Survey was conducted on business premises. The assessee has declared the stock in excess as recorded in books and also the cash found in the business premises is in excess of the cash as per the books. Kindly guide be whether the excess stock and excess cash would be deemed to be the part of Business income or part of income from other sources.
CA Rajiv Jain , Faridabad
Good question and little bit complicated to understand even by A.Os!
Whenever A.O finds anything extra which is not recorded in the books of accounts , the A.O makes addition u/s 69,69A,69B or 69C of the I T Act. The additions made under these section are by deeming fiction and surprisingly the law makers have placed these section is Chapter VI.
Important to understand is the fact that Income Tax Act is written Chapter wise and Chapter IV to VI are as under :
Chapter IV- Section 14 to Sec 59- Computation of Total Income Chapter V –Section 60 to 65 – Income of Other persons included in assessee’s income Chapter Vi-Section 66 to 80- Aggregation of income and set off of carry forward of loss As you can see , section 68,69,69A,69B,69C falls under Chapter VI and not under chapter IV. Which means that additions made under these sections is not even income from other source , but has too be added at the time of aggregation of income. In simple terms , though suffice to say is that additions made for excess cash or stock is not business income if done under aforesaid section. Practically , all these deeming addition are done by A.Os under residuary head “Income From Other source” , because there is no head fr these additions.
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