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2015 (12) TMI 1801 - AT - Income TaxTaxability of surrendered income - deemed income u/s 69A - HELD THAT:- In the present case, we see that the AO has nowhere disputed the business losses incurred by the assessee. The books have not been rejected. As stated at the Bar that even at the time of survey, in the trading account prepared by the survey team, there were losses incurred by the assessee. All these facts have not been disputed by the AO. The surrender made by the assessee was on account of cash found during the course of survey, discrepancy in the cost of construction of building, discrepancy in stock and discrepancy in advances and receivables. By no stretch of imagination, any of these incomes apart from cash can be considered as income under any head other that the ‘business income’. Nowhere in his order the AO has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of the assessee. Also nowhere he has objected to the heads under which the assessee had surrendered these amounts, i.e. cash, construction of building, discrepancy in stock and discrepancy in advances and receivable. Even the survey team has not found any source of income except the business income. Now, following the judgment of Jurisdictional High Court, in the background of the facts of the present case, we can safely infer that apart from cash all other income surrendered may be brought to tax under the head ‘business income’ while the cash has to be taxed under the head deemed income u/s 69A. As regards the business losses incurred by the assessee during the year, these can be set off against the income surrendered during the course of survey except for the amount of cash surrendered, as per the mandate of section 71. No loss can be set off against the cash surrendered as the same has already been held to be taxed under a different head. AO is hereby directed to set off business losses suffered by the assessee out of the surrendered income except the element of cash surrendered. Allow business losses suffered by the assessee out of surrendered income on account of sundry receivables only and not out of surrendered cash. Amount surrendered on account of sundry receivables is to be assessed under the head ‘business income’, AO is hereby directed to allow the benefit of current year depreciation to the assessee out of the same, as per law - Appeal of the assessee is partly allowed.
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