grounds raised by the assessee are allowed. 9. The ld. AR submits that the assessee is not interested to prosecute additional grounds. Hence, the same are dismissed as not pressed. Printed from counselvise.com ITA No.1611/PUN/2024 8 10. In the result, the appeal of assessee is allowed.” 17. We find similar view has been taken by the Tribunal in the case of Yash Construction Co. vs. ACIT (supra) and in the case of Late Harilal Mavjibhai Patel vs. ACIT (supra). Respectfully following the above decisions and considering the fact that the only source of income of the assessee is from retail shoe trading and no other business activity has been found by the Revenue either during survey action or subsequently, therefore, the additional income so declared during the course of survey action has to be considered as business income to be taxed at normal rate instead of applying the provisions of section 69 / 69A / 69B / 69C r.w.s. 115 BBE of the Act. We, therefore, uphold the order of the Ld. CIT(A) / NFAC and dismiss the grounds raised by the Revenue. 18. In the result, the appeal filed by the Revenue is dismissed.” 7. Accordingly, it was the contention of Ld. AR that the provisions of section 69A of the IT Act could not be invoked with reference to excess cash found at the business premises and admitted during the course of survey, consequently for purposes of computation of tax on excess cash found and admitted during the course of survey, provisions of section 115BBE of the IT Act are not applicable. Apart from above, it was also the contention that The Revenue has no other information or material that the assessee is engaged in any other activity other than the paints and hardware business on retail and wholesale basis. 8. On the other hand, Ld. DR relied on the orders passed by the subordinate authorities and requested to confirm the same. 9. Considering the totality of the facts of the case and respectfully following the decision of coordinate bench of this Printed from counselvise.com ITA No.1611/PUN/2024 9 Jurisdictional Tribunal in the case of Nishatbegum Syed Baba Rasool Patel (supra), we find force in the above arguments of Ld. Counsel of the assessee and therefore, we deem it appropriate to set-aside the order passed by Ld. CIT(A) and direct the Assessing Officer to calculate normal rate of tax, instead of special rate of tax as per provisions of section 115BBE of the IT Act, on excess cash of Rs.8,75,600/- found and admitted during the course of survey u/s 133A of the IT Act. Thus, the grounds of appeal filed by the assessee are allowed. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced on 22nd day of August, 2025. Sd/- Sd/- (MANISH BORAD) (VINAY BHAMORE) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 22nd August, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), Pune-12. 4. The Pr. CIT/CIT concerned. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. Printed from counselvise.com "