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[2024] 109 ITR (Trib) 1 (ITAT[Chand])
[BEFORE THE INCOME-TAX APPELLATE TRIBUNAL — CHANDIGARH "B" BENCH]

MONTU SHALLU KNITWEARS
v.
DEPUTY COMMISSIONER INCOME-TAX

AAKASH DEEP JAIN (Vice President) and
VIKRAM SINGH YADAV (Accountant Member)

December 1, 2023

Playlist: 69B, 115BBE
69B: Amount of investments, etc., not fully disclosed in books of account

A.Y: 2019-20/Assessee

Question: WHETHER UNRECORDED STOCK IN SURVEY CAN BE ADDED U/S 69B IF FOUND CONNECTED WITH BUSINESS OF ASSESSEE

1. The assessee firm was engaged in manufacture of wearing apparels.

2. A survey action u/s 133A was carried out and certain discrepancies were encountered in physical verification of stocks.

3. Assessee surrendered Rs. 50,00,000 as additional business Income and included in P&L Act, get audited by C.A. & paid tax at normal rates.

4. A.O. again taxed it, by disallowing u/s 37 and applied section 115BBE by applying section 69B.

5. CIT appeal deleted the disallowance of Rs 50 lakh u/s 37 but did not consider the assessee’s submission on the application of section 69B and confirmed the application of section 115BBE on account of amount surrendered by assessee during the course of survey on account of excess stock found on appeal: ITAT held that:

6. The Department had not pointed out that the excess stocks had any nexus between with any other receipts other than the business being carried on by the assessee.

7. There was a clear nexus between the stocks physically found with the stocks in which the assessee regularly dealt and recorded in the books of accounts

8. The difference in the value of stocks was in the nature of business income.

9. Further in the surrender letter, the assessee has stated that to purchase piece of mind and to avoid litigation additional business income of Rs 50 lakhs out of excess stock found out of their normal business income was surrendered over and above normal business income.

10. Though these transactions were not recorded at time of survey qualifying an unrecorded transaction satisfying one of the essential conditions, at the same time the assessee has provided necessary explanation about the nature and source of unrecorded transaction and the necessary nexus with the assessee’s business has been established.

11. Thus, the second condition for invoking deeming provisions of section 69B of the Act was not satisfied & question of application of section 115BBE did not arise.

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Link for some important videos:

1) WHETHER TRIBUNAL CAN REMAND MATTER IN ENTIRETY WHERE DEPARTMENT DID NOT FILE CROSS APPEALS?- https://www.youtube.com/watch?v=gkqMk...

2) WHETHER ASSESSEE HAS ALSO TO CHALLENGE THE FINDINGS OF THE A.O THAT NOTICE HAS BEEN SERVED?- https://www.youtube.com/watch?v=XbZWh...

3) WHETHER EXTENDED TIME LIMIT U/S 149(1)(b) CAN BE USED ON THE BASIS OF SALES CONSIDERATION U/S 48?- https://www.youtube.com/watch?v=WuRt9...

4) WHETHER NOTICE SENT TO SECONDARY EMAIL IS VALID IF NOT SENT TO PRIMARY E-MAIL U/S 148?- https://www.youtube.com/watch?v=aAzHE...

5) WHETHER ENTRIES IN BOOKS OF ACCOUNTS CONCLUSIVE TO DETERMINE TAXABLE INCOME OF ASSESSEE?- https://www.youtube.com/watch?v=Rx8JQ...