Income Tax Appellate Tribunal - Indore
Jaya Gupta, Indore vs Assistant Commissioner Of Income Tax, ... on 22 July, 2024
आयकर अपीलीय अिधकरण, इं दौर ायपीठ, इं दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER
AND
SHRI B.M. BIYANI, ACCOUNTANT MEMBER
IT(SS)A No. 1/Ind/2024 (AY: 2020-21)
Smt. Jaya Gupta, ACIT, (Central)-1,
B-4, Rajkamal Complex,
बनाम/ Indore.
Bada Sarafa, Vs.
Indore
(PAN: AFEPG5279C)
(Assessee/Appellant) (Revenue/Respondent)
IT(SS)A No. 2/Ind/2024 (AY: 2020-21)
DCIT, (Central)-1, Smt. Jaya Gupta,
Indore.
बनाम/ B-4, Rajkamal Complex,
Vs. Bada Sarafa,
Indore
(PAN: AFEPG5279C)
(Revenue /Appellant) (Assessee /Respondent)
IT(SS)A No. 15/Ind/2024 (AY: 2020-21)
Shri Shishir Gupta, ACIT, (Central)-1,
B-4, Rajkamal Complex,
बनाम/ Indore.
Bada Sarafa, Vs.
Indore
(PAN: AFWPG1959B)
(Assessee/Appellant) (Revenue/Respondent)
IT(SS)A No. 17/Ind/2024 (AY: 2020-21)
DCIT, (Central)-1, Shri Shishir Gupta,
Indore.
बनाम/ B-4, Rajkamal Complex,
Vs. Bada Sarafa,
Indore
(PAN: AFWPG1959B)
(Revenue /Appellant) (Assessee /Respondent)
Assessee by Shri Kunal Agrawal, AR
Revenue by Shri Ram Kumar Yadav, CIT DR
Date of Hearing 24.06.2024
Date of Pronouncement 22.07.2024
Page 1 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore
IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
आदे श / O R D E R
Per Bench:
The captioned four (4) cross-appeals concerning two different but related assessees are filed by assessees/revenue challenging two separate appeal- orders, one dated 30.11.2023 in case of assessee 'Smt. Jaya Gupta' and other dated 22.12.2023 in case of assessee 'Shri Shishir Gupta', passed by Commissioner of Income-tax (Appeal)-3, Bhopal ["CIT(A)"] which in turn arises out of respective assessment-orders dated 14.09.2021 passed by ACIT, Central-1, Indore ["AO"] u/s 143(3) of the Income-tax Act, 1961 ["the Act"] for assessment-year ["AY"] 2020-21.
2. Since these appeals involve common facts, they were heard together at the request of parties and are being disposed of by this consolidated order for the sake of convenience, brevity and clarity.
3. The background facts giving rise to these appeals are as under:
(i) The assessee Smt. Jaya Gupta was a proprietor of M/s Jaya Jewellers and Shri Shishir Gupta was a proprietor of M/s Shishir Jewellers, both concerns were engaged in the business of jewellery. Smt. Jaya Gupta is mother and Shri Shishir Gupta is son. A survey u/s 133A was conducted upon assessees on 18.04.2019 due to interception of cash and jewellery by the FST/Police of Sarangpur/Pachore Tehsil of Page 2 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 the poll bound Rajgarh District on 18.04.2019 from possession of Shri Vineet Gupta, an employee of M/s Jaya Jewellers, which was subsequently converted into a search u/s 132 on 19.04.2019. The assessees surrendered/disclosed certain incomes during survey/ search. Thereafter, assessments of preceding six years (AYs 2014-15 to 2019-20) were framed u/s 153A and the assessments of current year (AY 2020-21) were framed u/s 143(3) in both assessees. In present appeals, we are concerned with current AY 2020-21 only.
(ii) For AY 2020-21 under consideration, the assessee Smt. Jaya Gupta filed return showing total income of Rs. 3,83,78,390/- including undisclosed income of Rs. 3,32,66,356/- admitted during survey/ search. This undisclosed income had three components, namely excess-stock of Rs. 2,82,91,332/-, cash intercepted by FST of Rs.
40,45,390/- and excess-cash of Rs. 9,29,634/- found at business premise of assessee. In the return of income, the assessee offered these incomes as business income and paid tax at normal rates. While framing assessment, the AO made two modifications, namely (i) the AO taxed these undisclosed incomes already offered by assessee in return at a higher rate of tax treating the same as deemed income u/s 69A/69B r.w.s. 115BBE, and (ii) the AO made a further addition of Rs. 19,45,171/- on account of valuation-difference in excess-stock Page 3 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 and taxed the same also as deemed income u/s 69B r.w.s. 115BBE. Aggrieved by order of AO, the assessee carried matter in first-appeal before CIT(A) whereupon the CIT(A) granted part-relief to assessee in this manner : (i) The CIT(A) accepted non-application of section 69A/69B r.w.s. 115BBE to excess-stock but upheld application of those sections to the cash intercepted by FST and excess-cash found at business premise of assessee and (ii) The CIT(A) reduced addition of Rs. 19,45,171/- to 7,72,375/- on account of valuation-difference in excess-stock and thereby deleted addition to the tune of Rs. 11,72,796/-.
(iii) In the same way, the assessee Shri Shishir Gupta filed return showing total income of Rs. 1,94,67,700/- including undisclosed income of Rs. 1,79,19,678/- admitted during survey/search. This undisclosed income had two components, namely excess-stock of Rs. 1,73,82,909/- and excess-cash of Rs. 5,36,769/- found at business premise of assessee. In the return of income, the assessee offered these incomes as business income and paid tax at normal rates. While framing assessment, the AO made two modifications, namely (i) the AO taxed these undisclosed incomes already offered by assessee in return at a higher rate of tax treating the same as deemed income u/s 69A/69B r.w.s. 115BBE, and (ii) the AO made a further addition of Page 4 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Rs. 9,43,717/- on account of valuation- difference in excess-stock and taxed the same also as deemed income u/s 69B r.w.s. 115BBE. Aggrieved by order of AO, the assessee carried matter in first-appeal before CIT(A) whereupon the CIT(A) granted part-relief to assessee in this manner : (i) The CIT(A) accepted non-application of section 69A/69B r.w.s. 115BBE to excess-stock but upheld application of those sections to excess-cash found at business premise of assessee and (ii) The CIT(A) deleted the addition of Rs. 9,43,717/- on account of valuation-difference of excess-stock fully.
(iv) Now, both sides are aggrieved by the order of CIT(A) and have come in the captioned cross-appeals for their respective grievances.
4. The grounds taken by parties are as under:
Assessee's IT(SS)A No. 1/Ind/2024 in Smt. Jaya Gupta:
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO by treating the excess cash found at the business premise amounting to, Rs. 9,29,634/- as unexplained money u/s 69A r.w.s. 115BBE of the Act.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO by treating the cash sale proceeds of Rs. 40,45,390/- equivalent to 1687.560 gms. of jewellery stock sold sent on approval intercepted by the FST as unexplained money u/s 69A r.w.s.
115BBE of the Act.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO of taxing the excess cash found at business premises u/s 115BBE of the act.
Page 5 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO of taxing the cash sale proceeds of Rs. 40,45,390/- equivalent to 1687.560 gms. of jewellery stock sold sent on approval intercepted by the FST u/s 115BBE of the act.
5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the addition to the extent of Rs. 7,72,375/- made by the Ld. AO u/s 69B and taxing the same u/s 115BBE of the act.
Revenue's IT(SS)A No. 2/Ind/2024 in Smt. Jaya Gupta:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the assessee's appeal ignoring that the undisclosed income surrendered on account of excess stock found during the search/survey action is liable to be taxed at the rate stipulated u/s 115BBE of the Income-tax Act, 1961 ?
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that excess stock found during search/ survey proceedings was to be charged under the head of 'income from business or profession' at normal rate instead of as per provision of section 69B r.w.s. 115BBE of the Act, ignoring that
a) it is an admitted fact that the excess stock was not entered in the books of accounts at the time of survey/search?
b) mere subsequent recording of excess stock found during survey in the books of accounts by the appellant does not make such excess stock belonging to his disclosed business since assessee has failed, not only during survey/search but also during assessment as well as appellate proceedings, to provide any verifiable evidences regarding the source of investment in such purchases and the purchase bills/challans/debit/ credit notes/vouchers for expenses/receipts, the source of funds being received/transferred through banking channels/etc.?
c) assessee claiming that the Revenue did not find any other business during the survey/search, is a ploy of assessee to shift the initial burden on the Department, which is contrary to the provisions of section 69B (which clearly places the initial burden on the assessee) and the assessee has not discharged that burden despite having ample opportunity?
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the excess stock cannot be brought under the mischief of sections 69B r.w.s. 115BBE, without appreciating: Page 6 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
a) the broad scheme of sections 68 to 69D read with amended provisions of section 115BBE whereby as per statute itself the appropriate incomes reflected even in return of income, furnished u/s 139, get covered?
b) Without prejudice to the above, the wording of section 69B states "for any source of income"?
4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in restricting the addition, on account of valuation of excess stock, to Rs. 7,72,375/- (out of Rs. 19,45,171/-) ignoring that:
a) the assessee has failed to prove the date of purchase of excess stock?
b) valuation of the excess stock has, accordingly, been done at the prevailing market rate?
c) the facts on which relief has been allowed, amounts to admission of additional evidence in contravention of Rule 46A?
Assessee's IT(SS)A No. 15/Ind/2024 in Shri Shishir Gupta:
1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO by treating the excess cash found of Rs.
5,36,769/- at the business premise, as unexplained money u/s 69A r.w.s. 115BBE of the Act.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO of taxing the excess cash found at business premises u/s 115BBE of the Act.
3. The appellant craves leave to add any new ground of appeal or alter, amend or delete any of the above grounds of appeal.
4. On the facts and circumstances of the case, the assessment order is null and void as the same is in violation of CBDT Circular No. 19/2019 requiring mandatory DIN.
Revenue's IT(SS)A No. 17/Ind/2024 in Shri Shishir Gupta:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the additional income offered in respect Page 7 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 to the excess stock of Rs. 1,73,82,909/- detected during the course of survey/search be taxed under the head of 'income from business or profession' to, be charged at normal rate instead of the rate stipulated u/s 115BBE of the Act, ignoring that:
a) It is an admitted fact that the excess stock was not entered in the regular books of accounts at the time of survey/search?
b) It is an admitted fact that during survey, the assessee had no explanation for the excess stock and accordingly admitted above stock as his unaccounted income?
c) Mere subsequent recording of excess stock found during survey in the books of accounts by the appellant does not make such excess stock belonging to his disclosed business since assessee has failed, not only during survey/search but also during assessment as well as appellate proceedings, to provide any verifiable evidences regarding the source of investment in such purchases and the purchase bills/challans/debit/ credit notes/vouchers for expenses/receipts, the source and mode of payment, etc.?
d) Without prejudice to the above, mere subsequent recording of excess stock found during survey in the books of accounts by the appellant without verifiable/auditable evidences as stated above makes such recording itself ab initio invalid?
e) Without prejudice to the above, the claim that Revenue did not find any other business during the survey/search, is a play to shift the initial burden on the Department, which is contrary to provisions and scheme of sections 68 - 69D, which clearly places the initial burden on the assessee, and the assessee has not discharged that burden despite having ample opportunity both during the assessment as well as appellate proceedings?
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the excess stock duly explained by the assessee while the assessee failed to submit the bill or purchase, genuineness of such purchases by identifying sellers, showing mode and source of payment?
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 9,43,717/- made on Page 8 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 account of valuation differences and accepting the average rate adopted by the assessee even though the assessee has not submitted any proof of purchase of excess stock?
5. At the time of hearing, Ld. AR for assessee accepted that the Ground No. 3 of assessee Shri Shishir Gupta's IT(SS)A No. 15/Ind/2024 is a general ground and Ground No. 4 of same appeal is a legal ground but the assessee is not pressing the same. Therefore, Ground No. 3 and 4 are treated as non- pleaded and not taken for adjudication. In the subsequent discussions, we would be taking up only rest of the grounds for adjudication.
6. Ld. Representatives of both sides are ad idem that the effective grounds for adjudication precisely raise two issues as under:
(i) Whether the provisions of deemed income and higher rate of tax u/s 69A/69B/115BBE were applicable to the income admitted and offered by assessees in the form of excess-stock, cash intercepted by FST and excess-cash found at business premises? [Ground No. 1 to 4 of assessee's appeal and Ground No. 1 to 3 of revenue's appeal in Smt. Jaya Gupta + Ground No. 1 to 2 of assessee's appeal and Ground No. 1 to 2 of revenue's appeal in Shri Shishir Gupta].
(ii) Whether the addition made by AO on account of valuation-difference in excess-stock is to be sustained? [Ground No. 5 of assessee's appeal Page 9 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 and Ground No. 4 of revenue's appeal in Smt. Jaya Gupta + Ground No. 3 of revenue's appeal in Shri Shishir Gupta].
Accordingly, in the subsequent discussions, we proceed to adjudicate these issues one by one.
Issue of applicability of higher rate of tax u/s 69A/69B r.w.s. 115BBE to excess-stock, cash intercepted by FTS and excess-cash:
7. The short issue here is whether the excess-stock found during survey, cash intercepted by FST and excess-cash found at business premises were rightly offered by assessee as business income or whether they attracted higher rate of tax u/s 69A/69B r.w.s. 115BBE?
8. To adjudicate this issue, we would look into the vital facts as emerging from explanation/submissions made by assessee before lower-authorities. Firstly, when the authorities found excess-stock, cash intercepted by SFT and excess-cash at business premises on 18.04.2019 and interrogated the assessee during survey on the very same day of 18.04.2019, the assessee made following replies:
Statements recorded during survey on 18.04.2019:
न 18: आयकर सव ण क कायवाह के दौरान इस यावसा यक
प रसर म नकद भौ तक स यापन कया गया, M/s Jaya Jewellers का
नकद . 13,91,930/- पाया गया एवं M/s Shishir Jewellers का
Page 10 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore
IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
नकद 15,29,800/- पाया गया, जब क M/s Jaya Jewellers क
लेखा पु ि तकाओं के अनु सार cash in hand . 4,62,296/- बताया गया
है , इसी कार M/s Shishir Jewellers क लेखा पु ि तकाओं के अनु सार cash in hand . 9,93,031/- बताया गया है । कृ पया भौ तक स यापन एवं बु क के अनु सार नकद म अंतर के कारण को प ट कर ।
उ तर 18: भौ तक स यापन के दौरान जो भी नकद क ाि त क गई है , उसक गणना हमारे स मु ख हो गयी है , भौ तक स यापन एवं लेखा पु ि तकाओं के अनु सार नकद से न न ल खत अंतर ा त हु ए है:
(1) M/s Jaya Jewellers : Rs. 9,29,634/-
(2) M/s Shishir Jewellers : Rs. 5,36,769/-
Total Rs. 14,66,403/-
ा त नकद म अंतर हमार फम वारा कताब (लेखा पु ि तकाओं) के बाहर जो ब क गई है, उसी से संबं धत है । यह ब चालू व त वष 2019-20 से संबं धत है । इस सं बंध म और अ धक व तृ त जानकार बाद म आपके सम तु त कर दू ं गा ।Page 11 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Page 12 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Page 13 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Page 14 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Page 15 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 न 28 : या आप कु छ कहना चाहते है ॽ उ तर: आयकर सव ण क कायवाह के दौरान वभाग वारा जो भी वसंग तयां हमारे स मु ख लाया गया है उसी के आधार पर हमने अपने फम म यवसा यक ग त व धय से अिजत अघो षत आय के प म करारोपण हे तु सम पत कया है । िजसका ववरण न न है :Page 16 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Page 17 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
9. Secondly, when the authorities re-interrogated assessee during search u/s 132(4) on 19.04.2019 qua those very issues, the assessee again made following replies:
Statements re-recorded u/s 132(4) during search on 19.04.2019:
न 5 : कृ पया बताये क आप ी वनीत गु ता को जानते हैॽ
उ तर : जी हाँ। म एक वनीत गु ता को जानता हू ँ जो क हमार माताजी क फम
M/s Jaya Jewellers के एक कमचार है िज ह इस फम से . 18000/- pm वेतन
का भु गतान चेक वारा कया जाता है ।
न 6 : कसी व नत गु ता को पु लस पचोर, सारं गपु र(राजगढ़) वारा वेलर एवं
नकद के साथ पकड़ा है िजसका खबर दै नक अखबार म भी आया है या व नत
गु ता वह ं है जो आपके कमचार ह ।
उ तर 6 : जी हाँ। व नत गु ता मेरा ह कमचार है जो मेरे यहाँ लगभग पछले 5 वष से Salesman के प म कायरत है । वे हमार फम M/s Jaya Jewellers का कुछ माल लेकर पचोर ि थत पा टय को डल वर करने गये थे िजसे पचोर पु लस ने ग ती के दौरान नकद एवं वण आभु षण के साथ गर तार कया है। ी व नत गु ता वारा carry कए जा रहे वण आभू षण 990.94 gram हमार फम Jaya Jewellers क stock in Trade है तथा ी व नत गु ता से ज त क गई रा श . 40,45,390/- फम Jaya Jewellers क यवसा यक ग त व धय से अिजत क गई अघो षत आय है िजसक वीकृ त मेरे वारा सव ण क कायवाह के दौरान दज कए गए शपथपू व क बयान म क जा चु क है ।
न 7 : आयकर सव ण क कायवाह के दौरान इस प रसर से संचा लत फम के Books के अनु सार दखाए जा रहे नगद से यादा नगद ा त हु ए है । िजसे सव ण के दौरान आपके वारा दज कराए गए शपथपू व क बयान म संबं धत फम क Page 18 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 वण आभु षण के यवसाय से लेखा पु तक से बाहर क गई यावसा यक ग त व धय से ा त unaccounted income संबं धत फम का वीकार कया गया है । िजसके अंतगत Jaya Jewellers का . 9,29,634/- तथा Shishir Jewellers का . 5,36,769/- को अघो षत आय के प म वि तय वष 2019-20 के लए वीकार कया गया है । इस संबंध म बताए क चू ं क दोन फम के कुछ खच आपके वारा लेखा पु तक म दज नह ं कया गया है तो य न Jaya Jewellers के करण म 9,50,000/- तथा Shishir Jewellers के करण म 5,50,000/-
unaccounted cash के प म ज त कर लया जाए । उ तर 7 : मेरे वारा कायवाह के दौरान दज कराए गए शपथपू व क बयान म भौ तक
स यापन के दौरान पाए गए नकद एवं लेखा पु तक के अनु सार नगद म अंतर को संबं धत फम क अघो षत आय िजसे यवसा यक ग त व धय से अिजत क गई है, को व तीय वष 2019-20 के लए करारोपण हेतु सम पत कया गया है । यह स य है क कुछ फुटकर नकद खच क entry हमारे फम के लेखा पु तक म दज करने से रह गई है । अतः वभाग वारा Jaya Jewellers के करण म . 9,50,000/- एवं Shishir Jewellers के करण म . 5,50,000/- क ज ती म हम कोई आपि त नह ं है ।
न 8: ी व नत गु ता से FST-Sarangpur वारा ज त क गई रा श . 40,45,390/- को आपके वारा दज कराए गए शपथपू व क बयान सव ण कायवाह के अंतगत फम Jaya Jewellers क यवसा यक ग त व धय से अिजत क गई अघो षत आय वि तय वष 2019-20 के लए वीकार क गई है । इस संदभ म बताए क य न वभाग वारा FST-Sarangpur से उपरो त . 40,45,390/- ा त कर ज त कर लया जाए । उ तर 8: जी हाँ । हमारे वारा ी व नत गु ता से ज त क गई रा श . 40,45,390/- को फम M/s Jaya Jewellers क अघो षत आय के प म वीकार
कया गया है । अतः वभाग य द FST-Sarangpur से उ त नकद रा श को ज त कर ा त करता है तो मुझे कोई आपि त नह ं है ।Page 19 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
10. Thirdly, the assessees recorded surrendered income in its books of account by means of appropriate entries and included the impugned income in Trading and P&L A/c and also offered the same as part of 'business income' in the returns of income filed to department [Page 50 & 27 of Paper- Book of Smt. Jaya Gupta and Page 62 & 39 of Paper-Book of Shri Shishir Gupta].
11. Fourthly, during assessment-proceedings when the AO show-caused assessees, the assessees filed detailed replies to AO re-explaining the original facts as stated in the statements recorded in survey/search and also demonstrating as to why the surrendered income were in the nature of 'business income' and the provisions of sections 69A/69B r.w.s. 115BBE were not applicable. The assessees also filed duly sworn affidavits alongwith replies in support of the facts. Copies of assessees' reply-letters with affidavits are filed at Page 68 to 86 of Paper-Book of Smt. Jaya Gupta and Page 67 to 81 of Paper-Book of Shri Shishir Gupta.
12. However, the AO rejected assessee's entire explanation/submission while passing assessment-order and treated the assessee's income as deemed income u/s 69A/69B r.w.s. 115BBE and charged tax at higher rate.
13. During first appeal, the CIT(A) passed following order in case of Smt. Jaya Gupta (and the order passed in Shri Shishir Gupta is also on similar Page 20 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 lines). The CIT(A)'s order has dealt the case of assessee for AY 2019-20 as well as 2020-21 but since we are concerned with AY 2020-21 only in present appeals, we have removed or striken through the unnecessary details of AY 2019-20:
"3.1.4 I have duly considered the discussion made in the assessment order, submission by AO and submission made by the appellant. Briefly facts of the case are that initially a survey action u/s 133A of the Act was carried out in the case of appellant on 11.10.2018 and during the course of survey on 11.10.2018 various discrepancies by way of stock were found and physical valuation of the stock was done by the registered valuer. The total stock of gold jewellery was found at 18301.716 gms, however, the stock as per audited books of the appellant was 14531.136 gms. Therefore excess stock of 3770.580 gms amounting to Rs. 97,82,694/- was found during the course of survey. The appellant voluntarily offered the sum of Rs. 97,82,694/- as additional income under the head income from Business and profession and due taxes were paid at normal rates.
3.1.5 Thereafter, the FST and police team Pachor Distt Rajgarh intercepted cash of Rs. 40,45,390/- along with jewellery weighing 990.94 gms from possession of Shri Vineet Gupta on 18.04.2019 and subsequently an information was passed to District Officer and ITO, Rajgarh. The District Officer on receipt of information issued summons to Shri Vineet Gupta on 18.04.2019 and his statement was recorded. In his statement when enquired about source of cash and jewellery, he in reply stated that he is an employee of M/s Jaya Jewellers, Indore, proprietary concern of appellant and cash & jewellery found in his possession was part of total 2678.50 gms gold jewellery which have been sold in cash to five different parties of Sarangpur. In order to verify veracity of statement of Shri Vineet Gupta, summons u/s 131(1A) of the Act were issued to the purchasers. Statements of purchasers were recorded wherein all of them denied to having any such cash purchase. Consequently, survey proceedings u/s 133A of the Act were carried out at the business premises of the appellant on 18.04.2019. During the course of survey excess stock of gold jewellery of 10621.225 gms (including gold jewellery of 990.940 gms) was found and excess cash of Rs. 9,29,634/- was also found. On the basis of above facts, the survey proceedings were converted to search proceedings u/s 132 of the Act on 19.04.2019 and statement of Shri Shishir Gupta was recorded u/s 131(A) on 18.04.2019 & 19.04.2019. In his statement Shri Shishir Gupta surrendered sum of Rs. 2,82,91,332/- for excess jewellery found of Rs. 10621.255 gms on account of investment made out of unaccounted income earned from out of books business operations in the case of M/s Jaya Jewellers for AY 2020-21 at an average rate of gold jewellery as Page 21 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 per books of account of M/s Jaya Jewellers. He also surrendered cash of Rs.
40,45,390/- (intercepted by FST team) and excess cash Rs. 9,26,634/-found during survey from business premises in the hands of appellant in AY 2020-
21. The appellant has offered surrendered income to tax at normal rate of taxation as business income. Thus, as a result of both survey proceedings on 11.10.2018 & 18.04.2019 and search proceedings on 19.04.2019, the appellant admitted following undisclosed income for the years under consideration and offered for taxation at the normal rate:-
Sr. AY Head of disclosure Amount of disclosure
No. (Rs.)
1 2019-20 Excess Stock 97,82,694/-
2 2020-21 Excess Cash 9,29,634/-
3 2020-21 Excess Stock 2,82,91,332/-
4 2020-21 Cash intercepted by FST and 40,45,390/-
Police team
The appellant has submitted that the excess cash & excess stock have been generated out of regular business activities and there was no other source of income except income from business of trading of gold jewellery. Therefore, in view of the various judgements, as reproduced in the foregoing paras, the above income should be treated as income from business only. On other hand, the AO, in view of various judicial pronouncements, as mentioned in the assessment order has submitted that the appellant has miserably failed to furnish any evidence like bills, payment proof, transport bills, vouchers etc in support for its claim that the excess cash and stock found during survey was accumulated over a period of time. The appellant has also failed to explain how and when such suppressed income i.e. excess stock and cash was earned. Therefore, the income declared by the appellant falls under the provisions of section 69A/69B of the Act. I find significant force in the findings of the AO qua excess cash (Rs. 9,29,634/-) and cash intercepted by the FST team and police (Rs. 40,45,390/-). In the light of AO's finding explainability of the suppressed income by way of excess cash and excess stock need to be examined here. The discussion in this regard is being made hereunder:-
(i) Excess cash of Rs. 40,45,390/- & Rs. 9,29,634/-:-
The appellant has contended that the excess cash of Rs. 9,29,634/- found during search proceedings on 19.04.2019 has been generated out of unrecorded business transactions and suppression of profit over years. It is an undisputed fact that the appellant has offered this excess cash in the return of income filed for the year under consideration and has paid taxes at normal rates rather than rates as per provisions of section 115BBE of the Act.
Further, in respect of cash intercepted by the FST and police team it has been contended that the cash found was generated out of sales made by Shri Vineet Gupta to various persons. The appellant during appellate proceedings Page 22 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 submitted that cash found from possession of Shri Vineet Gupta amounting to Rs. 40,45,390/- was generated from sale of gold jewellery weighing 1687.56 gms which was part of entire gold jewellery weighing 2678.50 gms handed over to Shri Vineet Gupta for sale to various persons at Sarangpur and the balance gold jewellery weighing 990.94 gms was found by FST and police team. The appellant has also claimed that the gold jewellery weighing 2678.50 was shown as outwards for sale in books of accounts of M/s Jaya jewellers. Similar, claim was made by Shri Vineet Gupta in his statement recorded by the District Officer on 18.04.2019. The appellant has further claimed that Shri Vineet Gupta has also furnished names of the person to whom gold jewellery weighing 1687.56 gms was sold. In order to ascertain veracity of the claim of Shri Vineet Gupta, summons were issued to the concerned parties, wherein, all of them had denied of having any such transaction with Shri Vineet Gupta. Statement of Shri Shishir Gupta was also recorded during search proceedings, wherein vide Q.No 24, he was required to explain the source of cash and jewellery found from possession of Shri Vineet Gupta and also to furnish details of the buyers who had made purchase transaction with Shir Vineet Gupta. Shri Shishir Gupta, in reply submitted that Since, the buyers have denied to own the transaction, therefore, he was unable to furnish details of the buyers and voluntarily offered sum of Rs. 40,45,390/- as additional income of M/s Jaya Jewellers. It is an undisputed fact that the appellant has offered this income in the return of income filed for AY 2020-21 and has paid taxes at normal rates rather than rates as per provisions of section 115BBE of the Act.
Considering, the above facts, I find that the appellant neither during survey/search proceedings nor during assessment proceedings or during appellate proceedings has explained the nature and source of generation of excess cash of Rs. 9,29,634/- and for cash of Rs. 40,45,390/- has shown his inability to explain its nature and source with supportive evidences. Though the appellant has claimed that the same has been generated from regular business activities of trading in gold jewellery, however, the relevant bills supporting suppression, like unaccounted purchase bills, recorded sales bills, details of sellers/purchasers, year in which transaction executed etc, have not been furnished so that it cannot be presumed that the said cash of Rs. 9,29,634/- pertained to business only. Further, qua cash of Rs. 40,45,390/-, the appellant has failed to furnish necessary details like name of the buyers, details of gold jewellery sold, confirmation from the buyers etc. I find myself in agreement with the view taken by the AO that the appellant has not explained nature and source of excess cash and does not prove that the income was earned from the regular business activities of the appellant. I find that during the assessment as well as appellate proceedings, the appellant did not submit any valid piece of evidence to prove generation of unaccounted cash from regular business activities. The Primary onus is casted upon appellant to prove the nature and source of excess cash as per provisions of section 69A of the Act. However, the appellant has not discharges its onus to establish that whether the excess cash was either earned out of sale or recovery made from Page 23 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 the debtors etc or from suppression of profit. The details for suppression of profit over a period of time have not been put forth on record by the appellant. The manner in which such suppression was made has not been explained by the appellant. No sale bill in this regard has been brought on record by the appellant. In absence of these vital details, it cannot be said that the excess cash has been generated from the same business in which the appellant had been engaged. Further, the AO can always examine the nature and source of any transaction entered in the books of account. The assessee has to prove such entry by placing cogent evidences before the AO. Further, during survey/search, the appellant had no explanation to prove nature and source of excess cash and accordingly, admitted above cash as his unaccounted income and subsequently offered for taxation. Thus, there is substantial force in the findings of AO that mere claiming that the cash has been generated out of business activities, is of no proof and does not make it explainable as per section 69A of the Act. Here, the appellant has failed to explain nature and source of cash of Rs. 9,29,634/- and Rs. 40,45,390/-. Summarising the above discussion, it can be said that (i) the appellant was found to be owner of money i.e. excess cash of Rs. 40,45,390/-; (ii) the employee of appellant was found in possession of cash of Rs. 40,45,360/- which belonged to the appellant; (iii) the excess cash was not recorded in the books of account of any source (i.e. books of business in present case) maintained by the appellant; and (iv) the appellant has himself admitted that the excess cash of Rs. 9,29,634/- and Rs. 40,45,360/- found from his premise and as intercepted by FST and police team is earned from undisclosed sources. Therefore, the nature and source of such cash cannot said to be explained. Hon'ble ITAT, Indore in the cases of Shri Shyamlal Goyal and others ITA No. 245-247/Ind/2021, order dated 29.06.2022, A.Y.2019-20, has held as under:
"7. Section 115BBE reads as under:
"115BBE. (1) Where the total income of an assessee, --
(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or
(b) determined by the Assessing Officer includes any income referred to in section 68, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of -
(i) the amount of income-tax calculated on the income referred to in clause
(a) and clause (b), at the rate of sixty per cent; and
(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).Page 24 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 (2) XXX"
8. A perusal of section 115BBE makes it clear that once the total income of an assessee includes any income referred to in section 69A, the tax is payable in accordance with that section. There is no ambiguity in the law of section 115BBE.......
Thus, in his reply the assessee has himself accepted that "the excess cash of Rs. 7,57,290/- found from his premise is earned from undisclosed sources, therefore he is unable to give explanation of its source".
9. Now we proceed to check whether this statement of assessee fits in the clutches of section 69A or not.
Section 69A "69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewelry or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewelry or other valuable article may be deemed to be the income of the assessee for such financial year." Thus, section 69A is applicable if three conditions are satisfied, viz. (i) the assessee is found to be owner of any money; (ii) such money is not recorded in the books of account maintained for any source of income; and
(iii) the assessee offers no explanation about the nature and source of acquisition of money. Reverting back to the statement of assessee, we observe that all three conditions are clearly satisfied, viz. (i) the assessee was found to be owner of money i.e. excess cash of Rs. 7,57,290/-; (ii) the excess cash was not recorded in the books of account of any source (i.e. books of business in present case) maintained by the assessee; and (iii) the assessee has himself admitted that the excess cash of Rs. 7,57,290/- found from his premise is earned from undisclosed sources, therefore he is unable to give explanation of its source. Thus, we find that all ingredients of section 69A are satisfied from the material held on record i.e. the statement of assessee. Being so we do not have iota of doubt in the application of section 69A.
13. In view of above discussion, we are of the considered view that the impugned excess cash of Rs. 7,57,290/- found by the revenue during surveyproceeding attracted section 69A as well as section 115BBE of the act. Therefore, we agree that the lower authorities have rightly invoked / confirmed that the excess cash is taxable u/s 69A read with section 115BBE. The conclusions taken by lower authorities do not require our interference."
Page 25 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Similar view was taken by Hon'ble jurisdictional ITAT Indore Bench in the case of M/s Brij Mohandas Devi Prasad vs ACIT in ITA No 428/Ind/2022 dated 17.07.2023, wherein, the Hon'ble ITAT has treated excess cash found during the course of survey as deemed income u/s 69A of the Act. The relevant extract of the decision is reproduced hereunder:-
"Excess-Cash: 12. With regard to excess-cash, the position is materially different. On perusal of Q.No. 8 of statement, we find that the survey-officer found excess cash of Rs. 7,41,152/-. When the assessee's partner was asked to explain the difference, he himself explained difference to the extent of Rs. 1,58,508/- [Rs. 2,06,610/- related to sale (-) Rs. 48,102/- related to purchase of survey-day] and admitted his inability to explain the remaining difference of Rs. 5,82,644/- which is very much clear from the reply given by him at the very first stage of recording statement itself. The said reply is re- produced below for an immediate reference:
Notably, neither before lower-authorities nor before us, the assessee has not shown anything to demonstrate that the said reply was not correct. Therefore, there could hardly be any dispute that the excess-cash of Rs. 5,82,644/- represented assessee's income from unexplainable source attracting the provisions of section 69A. Ld. AR, in his submission, has referred to a part of the reply and not taken into account this part of assessee's reply. Being so, we are inclined not to accept Ld. AR's submission that the excess cash could be treated as business income. Consequently, we uphold the action of lower-authorities in holding excess cash as deemed income u/s 69A attracting higher rate of tax u/s 115BBE.
The above decision of Hon'ble jurisdictional ITAT, having similar facts, is squarely applicable to this case. In view of the above discussion, the contentions of the appellant are rejected as I find no infirmity in the findings of the AO that the excess cash and cash intercepted by FST and police team was Page 26 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 unexplained u/s 69A and the same should be taxed as per the provisions of section 115BBE of the Act.
(ii) Excess stock of Rs. 97,82,694/- (AY 2019-20) & Rs. 2,82,91,332/- (AY 2020-21):-
A survey action u/s 133A of the Act was carried out in the case of appellant on 11.10.2018 and during the course of survey on 11.10.2018 various discrepancies by way of stock were found and physical valuation of the stock was done by the registered valuer. The total stock of gold jewellery was found at 18301.716 gms, however, the stock as per audited books of the appellant was 14531.136 gms. Therefore excess stock of 3770.580 gms amounting to Rs. 97,82,694/- was found during the course of survey. The appellant voluntarily offered the sum of Rs. 97,82,694/- as additional income under the head income from Business and profession and due taxes were paid at normal rates.
Another survey proceedings u/s 133A of the Act were carried out at the business premises of the appellant on 18.04.2019. During the course of survey excess stock of gold jewellery of 10621.225 gms (including gold jewellery of 990.940 gms) was found. On the basis of above facts, the survey proceedings were converted to search proceedings u/s 132 of the Act on 19.04.2019 and statement of Shri Shishir Gupta was recorded u/s 131(A) on 18.04.2019 & 19.04.2019. In his statement Shri Shishir Gupta surrendered sum of Rs.
2,82,91,332/- for excess jewellery found of Rs. 10621.255 gms (including jewellery weighing 990.94 gms found from Shri Vineet Gupta) on account of investment made out of unaccounted income earned from out of books business operations in the case of M/s Jaya Jewellers for AY 2020-21 at an average rate of gold jewellery as per books of account of M/s Jaya Jewellers. I have considered the facts of the case, plea raised by the appellant and findings of the ld AO. The appellant in his return of income has disclosed amount of Rs. 97,82,694/- in AY 2019-20 and Rs. 2,82,91,332/- in AY 2020- 21 on account of excess stock under the head income from business and made payment of taxes at normal rate and not as per the provisions of section 115BBE of the Act. During the survey/search proceedings, physical stock of inventory of the appellant was done by the government approved valuer and excess stock of Rs. 97,82,694/- in AY 2019-20 and Rs. 2,82,91,332/- in AY 2020-21 was found which was admitted as additional income in respective years. During the course of survey/search proceeding, statement of the appellant and Shri Shishir Gupta was recorded on 11.10.2018/18.04.2019/ 19.04.2019 wherein he was confronted with the difference between the value of physical stock and stock as per books of account in respective years. In response to the query raised by the authorized officer, the excess stock in AY 2019-20 & 2020-21 respectively was accepted and was offered as additional income in addition to regular income for the respective years. The amount of excess stock of Rs. 97,82,694/- in AY 2019-20 and Rs. 2,82,91,332/- in AY Page 27 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 2020-21 was offered for taxation in the return of income for respective assessment years which has also been accepted by the Ld. AO during the assessment proceedings. But the Ld AO has applied taxation rate as per section 115BBE as the excess stock was treated as undisclosed investment within the meaning of section 69B of the Act.
As regards the source of excess stock, the appellant submitted that there was no other source of income of the appellant except trading in gold jewellery. Therefore, the source of such excess stock is self-explanatory. During the course of survey/search proceedings, statement of appellant as well as Shri Shishir Gupta was recorded wherein it was explained that there was no other undisclosed source of income except the trading in gold jewellery, hence, the excess stock was offered as income from business during survey/search proceedings itself. The appellant has also reported the additional income represented by the way of stock in trade in the financial statements. I have further found that the appellant as on 31.03.2019 has shown income on account of surrender made u/s 133A in profit and loss account at Rs. 97,82,694/- and purchases have been increased with same contra amount. Likewise as on 31.03.2020 has shown income on account of surrender made u/s 133A in profit and loss account at Rs. 3,32,66,356/- (including stock of Rs. 2,82,91,332/- and purchases have been increased with same contra amount resulting into increase of closing stock by same amount at the end of year. Accordingly, the appellant has accounted for the excess stock in its books of account. Thus, this stock became the part of regular books of account of the appellant and was made available for the subsequent sale. The entries so made in the books of account provide a credible base to bring to tax subsequent profit/loss on sale of such stock in future. On perusal of financial statements, it is evident that the excess stock has been duly incorporated in the books of account by the appellant. Accordingly, I do not see any infirmity in assessee's bringing such transaction in its books of accounts and in the accounting treatment thereof so as to regularise its books of accounts. The ld AO has also not rejected the books of account of the appellant and rather accepted the entries passed in the books of account.
As a matter of fact, the appellant has been involved in trading of gold jewellery and no other undisclosed business activity has been brought to light either by the survey/search team or by the Ld. AO in the body of assessment order. Further the stock found in possession of the appellant during survey/search contain mixed stock (i.e recorded and unrecorded stock) which is also evident from the inventory made during survey/search proceedings. The excess stock found during survey/search was not kept separately and was not easily identifiable. The excess stock was part of the mixed lots of stock found at the premises of the appellant which included declared stock and also the unrecorded stock as found during the course of survey/search. Since the excess stock found in possession of appellant was not clearly identifiable or was not kept at a secret place, therefore, it can be safely held Page 28 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 that the same could have been earned/accumulated over the time out of regular business activities. Further, the appellant does not have any income other than trading in gold jewellery, therefore, the excess stock found during survey/search was earned out of business income by the appellant. Hon'ble Ahmadabad ITAT in the case of Chokshi Hiralal Maganlal vs DCIT, (ITA No 3281/Ahd/2009 dated 05.08.2011) has held that the provisions of section 69A/69B of the Act can only be applied in a case where the asset is separately applicable and separately identifiable and where it has an independent physical existence of its own. Since the excess stock is a result of suppression of profit from business over the years and has not been kept separately but is a part of the overall physical stock found, the investment in the excess stock has to be treated as business income. Similar view has been taken by Hon'ble jurisdictional Indore tribunal in the case of M/s Shahnai vs ITO 1(1), Ujjain (ITA No 658/Ind/2014) dated 15.05.2015. Relevant para of the said decision is reproduced here under:
"5. I have heard both the sides. The amount of Rs.4 lacs. disclosed during the course of survey was on the basis of excess stock found and loose papers relating to business found during survey operation. Thus, both these aspects on the basis of which disclosure was made were relating to the business of the assessee. Whatever income was declared was related to the business of the assessee and it was assessee's business income. The assessee shall be entitled to pay remuneration to its partners as per clauses of partnership deed. Therefore, we allow this ground of appeal of the assessee."
Above findings are also supported by the jurisdictional ITAT Indore in the case of ACIT vs Vijay Kumar Surana ITA No 644/Ind/2019 wherein, it has been held that once the excess stock found during the survey is made part of business income by making entries in the books of account, such stock should be treated as 'income from business or profession'. It has been also held that the only source of income of the assessee was from business of daal and basen mill. No other incriminating material or documents was found during the course of survey which could indicate that the assessee had any other undisclosed source of income. Accordingly, Hon'ble ITAT concluded that alleged excess stock was part of the business income of the assessee. Relevant para of the said decision are reproduced hereunder:-
"11. On perusal of the above finding of Ld. CIT(A) and the decisions referred therein we observe that the revenue authorities have not disputed the fact that the assessee's only source of income is from Dal & Basen Mill. No other incriminating material or document was found during the course of survey which 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.......
......We are of the view that since the income alleged excess stock and excess cash found during the course of survey is part of the business Page 29 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 income, the provisions of section 115BBE of the Act would not be applicable.....
12. As the excess stock and excess cash are part of the business income we further find that the manner of disclosing the excess stock in the trading account is correct. As it is the only way through which the excess stock can be brought into the regular books. If the Ld. AO was not satisfied with the book 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 income of Rs. 2,11,37,081/- is neither here nor there:
"On verification of the Trading account of the assessee as reproduced on page 4, it is clear that the assessee passed "journal entry in the books of account debiting the amount of Rs.3.90,15,200/- This entry has been passed without any basis t.e. copy of purchase bills/ vouchers and payment made for this purchases The excess stock found during the course of survey is assessable as income from other 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/ Similarly, the amount of Rs.4,00,00,043/- credited in the P&L account is also 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 indicates that he is not aware how to disclose the undisclosed income in the books of account. In case he was not satisfied with the book results, he has to first find error/mistake in the books of account, give detailed finding on it, and then should have re-casted the trading account. The manner in which the Ld. AO has made addition is not justified and thus Ld. CIT(A) has rightly deleted the addition by accepting book results shown by the assessee. Ld. AO has also not given weightage to the fact that once the excess stock has been debited in the Profit and Loss Account then the unsold stock as on 31 March 2015 also forms part of the closing stock which is to be valued as per the method regularly adopted by the assessee.
14. We, therefore, in the given facts and circumstances of the case, find no reason to interfere in the finding of Ld. CIT(A) deleting the impugned addition made by the ld. AO and has also holding that the provisions of section 115BBE of the Act are not applicable on the assessee since the income declared during the course of survey is a business income. Accordingly all three grounds of appeal raised by the revenue are dismissed."
In the case of Vijay Kumar Surana a different method for making entries in the books of account has been adopted. But the main purpose for making the entries, in whatever manner, is to make the excess stock part of the books of account so that the same is available for the taxation of profit from the subsequent sale of such excess stock. The appellant has made excess stock Page 30 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 part of closing stock which led to increase in closing stock by such excess stock. Therefore, in view of the above discussion the excess stock is treated as business income and thus, the excess stock is out of the purview of the provisions of section 69B of the Act and therefore, provisions of section 115BBE of the Act will not be applicable.
It is a settled law that additional income declared on account of excess stock is business income of the assessee. This proposition finds support from the following case laws:-
(a) Bajrang Traders Vs. ACIT (Circle)-2, Alwar (ITA No. 137/Jp/17 dated 17.03.2017). In this case, it is held as under:-
"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 other sources". In the present case, the assessee is dealing in sale of food grains, rice and oil seeds, and the excess stock which has been found 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. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources". In the result, ground No.1 of the assessee is allowed."
(b) DCIT (Central), Ajmer Vs. Ramnarayan Birla (ITA No. 482/Jp/2015 dated 30.09.2016) In this case, it is held as under:-
"4.3. We have heard rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that the assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and silver jewellery. The Coordinate Bench in the case of Chokshi iralal Maganlal vs. DCIT, 131 TTJ (Ahd.) 1 has held that in a cases where source of nvestment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give Page 31 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon'ble Gujarat High Court in the case of Fakir Mohd. HajiHasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon'ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT (A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found."
(c) Fashion World Vs. ACIT (Cirecle)-12, Ahemdabad (ITA No. 1634/Ahd/2016 dated 12.02.2010) In this case, it is held as under:-
"12. Thus the important aspect that emerges from the entire discussion is that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable asset or expenditure. In the present case we find that entire physical stock of Rs.25,14,306/- was part of the same business. Both kind of stock i.e. what is recorded in the books and what was found over and above the stock recorded in the books, were held and dealt uniformly by the assessee. There was no physical distinction between the accounted stock or unaccounted stock. No such physical distinction was found by the Revenue either. The assessee has repeatedly claimed that unaccounted business income is invested in stock and there is no amount separately taxable under section 69. The department has ignored this claim of the assessee and sought to tax the difference between book-stock and physical-stock as unaccounted investment under section 69 without considering the claim of the assessee that first the business receipt has to be considered and then investment should be treated as coming out of such unaccounted income. The difference in stock so worked out by the authorities below had no independent identity of its own and it is part and parcel of entire lot of stock. The difference between declared stock in the books and what is physically found would only be a mathematical expression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that there is an undisclosed asset existed independently. Once this is so then what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset.
14. To conclude sum of Rs.8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head 'business'. Other assets have separate Page 32 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only.
15. In view of the above, AO is directed to consider the sum of Rs.8,10,011/- as undisclosed business income assessable under the head 'business' and other two sums under section 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO."
(d) Chokshi Hiralal Maganlal Vs. DCIT, Ahemadabad (ITA No. 3281/Ahd/2009 dated 05.08.2011) In this case, it is held as under:-
"9. Since in the present case excess stock found during the survey is not separately and clearly identifiable but is part of mixed lots of stock 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 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own.Since excess stock is a result of suppression of profit from business other the years and has not been kept identifiable separately but i.e. the 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 (supra). Once excess stock is treated as business income then assessee is entitled for higher remuneration to the partners as per section 40(b). As a result, this ground -of assessee is allowed."
(e) Shri Lovish Singhal Vs. ITO, Ward-2, Sriganganagar (ITA No. 143/Jodh/2018 dated 25.05.2018) In this case, it is held as under:-
"I have heard the rival contentions and record perused. I have also carefully gone through the orders of the authorities below. I have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld AR during the course of hearing before the ITAT in the context of factual matrix of the case. From 18 ITA 142 to 146/Jodh/2018 Vasu Singhal Vs ITO with 4 Ors. cases the record, I find that during the course of survey, income was surrendred by the assessee on account of stock, excess cash found out of sale of stock and also in respect of incriminating documents. As per judicial pronouncements cited by the ld. AR and also the decision of Hon'ble Rajasthan high court in the case of Bajrang Traders in Income Tax Appeal No. 258/2017 dated 12/09/2017 I observe that the Hon'ble High Court in respect of excess stock found during the course of survey and surrender made thereof was found to be taxable under the head 'business and profession'. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as Page 33 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, I hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act. Thus, there is no justification for taxing such income U/s 115BBE of the Act."
(f) ACIT Vs. Sanjay Bairathi Gems Ltd - 189 TTJ 487/492 (Jp). In this case, it is held as under:-
"From the above, it is seen that the excess stock found during the search operation is not separately and clearly identifiable but is part of mixed lots of stock found at the premises which included declared stock as per books and also the excess stock as computed by the authorized officers during the search operation at the premise. Since excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but is the part of overall physical stock found, the investment in the excess stock has to be treated as business income. Further, the excess stock so found is part of the regular business, therefore, following decision of Hon'ble Tribunal Bench Jaipur in case of Ramnarayan Birla (cited supra), the same has to be taxed under the business income. Otherwise even if the same is taxed under s. 115BBE of the Act, the provisions of not allowing the set off has come into effect from 1st April, 2017."
(g) M/s. Great Gallon Ventures Limited vs. DCIT (2022) 43 ITJ 266 (Ind/Tri) order dated 23.12.2021. In this case, it is held as under:-
"In view of categorical findings of Ld. CIT(A) and our examination of the fact that additions confirmed by us in the hands of assessee are arising out of the business carried out and do not fall under any of the provisions of as referred in Section 115BBE of the Act. Thus, we do not find any merit in the grounds raised by the revenue."
Hon'ble jurisdictional ITAT Indore bench in the case of M/s Brij Mohandas Devi Prasad vs ACIT in ITA No 428/Ind/2022 having similar facts, as involved in the case of appellant, has held that the excess stock found during survey was found in mixed lost and was clearly unidentifiable and therefore, the same should have been treated as to have been generated out of regular business income. The relevant extract of the decision is appended as under:-
" Excess-Stock:
9. Firstly, we are in agreement with the very first and foremost contention of Ld. AR that in Q.No. 6 and 7 of statement, the survey-officer has nowhere asked the assessee to explain the source of excessstock/excess-cash; he has simply asked the assessee to explain the difference. Going further to replies, we do not find that the assessee's partner has admitted the same as having Page 34 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 been earned from "undisclosed sources"; he has only admitted the same as "additional undeclared income" in addition to regular income. Therefore, from the questions raised and replies given, it is little difficult to deduce that the "additional undeclared income" was earned from undisclosed or unknown sources. Needless to mention that it is also undisputed that the assessee is a partnership firm and its sole source of income for last 30 years is the business of jewellery and no evidence had been found during survey indicating any other source of income and the assessee claims that the excess-stock was outcome of suppressed business income over the years.
10. Secondly, it is pertinent to note that during the course of survey what was detected in respect of the stock was that the physical stock found at the business premises of the assessee was excess in comparison to the stock recorded in the books of account. It is not the case of the AO that the excess stock found during the survey was separated from other stock of the assessee but it is one and common nature of stock found during survey except the quantity of the stock on physical verification was found to be excess in comparison to the stock recorded in books of accounts. Thus, there is no separable identifiable stock found during survey then the stock regularly held by assessee in the normal course of business of jewellery.
Once the stock found during survey is part of total stock of business, then the said excess stock cannot be given a separate identity than the other stock of assessee. Further, even if excess stock found during survey was not recorded in the books of account but when the survey was conducted before closure of financial year then the assessee was at liberty to incorporate excess stock in books of account at the time of finalizing accounts, which also the present assessee has done which is evident from a separate credit entry made in Profit & Loss A/c. The Hon'ble Rajasthan High Court in case of Pr. CIT vs. Bajarang Traders (supra) has upheld the finding of the Tribunal that excess stock found during the survey is not separable and identifiable but it is part of mixed stock found at the premises which including declared stock as per books as computed by the survey team. Therefore, it is held that the provision of section 69B of the Act cannot be made applicable as primary condition for invoking the provision is that asset should be separately identifiable and it should have independent physical existence on its own. Further, the Coordinate Bench of this Tribunal in case of ACIT vs. Anoop Neema (supra) has also considered an identical issue........
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 the revenue. The orders of the authorities below qua this issue is set aside. The assessee succeeds to this extent."
Page 35 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Similar view was taken in the case of M/s Supremo India Pvt Ltd vs ACIT in ITA No 29/Ind/2023 dated 07.06.2023.
Considering the submission made by the appellant, facts discussed above and decisions of jurisdictional ITAT Indore as referred above, the appellant has recorded excess stock in the regular books of account by passing necessary entries and made available the said stock for future sales and taxation on profit thereon. It is also an undisputed fact that the appellant is having only source of income from Trading in gold jewellery which is also evident from statement of the appellant recorded during the course of survey proceedings, the relevant extract for ready reference is reproduced hereunder:-
Statement recorded during survey on 11.10.2018:-
XXX (not relevant to AY 2020-21, hence not re-produced) Statement recorded during search on 19.04.2019:-Page 36 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Page 37 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 From above it is evident that no other undisclosed source of income was unearthened during the course of survey/search proceedings and the appellant was having income from trading in gold jewellery. Thus, it can be held that the excess stock have been accumulated from unaccounted regular business activities.
Lastly, the Ld. AO has placed reliance upon various judicial pronouncements which are as under:-
1. In case of "SVS Oil Mills. v. ACIT (2019) 418 ITR 442/ 311 CTR 1002 / (2020) 186 DTR 122(Mad.) (HC) Hon`ble Court "dismissing the appeal of the assessee the Court held that, the excess stock, per se, had to be brought to tax as undisclosed income and there was no justification for or question of giving corresponding deduction to the extent of any purchase or source of incurring such expenditure or unexplained investments. When the excess stocks were found during the survey, there was "no question of allowing the assessee to record any additional purchases because such purchases had already been recorded in the books of account of the assessee". S. 69B which provided for bringing to tax investments in bullion, jewellery or other valuable articles (including excess stocks) would have been the more appropriate section to have been indicated in the orders passed by the authorities below rather than under S. 69C as unexplained expenditure. Mention of the wrong section in the order would not upset the additions made by the assessing authorities below. No question of law arose. (AY. 2014-15).
In the case of appellant, no deduction in respect to any expenses were claimed toward purchase of surrendered alleged excess stock. Therefore, the ratio decidendi of the case cannot be applied in the case of appellant.
Page 38 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
2. Fakir Mohmed Haji Hasan vs Commissioner of Income-Tax on 10 August, 2000 2001 247 ITR 290 Guj:
the factual position is that "Assessee would bring imported gold on April 19, 1983, in his car and would make delivery thereof at a place near Quality Restaurant, Kankaria, Ahmedabad. On the basis of such information, a watch was kept and at about 4.30 p.m. when the customs officers spotted the persons who were concerned and accosted them and after a scuffle apprehended three persons, one of whom was the assessee. The car was seized in the presence of the panch witnesses and at that time during search 232 gold bars of foreign markings valued at Rs. 48, 72,000 were recovered.
These were concealed in five cotton strips kept in the dashboard `behind the air-conditioner of the car. A bag containing currency notes of Rs. 46,000 was also recovered. All these articles were seized. The statements which were recorded under Section 108 of the Customs Act were considered in the adjudication proceedings and the gold was confiscated absolutely to the Government by an order made by the customs authorities. Ruling: In our opinion, therefore, the Tribunal was perfectly right in holding that the value of the gold was liable to be included in the income of the assessee as the source of investment in the gold or of its acquisition was not explained and that the assessee was not entitled to claim that the value of the gold should he allowed as a deduction from his income.
In the instant case, the source of acquisition of excess stock was duly explained by the appellant and has voluntarily admitted that the same has been generated out of regular business activities which was also accepted by the ld AO and no adverse inference has been drawn qua source of acquisition of stock.
Thus, I am of the considered view that the additional income offered was on account of business income of the appellant and is, therefore, liable to be taxed under the head of 'income from business or profession' only. Provisions of section 115BBE of the Act are not applicable as the excess stock, in the facts and circumstances as narrated above, does not fall within the provisions of section 69/69B of the Act. In view of the above discussion, the AO is directed to charge income tax at the rate applicable to the income from business or profession qua excess stock found during survey & search proceedings.
3.1.6 Accordingly, the grounds of appeal are partly allowed." Page 39 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
14. Before us, Ld. Representatives of both sides raised their respective vehement contentions at length for or against the orders of lower- authorities. We have heard them peacefully at length and considered the orders passed by lower-authorities as well as the documents held on record in the light of legal provisions of the Act and judicial rulings cited before us.
15. After a careful consideration, we firstly find that the assessee has made enough explanation/submission not only to the survey/search authorities during survey/search proceeding itself but also to the AO during assessment-proceedings about the factual aspects of impugned incomes. From the explanation/submission made by assessee at all stages of proceedings, the following consistent facts emerge:
(i) The excess-stock of 10,621.225 grams jewellery valued at Rs.
2,82,91,332/- in the case of M/s Jaya Jewellers and the excess-stock of 6,525.949 grams jewellery valued at Rs. 1,73,82,909/- in the case of M/s Shishir Jewellers were a part of mixed stock of assessee's business and no different from regular stock of business held by assessee. The assessee also explained that the investment in impugned excess-stock was made from profit of business earned. [Q.No. 25 of survey statements].
Page 40 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21
(ii) In so far as the cash intercepted by SFT is concerned, the same was seized from Shri Vinit Gupta, an employee of 'M/s Jaya Jewellers', proprietorship concern of assessee Smt. Jaya Gupta. Shri Vinit Gupta was working as a salesman for assessee for last five years and he went to deliver goods of M/s Jaya Jewellers to some parties located at Pachore for approval. He delivered part of jewellery and received cash. While he was returning back to Indore with cash and unsold jewellery, Pachore Police inspected and detained him due to election code with cash of Rs. 40,45,390/- and jewellery items weighing 990.94 grams. Shri Vinit Gupta explained to Police that the cash and jewellery belonged to M/s Jaya Jewellers. He also telephoned the assessee and told about interception of cash and jewellery by Police. Further, the jewellery sent for approval was already entered in the books of account of M/s Jaya Jewellers and the cash was from sale of delivered jewellery. Shri Vinit Gupta's statements were recorded by ITO, Pachore in which he stated the names of parties but the concerned parties denied transactions, therefore the assessee, to avoid departmental hurdles, surrendered the seized cash of Rs. 40,45,390/- as business income for the financial year 2019-20 and admitted to pay tax. The assessee also reduced his physical stock by 1,687.560 grams relatable to sale of Rs. 40,45,390/-, this reduction is also factored by survey authorities in determining quantity of excess-stock Page 41 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 found during survey which is very much evident from the working noted on Page 10 of statements. [Q.No. 21 to 25 of survey statements + Q.No. 5, 6, 8 of search statements].
(iii) The excess cash of Rs. 9,29,634/- and Rs. 5,36,769/- found with M/s Jaya Jewellers and M/s Shishir Jewellers respectively at business premises during survey, was also stated by assessee as related to unaccounted sales of business. [Q.No. 18, 25 of survey statements + Q.No. 7 of search statements].
(iv) Once again, in reply to last Q.No. 28 of survey, the assessee categorically re-explained to survey authorities that the excess-stock found at business premises, the cash intercepted by police and the excess-cash found at business were generated from unaccounted sale of jewellery business; that the assessee had no source of income except the business of jewellery and that the assessee made surrender to co-operate the department.
16. Further facts borne out from record are such that both of the assessees have recorded surrendered incomes in their respective books of account by means of appropriate entries, included the impugned incomes in Trading and P&L A/c and accordingly offered the same as part of 'business income' in the returns of income filed to department as is evident from Page Page 42 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 50 & 27 of Paper-Book of Smt. Jaya Gupta and Page 62 & 39 of Paper-Book of Shri Shishir Gupta. During assessment proceedings also, when the AO show-caused assessees by means of notices u/s 142(1), the assessees filed detailed replies to AO re-explaining the original facts as stated in statements recorded in survey/search to show as to why the surrendered income were in the nature of 'business income' and the provisions of sections 69A/69B r.w.s. 115BBE were not applicable. The assessees also filed duly sworn affidavits to the AO in support of his submissions. Copies of assessees' reply-letters with affidavits are available at Page 68 to 86 of Paper-Book of Smt. Jaya Gupta and Page 67 to 81 of Paper-Book of Shri Shishir Gupta.
17. Thus, it is clearly discernible that the excess-stock, the cash intercepted by Police and excess-cash were part of assessee's jewellery business and sourced from unaccounted sale/profit of business carried on by assessees. The assessees are also found to have no source of income except the business of jewellery.
18. The CIT(A) is very much correct in holding, vide Para 3.1.5(ii) of his order, that the excess-stock found from possession of assessee was mixed stock (i.e. recorded and unrecorded stock) of jewellery business; that the excess-stock was not kept separately and not separately identifiable and the assessee was not found to have any other source of income. Further, the CIT(A) has relied upon various decisions of different appellate forums Page 43 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 including the decisions rendered by ITAT, Indore bench as mentioned in his order re-produced above and after taking into account the assessee's replies to the questions raised by authorities in the statements during survey/ search and the facts of case, has arrived at a valid conclusion that the excess-stock represented business income of assessee and did not attract the provisions of section 69A/69B r.w.s. 115BBE of the Act. One recent decision of ITAT, Indore relied by Ld. CIT(A) in the case of M/s Brij Mohandas Devi Prasad vs ACIT in ITA No 428/Ind/2022 having similar facts as involved in present assessees, is re-produced by CIT(A) in his order and the same is extracted below for an immediate reference:
"Excess-Stock:
9. Firstly, we are in agreement with the very first and foremost contention of Ld. AR that in Q.No. 6 and 7 of statement, the survey-officer has nowhere asked the assessee to explain the source of excess stock/excess-cash; he has simply asked the assessee to explain the difference. Going further to replies, we do not find that the assessee's partner has admitted the same as having been earned from "undisclosed sources"; he has only admitted the same as "additional undeclared income" in addition to regular income. Therefore, from the questions raised and replies given, it is little difficult to deduce that the "additional undeclared income"
was earned from undisclosed or unknown sources. Needless to mention that it is also undisputed that the assessee is a partnership firm and its sole source of income for last 30 years is the business of jewellery and no evidence had been found during survey indicating any other source of income and the assessee claims that the excess-stock was outcome of suppressed business income over the years.
10. Secondly, it is pertinent to note that during the course of survey what was detected in respect of the stock was that the physical stock found at the business premises of the assessee was excess in comparison to the stock recorded in the books of account. It is not the case of the AO that the excess stock found during the survey was separated from other stock of the assessee but it is one and common nature of stock found during survey except the quantity of the stock on physical verification was found to be excess in comparison to the stock recorded in books of accounts. Thus, there is no separable identifiable stock found during Page 44 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 survey then the stock regularly held by assessee in the normal course of business of jewellery. Once the stock found during survey is part of total stock of business, then the said excess stock cannot be given a separate identity than the other stock of assessee. Further, even if excess stock found during survey was not recorded in the books of account but when the survey was conducted before closure of financial year then the assessee was at liberty to incorporate excess stock in books of account at the time of finalizing accounts, which also the present assessee has done which is evident from a separate credit entry made in Profit & Loss A/c. The Hon'ble Rajasthan High Court in case of Pr. CIT vs. Bajarang Traders (supra) has upheld the finding of the Tribunal that excess stock found during the survey is not separable and identifiable but it is part of mixed stock found at the premises which including declared stock as per books as computed by the survey team. Therefore, it is held that the provision of section 69B of the Act cannot be made applicable as primary condition for invoking the provision is that asset should be separately identifiable and it should have independent physical existence on its own. Further, the Coordinate Bench of this Tribunal in case of ACIT vs. Anoop Neema (supra) has also considered an identical issue........
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 the revenue. The orders of the authorities below qua this issue is set aside. The assessee succeeds to this extent." The view taken by CIT(A) is also supported by ITAT, Indore in DCIT Vs. Shri Krishna Kumar Verma (2023) 46 ITJ 345 as upheld by Hon'ble Jurisdictional High Court of M.P. in Appeal No. 130 of 2023 order dated 19.03.2024, discussed in subsequent para.
19. However, in so far as the cash intercepted by Police and excess-cash found at business premises during survey is concerned, the CIT(A) has rejected assessee's claim that the same represented his business income. In doing so, the CIT(A) has mentioned certain reasons. The first reason Page 45 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 mentioned by CIT(A) is such that the assessee neither during survey/search nor during assessment/appellate proceedings, has explained the nature and source of generation of cash intercepted by Police and excess-cash found at business premises. This contention taken into account by CIT(A) is apparently incorrect. As noted earlier, when the survey/search authorities interrogated assessee qua the cash intercepted by Police vide Q.No. 21 to 25 of survey statements + Q.No. 5, 6, 8 of search statements, the assessee clearly replied the entire facts of the cash possessed by Shri Vinit Gupta that the said cash represented the amounts received from various parties against sale of jewellery. In fact, prior to assessee's statements, Shri Vinit Gupta himself reported this true and factual position to the Police as well as ITO, Pachore. The second contention taken into account by CIT(A) is such that the assessee failed to file the details and confirmations from buyers. This contention is also not fair, practical or meritorious. From reply given by assessee to Q.No. 24 of survey statements itself, one can easily discern that Shri Vinit Gupta informed the names of parties to ITO, Pachore and ITO, Pachore made enquiries from those parties but they denied before ITO. Thus, there can hardly be a point that the names of parties were not made available by assessee. Although it is a fact that the concerned parties made a denial before ITO but this is very natural in the line of assessee's business. It is a known secret that the customers who purchase jewellery do not want to disclose purchases to tax authorities for the reasons best known to them Page 46 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 and to counteract such bad practice, the Govt. has introduced several provisions in Income-tax Act also from time to time. Therefore, the denial by parties was suitable to the parties for their own reasons but the same cannot upset the assessee's realistic fact that the cash found in Shri Vineet Gupta's possession was a part of sale-proceed collected from parties. The third contention taken by Ld. CIT(A) that the assessee has not been able to produce any bill, voucher, etc. of supressed sale is also not meritorious when in present case, the assessee has categorically mentioned in his replies to various questions recorded firstly in survey and secondly in search u/s 132(4) itself that the impugned cash represented his business income. The statements recorded in search u/s 132(4) have a strong legal recognition and weightage so far as evidentiary value is concerned, this is very clearly prescribed in section 132(4) itself. That apart, things would have been different if the assessee would not have stated so and subsequently made a claim before AO during assessment-proceeding that the impugned cash represented his unaccounted sales, in that case certainly there would have been an onus upon assessee to prove before AO. But in present case, the assessee has instantly explained the fact of generation of cash from unaccounted business sale in the statements recorded during survey/ search itself and the authorities have also acted upon those very statements. Therefore, there would hardly be any requirement on the part of assessee to prove further. Lastly, the CIT(A) has misplaced reliance on decision of ITAT, Page 47 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Indore in Shri Shyam Lal Goyal and others ITA No. 245-247/Ind/2021 dated 29.06.2022 and M/s Brij Mohandas Devi Prasad Vs. ACIT ITA No. 428/Ind/2022 dated 17.07.2023. In those cases, the assessee did not explain source of excess-cash in the statements recorded by authorities and hence the Bench took a conclusion that the excess-cash represented assessee's unexplained income attracting deeming provisions of section 69A/69B. But in present case, the assessee has categorically, instantly and repeatedly explained the source as unaccounted sale of business at all stages. Therefore, the view taken by Ld. CIT(A) that the cash intercepted by Police and excess-cash did not form part of assessee's business income, is not correct.
20. Ld. AR has also placed a heavy reliance on the decision of ITAT, Indore in DCIT Vs. Shri Krishna Kumar Verma (2023) 46 ITJ 345 as upheld by Hon'ble Jurisdictional High Court of M.P. in Appeal No. 130 of 2023 order dated 19.03.2024. We quote relevant paras of the order of ITAT and Hon'ble High Court both for an immediate reference:
ITAT Indore Bench:
"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 Page 48 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 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 was 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 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 accepted by 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 Page 49 of 53 Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 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 not bring 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."
Hon'ble Jurisdictional High Court of MP:
"7. The respondent/assessee is the proprietor of M/s Bhayaji Jewellers and derives income from the business activities of gems and jewellery. The assessee filed Return of Income for the A.Y. 2017-18 on 31.10.2017 declaring total income of Rs. 5,30,55,260/-. The income so disclosed in Return of Income was inclusive of undisclosed income surrendered during the course of Search and Seizure. The return of income for assessment year 2017-18 was selected for scrutiny assessment under Section 143(3) of the Act of 1961 on 30.02.2018. No fresh addition was made to the total income and income so declared was taxed at special rate in view of the provisions under Section 115BBE of the Act of 1961. The Assessing Officer himself has admitted that at the time of Search and Seizure that the undisclosed income so surrendered was not entered in regular books of accounts. The undisclosed income falls within the ambit of Section 69A of the Act and therefore, liable to be taxed at special rate within the meaning of Section 115BBE of the Act of 1961. Being aggrieved with the order of the Assessing Officer, the respondent/assessee preferred an appeal before the CIT(A), Bhopal. The CIT(A) allowed the appeal vide order dated 31.01.2020 relying upon the contention put forth by the assessee that the undisclosed income so surrendered is derived from regular business activities, therefore, it is liable to be taxed at normal rate instead of under the provisions stated under Section 115BBE of the Act.
8. Being aggrieved by the order of CIT(A) dated 31.01.2020, the appellant/Revenue filed an appeal before the ITAT, Indore Bench which was dismissed vide order dated 10.02.2023 on the ground that the Assessing Officer without making any addition under Section 69A or other provisions of the Act, has accepted the returned income wherein the assessee has included the surrendered amount on account of excess stock and excess cash as business income and successfully explained the source from where the said surrendered amount was earned, which was the business activity of the assessee of trading in jewellery and gems. There was no application of Section 115BBE of the Act.Page 50 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 XXX
18. When tested on the anvil of the aforesaid legal principles, we are of the opinion that in the instant case no substantial question of law arises from the order of the Tribunal as the appellant has raised all the question of facts and have disputed the fact findings of the ITAT in the garb of substantial questions of law which is not permitted by the statute itself. This Court refrains from entertaining this appeal as there is no perversity in the order passed by the ITAT since the ITAT has dealt with all the grounds raised by the appellant in the order impugned and has passed a well reasoned and speaking order taking into consideration all the material available on record. The Tribunal being a final fact finding authority, in the absence of demonstrated perversity in its finding, interference with the concurrent findings of the CIT(A) as well as the ITAT therewith by this Court is not warranted."
21. Thus, the Hon'ble Jurisdictional High Court has upheld ITAT's order holding that if the surrendered excess stock/cash is found to have been derived from business activities, the deeming provision of section 69A shall not apply. The view taken by ITAT and upheld by Hon'ble Jurisdictional High Court is directly applicable to assessee. Therefore, we have no hesitation in saying that the section 69A/69B/115BBE cannot apply to assessees' cases.
22. In view of above discussions, we hold and conclude that the excess- stock, cash intercepted by Police and excess-cash found at business premises of assessees were rightly offered as business income taxable at normal rate and the AO was not justified in treating the same as deemed income u/s 69A/69B r.w.s. 115BBE. Therefore, we settle this issue in favour of assessee. Accordingly, the Grounds raised by assessees are accepted and the grounds raised by revenue are dismissed. Page 51 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 Issue of addition on account of valuation-difference in excess-stock:
23. The next issue is whether the addition made by AO on account of valuation-difference of excess-stock is sustainable?
24. The factual matrix can be fit in a narrow compass. The assessee Smt. Jaya Gupta surrendered excess-stock of jewellery found during survey/ search at Rs. 2,82,91,332/- and offered the same as undisclosed income in her return of income but the AO valued excess-stock at Rs. 3,02,36,503/- and accordingly made a further addition of Rs. 19,45,171/- on account of valuation-difference in assessment-order. Identical addition has been made in case of Shri Shishir Gupta with the variation of respective figures at Rs. 1,73,82,909/-, 1,83,26,626/- and Rs. 9,43,717/-. Admittedly, this difference is because of change in valuation method adopted by assessee and by AO.
25. During discussions of the issue, it surfaced that the survey was conducted on 18.04.2019 and the excess-stock was also found on that day. Therefore, the difference in valuation considered by AO, even if held to be valid, would increase the closing stock as on 18.04.2019 but at the same time the increased value has to be allowed as opening stock on 19.04.2019. Thus, it is not a case of year-end valuation so as to disturb closing stock of one year and give deduction in next year. The whole exercise would be done in the same financial year 2019-20, therefore the exercise becomes revenue- Page 52 of 53
Smt. Jaya Gupta and Shri Shishir Gupta, Indore IT(SS)A. Nos. 1,2,15 & 17/Ind/2024 - A.Y.2020-21 neutral and cannot have any impact over the income of AY 2020-21 in the sense neither the income would increase nor it would decrease. Ld. DR for revenue quickly understood this nitty gritty. Faced with this situation, we do not find any justification in the additions made by AO. We make a straightforward conclusion that there would be no impact in AY 2020-21 and therefore the additions made by AO are not sustainable. Consequently, the grounds raised by assessee qua this issue are allowed and the grounds raised by revenue are dismissed.
26. Resultantly, the assessees' appeals are allowed and revenue's appeals are dismissed.
Order pronounced in open court on 22.07.2024
Sd/- sd/-
(VIJAY PAL RAO) (B.M. BIYANI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore
िदनांक/ Dated : 22.07.2024
CPU/Sr. PS
Copies to: (1) The appellant
(2) The respondent
(3) CIT
(4) CIT(A)
(5) Departmental Representative
(6) Guard File
By order
UE COPYAssistant Registrar
Income Tax Appellate Tribunal
Indore Bench, Indore
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