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2010 (2) TMI 1171 - AT - Income TaxInvoking deeming provisions u/s 69, 69A, 69B &69C - Physical distinction between the accounted stock or unaccounted stock -unexplained investment/expenditure - undeclared business income - HELD THAT:- The first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is only where no nexus is established with any head then it should be considered as deemed income u/ss 69, 69A, 69B & 69C as the case may be. It is because when assessee fails to explain satisfactorily the source of such investment the nit should be taxed under section 69, 69A, 69B & 69C as the case may be. It should not be done at the first instance without giving opportunity to the assessee to establish nexus. Following the decision in the case of Fakir Mohmed Haji Hasan [2000 (8) TMI 44 - GUJARAT HIGH COURT] held that where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, we hold that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. To conclude sum being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head ‘business’. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered u/s 69 only. In view of the above, AO is directed to consider the su as undisclosed business income assessable under the head ‘business’ and other two sums u/s 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO.
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