The DCIT v. Punjab Retail (P) Ltd

Case snapshot

Sections / provisions: 115BBE and 69A

Questions before the Court / Tribunal

• section 115BBE which was amended w.e.f. 15-12-16 will not apply to search made prior to this date. drv 115BBE does not apply to excess stock if the business is the only source of Income
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

The DCIT, Vs. M/s. Punjab Retail Pvt. Ltd. Central-2, 577, Gold Plaza, M. G. Indore Road, Indore PAN No.AACCP5782B (Appellant) .. (Respondent)

Appellant by : Shri S. N. Agrawal, CA & Shri Pankaj Mogra, CAs Respondent by : Shri Rajib Jain, CIT DR

2. On the facts and in the circumstances of the case the Ld. CIT (Appeals) was not justified in allowing the assessee’s appeal on the chargeability of tax as per normal rates instead of amended provisions of section 115BBE of the act applicable

ITA No.677/Ind/2019 DCIT vs.M/s. Punajb Retail Pvt. Ltd. Asst.Year –2017-18 -2– w.e.f. 01/04/2017 relevant to AY 2017-18 which are clearly attracted in the case of the assessee.”

3. The brief facts leading to the case is this that the assessee is engaged in trading and manufacturing business of gold and diamond jewellery. A search operation under Section 132 of the Act was carried out on 28.09.2016 at the business as well as residential premises of Anand & Punjab Group of Indore including the assessee along with other concerns/business associates wherein certain discrepancies in the quantity of closing stock were found. The assessee offered additional income of Rs. 10,10,00,000/- on account of the aforesaid difference in the quantity of stock found in the said search proceeding. Subsequently, another survey proceeding under Section 133A was carried out on the business premises of the assessee on 15.11.2016 which was concluded on 19.11.2016. During the course of survey additional income to the tune of Rs. 1,20,02,793/- was declared by the assessee on account of excess stock. While filing the income tax return on 07.11.2017 the valuation of difference in quantity of stock was calculated at 10,14,95,122/- which was duly incorporated in the books of accounts and shown separately in the Profit and Loss for the year ended on 31.03.2017. In the said return income…

Appellant / assessee submissions

24. The learned CIT(DR) during the course of hearing contended that the Assessing Officer's computation be upheld but could not point out any reason to differ with the methodology adopted by the Learned CIT(Appeals). Accordingly, so far as the Revenue's appeal is concerned, we are of the view that the methodology adopted by the Learned CIT(Appeals) is correct for determining the value of the undisclosed stock and the computation done by the Assessing Officer to determine the value of undisclosed stock is not correct one. For the purpose of making addition on account of undisclosed stock, first the quantity/weight of such undisclosed stock has to be

Revenue / respondent submissions

The packaged judgment does not separately label the respondent's submissions in an independently extractable passage. No contention is inferred; read the full order.

Court / Tribunal analysis and reasoning

4. We have heard the respective parties and perused the relevant materials available on record.

8. We have considered the judgment relied upon by the Ld. AR passed by the Hon’ble Delhi Bench in the case of Neha Jewellers Pvt. Ltd. vs. ACIT in ITA No. 3711/Del/2010. On the identical situation the Hon’ble Bench was pleased to observe as follows:

having any other source of income. While deleting the addition made by the Ld. AO the Ld. CIT(A) observed as follows: “First of all let me discuss whether the provisions of section 115BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017. Hon'ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC); (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that "An amendment made to the taxing statute can be said to be intended to remove 'hardships' only of the assessee, not of the department-on the contrary, imposing a retrospective levy on the assessee would have caused undue hardship. Hon'ble ITAT Indore in the case of Priyadharshani Construction vs ITO (2012) 19 ITJ 276 (Trib- Indore) has held that "Substantive law shall be understood to be applicable prospectively unless made specifically retrospective. Thus, it is settled position of law that provision of section 115BBE of the Act is clearly not applicable in case of business income which is taxed under section 28 to 44 of the Income Tax Act. The assessing…

Operative decision and relief

10. Thus, considering the entire aspect of the matter we find no justification for addition in the difference the valuation of the jewellery to the total income of the appellant. The addition made by the Ld. AO on account of excess stock found during the course of search those cannot be set to be justified in view of the observation made hereinabove and, thus, the deletion of addition made by the Ld. CIT(A) is according to us is just and proper so as to warrant interference. Hence, the grounds of appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed.

ITA No.677/Ind/2019 DCIT vs.M/s. Punajb Retail Pvt. Ltd. Asst.Year –2017-18 - 16 – 69B, 69C and 69D i.e. from residuary category w.e.f 01.04.2017. However, in the present case in hand, additional income was offered and even addition was made on account of difference in the stock which was liable to be taxed under the head of income from business and profession only and valuation of stock was done on the basis of various observations drawn during the course of search & survey which took place on 28.09.2016 & 15.11.2016 respectively. Since, the search in the case of appellant was carried out on 28.09.2016 and additions were made consequential to search, therefore, the assessing officer, was not justified in stating that provisions u/s 115BBE were invoked by the appellant which in fact was applicable from 01.04.2017 and not from 28.09.2016 (date of search). Thus, the assessing officer is hereby directed to calculate tax as per normal rate applicable in the case of the appellant Therefore, appeal on this ground is Allowed.”

Since the search in the case of the appellant was carried out before the amendment the addition ought to have been made in terms of the prevailing provision and therefore, the addition made by the AO invoking Section 115BBE provision of which came into force only on 01.04.2017 is not sustainable. Therefore, the order passed by the Ld. CIT(A) deleting the addition made on that premise is according to us just and proper so as to warrant interference. Hence, the appeal preferred by the Revenue found to be devoid of any merit and is dismissed.

15. In the result, the appeals filed by the Revenue is dismissed. This Order pronounced in Open Court on 08 /10/2021

Ratio and legal principle

• The packaged judgment addresses section 115BBE which was amended w.e.f. 15-12-16 will not apply to search made prior to this date. drv 115BBE does not apply to excess stock if the business is the only source of Income. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with section 115bbe which was amended w.e.f. 15-12-16 will not apply to search made prior to this date. drv 115bbe does not apply to excess stock if the business is the only source of income Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• 115BBE and 69A - apply the exact version considered in the judgment.

Case network

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Different outcome / possible distinction

• Commissioner of Central Excise and Service Tax , Kanpur Vs AR Polymers Pvt ltd - Quashed / set aside
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