ITAT Chennai: Difference in stock cannot be treated as unexplained investment u/s 69B where the source of investment in excess stock is explained and the same has not been disputed by the Revenue

Facts of the case

A survey u/s.133A of the Income Tax Act, 1961 was carried out on the business premises of the assessee. During the survey the physical stock available at the business premises of the Assessee was inventoried and upon comparison with the stock recorded in books of account, an excess stock of Rs.1.04 Cr was found. The Assessee offered the excess stock so found to tax as business income. The assessee explained the source for excess stock found during the course of survey to be from business income earned in either relevant AY or the earlier AYs. On the contrary, the AO without considering the facts of the case, treated the excess stock amounting to Rs. 1.04 Cr as unexplained investment u/s 69B of the Act and subjected the same to tax at higher rate u/s 115BBE. The Ld. CIT(A) confirmed the AO’s order.

ITAT Ruling

ITAT noted that the assessee has declared additional income towards excess stock found during the course of survey and also explained the source for such excess stock as it was arising out of the income earned from current year business or earlier years business. ITAT observed that the AO has not done anything to dispute the claim of assessee and accordingly it was held that the difference in valuation of stock has to be taxed as ‘normal business income’ and not as ‘unexplained investment’ u/s.69B of the Act.

Ethiraj Hotel Mart ITA No.: 1086/CHNY/2022

The above information has been complied by CA Ankit Karanpuria and CA Ankush Karanpuria. Please connect on karanpuriaankit@gmail.com for further information.

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