| Question And Answer | |
|---|---|
| Subject: | Applicability of Sec.115BBE |
| Category: | Income-Tax |
| Querist: | CA. Prerna Bora |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | partnership firm, search, shortage of stock |
| Date: | October 14, 2021 |
- Assessee is partnership firm. DURING the course of Search shortage in stock is found. Assssee has stated that though there is no reason for shortage, as his maintaining stock record , however to avoid litigation partner agree that they will offer income on the value of shortage in stock in the return . However AO is saying he is going to add entire amount of shortage and tax the same by resorting to sec. 115BBE at special rate. Is he is correct .
As the Assessee will offer the shortage in stock found in the course of search as business income. It can be contended that the provisions of section 115BBE of the Income-tax Act, 1961 (Act) are not applicable as the same qualifies as a part of business turnover.
Reference is drawn to the decision of the Hon’ble ITAT – Mumbai Bench in the case of ACT Central Circle-13 Mumbai v. Rahil Agencies, order dated 23 November, 2016 wherein it was held that the provisions of Section 115BE of the Act are applicable on the income taxable under section 68, 69, 69A, 69B, 69C or 69D of the Act. The income declared by the assessee is unrecorded stock of diamond found during the course of search. The assessee is in the business of diamond trade and such stock was part of the business affair of the company. Therefore, since income declared is in the nature of business income, the same is not taxable under any of the section referred above and accordingly section 115BBE of the Act has no application in case.