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2018 (6) TMI 1705 - AT - Income TaxAdditional income declared by the appellant in the course of survey u/s.133A - deemed income u/s.69A - claim of set off of brought forward losses against the additional income - disallowance of provision for warranty - HELD THAT:- Income offered on the basis of the impounded documents collected during the survey action conducted on 24-01-2007 on the assessee. These documents clearly reflect the unexplained expenditure and unexplained receipts relates to sale of flats to the parties. Assessee is a Builder and his business is to construct the flats and sell the same to the customers. All these details clearly indicate the business nexus of the receipts/expenditure to the core business activities of the assessee. It is not the case that there was any cash impounded or seized in this case to deny such claim of set off as the source of the same becomes very vague issue. The entries available on the impounded material suggest the business nexus of the additional income. The income in question is derived from the business activities of the assessee although they are outside the books of account of the assessee. Having held so, the taxability of the same under the head ‘business’ or ‘income from other sources’ is the next issue for adjudication. Considering the existence of business nexus, we are of the opinion that there is no reason why such income is taxed as ‘income from other sources when the source for the same from the business activity, is already demonstrated by the assessee during the proceedings before the assessment/appellate authorities. Unaccounted receipts/expenditure constitutes business receipts/expenditure. As such, the judgment of jurisdictional High Court in the case of CIT Vs. Sheth Developers Pvt. Ltd. [2012 (8) TMI 159 - BOMBAY HIGH COURT] affirms that the income from business is required to be taxed as ‘business income’. We have also examined the allowability of statutory deductions out of such additional income disclosed during search and seizure/survey actions. There are binding decisions to support the claim of deduction qua the deductions u/s.80IB, 40B of the Act etc. Therefore, in principle, granting statutory deductions out of such additional income arising out of business activities is sustainable. Linking the additional income to the business activities OR income from other sources - HELD THAT:- Items of income that are chargeable to tax under the head ‘income from other sources’ as per the provisions of section 56 of the Act, are specified therein. The deemed income like the present case is certainly not specified in the said section. Further, it is not the case of the AO that the said unaccounted income of ₹ 53 lakhs and ₹ 78 lakhs cannot be classified to any other head of income. In fact, section 56(1) of the Act provides for bringing such items of income under the scope of section 56 of the Act. Therefore, the decision of the AO in treating the same as chargeable to tax under the head ‘income from other sources’ is not valid as the source for such additional income is clearly determinable as chargeable u/s.28 of the Act. Further, there is no law to automatically tax each and every ‘unaccounted income’ disclosed during search/survey actions as ‘income from other sources’. In our view, such income needs to be treated as the ‘business income’ of the assessee and consequently, the benefit of set off/carry forward should be granted to the assessee against such additional business income of the assessee in both assessment years. Accordingly, the decision of CIT(A) stands reversed on this issue. - Decided in favour of assessee.
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