Chokshi Hiralal Maganlal v. Dy. CIT

Case Laws Analysis
Followed on DTE Exports (P) Ltd. v. Pr. CIT 2020 TaxPub(DT) 5076 (Visakhapatnam-Trib)
Distinguished on Rajesh Kumar Bajaj v. ACIT 2020 TaxPub(DT) 2805 (Ind-Trib)
Affirmed on CIT v. Sanghvi & Doshi Enterprise 2013 TaxPub(DT) 0328 (Mad-HC)

SUBSCRIBE FOR FULL CONTENT


The Tax PublishersITA NO. 486/AHD/2008 2011 TaxPub(DT) 1410 (Ahd-Trib) : (2011) 141 TTJ 0001 : (2011) 045 SOT 0349 Chokshi Hiralal Maganlal v. Dy. CIT INCOME TAX ACT, 1961 Income from undisclosed sources- Addition under section 69B-Excess valuation of stock at the time of survey A survey under section 133A was carried out at the premises of assessee. Excess stock of gold and silver ornaments was found during the course of survey. The assessee agreed to disclose this excess stock in the return and to pay the taxes thereon. AO found that the assessee had included the value of excess stock in the inventory of closing stock on verification of the accounts filed by the assessee. AO was a view that said disclosure was not consistent with the provisions of sections 69, 69A, 69B & 69C. AO made addition the amount of excess stock under section 69B after reducing the same from total income disclosed by the assessee. CIT(A) confirmed the order of AO on the ground that excess stock was to be added separately. *Held:* In this case, excess stock found during the survey was not separately and clearly identifiable but it was 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 could not be made applicable as primary condition for invoking the provisions of sections 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own. Since excess stock was a result of suppression of profit from business over the years and had not been kept identifiable separately but was the part of overall physical stock found, the investment in the excess stock had to be treated as business income. [Para 9] Therefore, matter was decided in favour of Assessee. Income Tax Act, 1961 Section 69B read with section 28(i) Case Law analysis:Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290 /[2002] 120 Taxman 11 (Guj.) (para 2), Fashion World v. ACIT [IT Appeal No. 1634 (Ahd.) of 2006, dated 12-2-2010] (para 5) and Dy. CIT v. RadheDevelopers India Ltd. [2010] 329 ITR 1 (Guj.) (para 5). Decision: In favour of Assessee. A.Y. 2004-05 SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA NO. 486/AHD/2008
2011 TaxPub(DT) 1410 (Ahd-Trib) : (2011) 141 TTJ 0001 : (2011) 045 SOT 0349

Chokshi Hiralal Maganlal v. Dy. CIT

INCOME TAX ACT, 1961

Income from undisclosed sources- Addition under section 69B-Excess valuation of stock at the time of survey

A survey under section 133A was carried out at the premises of assessee. Excess stock of gold and silver ornaments was found during the course of survey. The assessee agreed to disclose this excess stock in the return and to pay the taxes thereon. AO found that the assessee had included the value of excess stock in the inventory of closing stock on verification of the accounts filed by the assessee. AO was a view that said disclosure was not consistent with the provisions of sections 69, 69A, 69B & 69C. AO made addition the amount of excess stock under section 69B after reducing the same from total income disclosed by the assessee. CIT(A) confirmed the order of AO on the ground that excess stock was to be added separately. Held: In this case, excess stock found during the survey was not separately and clearly identifiable but it was 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 could not be made applicable as primary condition for invoking the provisions of sections 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own. Since excess stock was a result of suppression of profit from business over the years and had not been kept identifiable separately but was the part of overall physical stock found, the investment in the excess stock had to be treated as business income. [Para 9]

Therefore, matter was decided in favour of Assessee.

Income Tax Act, 1961 Section 69B read with section 28(i)

Case Law analysis:Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290 /[2002] 120 Taxman 11 (Guj.) (para 2), Fashion World v. ACIT [IT Appeal No. 1634 (Ahd.) of 2006, dated 12-2-2010] (para 5) and Dy. CIT v. RadheDevelopers India Ltd. [2010] 329 ITR 1 (Guj.) (para 5).

Decision: In favour of Assessee.
A.Y. 2004-05