TMI Blog2005 (10) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 234B of the I.T. Act." 2. The facts of the case custom authorities carried out search on 21-23rd March, 1991, at the business and residential premises of the assessee. One boy named Raju Bhamre was found in possession of diamonds, which were seized by the Custom Authorities. The diamonds were accepted by the assessee as belonging to him and Raju Bhamre was explained as an employee of the assessee-company. Total diamonds and their value so seized were as under : "( i )Cut and polished diamonds as per the Stock Register of Manufacturing division 1996.07 Cts. ( ii )Rough diamonds as per Stock Register of Manufacturing Division 5068.11 Cts. Total value of the above Diamonds at Sl. Nos. ( i ) ( ii ) is stated to be Rs. 25,16,504. ( iii )Polished diamond as per Stock Register of Trading Division 4473.89 Cts. These are further divided into those purchased from Shri L.L. Moradia of 1890.71 Cts. and those purchased from Shri Thackersey V. Patel of 2583.18 Cts. ( iv )Polished diamonds received from Karigars to whom issues were made as per the Stock Register of the Mfg. Division of rough diamond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing whereas it runs from 1-4-1990 to 11-3-1991, writing in one sitting is not possible, if it was genuine stock register. We, therefore, restore the matter to the file of the Assessing Officer to find out whether any stock register was maintained prior to the search, if so, where it is lying at present. Whether Custom authorities have seized such stock register and if yes, what finding they have given. What explanation the assessee has furnished before the Custom authorities about the source of the diamonds and what view they have taken on the explanation furnished by the assessee. Further, if the diamonds were purchased then how the payments were made and whether the sellers were in a position to sell the diamonds to the assessee. We feel that there is a contradiction in the views one taken by Assessing Officer that there was no stock register of manufacturing division and other taken by CIT(A) (that there was a stock register). Thus, a fresh verification of facts is necessary before accepting or rejecting the explanation of the assessee. Accordingly, this issue is restored back to the file of Assessing Officer. This ground of revenue is allowed for statistical purposes. 6. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed as income. This section falls in Chapter VI which heads "aggregation of income and set-off of carry forward of losses". This income under five heads. ( i ) Salary ( ii ) House property ( iii ) Business income ( iv ) Capital gains and ( v ) Other sources is aggregated and then the income under sections 68 to 69 is added. Thus, addition made under Chapter VI is independent of any other head and cannot be given the colour of a particular head previously described. It is so held in Fakir Mohmed Hazi Hasan v. CIT [2001] 247 ITR 290 2 (Guj.). The head notes for reference are : "The scheme of sections 69, 69A, 69B and 69C of the Income-tax Act, 1961, would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion, etc., owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and moneys or value of articles not recorded in the books of account or the explained expenditure may be deemed income of such assessee. It follows that the moment a satisfactory explanation is given about s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from the export of goods outside India. For the meaning of words "derived from" we may safely refer to the decision of Hon ble Supreme Court in Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 1 . The head notes are as under : "The words "derived from" in section 80HH of the Income-tax Act, 1961, must be understood as something which has a direct or immediate nexus with the assessee s industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. Held accordingly, that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction under section 80HH." 11. It is clear that profits of the business for the purposes of deductions under section 80HHC should have a direct nexus with the assessee s business. Neither the income assessable under " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. In Naginadas Sons v. Asstt. CIT [IT Appeal No. 1615 (Bom.) of 1994] for assessment year 1991-92 decided by I-Bench of ITAT on 27-6-2002 was on the question of allowing deduction under section 80HHC on the disclosure made under section 132(4). It was stated that such income was earned as premium from high sea sales. The Tribunal considered it to be business profit and allowed deduction under section 80HHC. The facts are different. No addition under section 69 is involved in the case relied upon by the learned AR. Further the effect of decisions of Hon ble Supreme Court in Pandian Chemicals Ltd.s case ( supra ) and Hon ble Delhi High Court in Ritesh Industries ( supra ) are not considered. In other decisions cited by ld. Counsel is Asstt. CIT v. Hindustan Chemicals Works [IT Appeal No. 1921/(Mum.) of 1995] for assessment year 1986-87 decided on 25-2-2001 - the question involved was taxing cash credit under the head "Other sources" rather under the head "Business". The Tribunal held there, that it was a business income. The case is distinguishable. We are of the view that the decision of Hon ble Gujarat High Court in Fakir Mohmed Hazi Hasan s case ( supra ), w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ister seized by custom authorities or it does not contain any entry about these purchases then the addition of this sum is sustainable under section 69. 19. In view of this, this ground of the assessee is allowed for statistical purposes. 20. Second ground is about receipt of cut and polished diamonds of 563.34 Cts. from M/s. Gayatri Exports. After considering the arguments of the parties and the order of CIT(A), we restore this ground to the file of Assessing Officer to find out whether assessee has originally kept any stock register prior to search as observed elsewhere in this appeal and appeal filed by the department. The Assessing Officer will decide the issue on the basis of original stock register if any kept by assessee. 21. The next ground is about claim of business loss of Rs. 88,72,947 on account of confiscation of stock by custom authorities. We find that the assessee has contested the issue before custom authorities and final decision has not yet come. Let this issue be decided after final order by custom authorities. For deciding this issue, the decision of Hon ble Gujarat High Court in Fakir Mohmed Hazi Hasan s case ( supra ) may be kept in view. The or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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