TMI Blog2010 (7) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to explain nature and source of income comprised in the amounts surrendered during the survey in the form of stocks, cash in hand and unexplained expenditure amounting to Rs. 70,00,000/ - Consijtiering the submissions of the assessee, the Assessing Officer shall adjudicate as to whether the same is assessable as 'business income' as contended by the assessee or under Sections 69/69A/69B/69C of *the Act as professed by the Commissioner - the case laws relied by the appellant, since the propositions canvassed therein are not in conflict with the principles laid down by the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd.(supra), which have been kept in mind by us, while adjudicating the appeal of the assessee. - The appeal of the assessee is partly allowed - ITA No. 73/Chd/2009 - - - Dated:- 30-7-2010 - ORDER Per G. S. Pannu, AM This appeal by the assessee pertaining to the assessment year 2005-06 is directed against the order of the Commissioner of Income Tax, Panchkula (in short 'the Commissioner') dated 03.12.2008 passed u/s 263 of the Income Tax Act, 1961 (in short 'the Act'), which, in turn, is based on an order passed by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income was determined at Rs. 32,66,100/-, after allowing credit for carried forward losses of Rs. 3 1,62,376/-. 4. According to the Commissioner, the entire income of Rs. 70,00,000 which was liable to be assessed as deemed income u/s 69/69A/69B of the Act and the same was not eligible to be set-off against carried forward business losses. Notably, the assessee had claimed set-off of carried forward business loss of Rs. 1,22,390/- and unabsorbed brought forward depreciation of Rs. 30,39,986/-, as per page 2 of the Computation of income, copy of which has been placed on record. This set-off was considered by the assessee in determining total income of Rs. 24,66,096/-, which was eligible for Section 80IB deduction amounting to Rs. 7,39,829/-. Accordingly, net taxable income was determined at Rs. 17,26,270/- which has been enhanced in 'the assessment finalized u/s 143(3) of the Act to Rs. 32,66,100/- after making the disallowances mentioned earlier. In sum and substance, the Commissioner has found the assessment order dated 28.12.2007 as erroneous in so far as it is prejudicial to the interests of the Revenue on a single point, which is, that the income surrendered during the sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Gujrat High Court. Under these circumstances, it is pointed out that the adjustment allowed for brought forward un-absorbed loss/depreciation in the assessment order was after due application of mind, and the Commissioner could not invoke his jurisdiction u/s 263 of the Act. In support, the learned counsel has relied upon the following decisions i) Malabar Industrial Co.Ltd., 243 ITR 83 (S.C) ii) CIT V Max India Ltd.,295 ITR 282 (SC) iii) CIT V Mehsana District Co-operative Milk Producers Union Ltd., 263 ITR 645 (Guj) iv) CIT V Arvind Jewellers, 259 ITR 502 (Guj) v) Vinod Kumar Gupta V ITO, 32 ITD 254 (Chd) A vi) Decision of the Chandigarh Bench of the Tribunal in the case of Little Bee Impex V Addl. CIT, ITA 36 85 37/Chandi/2009 for assessment year 2004-05 and 2005-06. 6. On the other hand, learned DR appearing for the Revenue has defended the order of the Commissioner by pointing out that the Assessing Officer should have assessed the surrendered income under Sections 69/69A, 69B and therefore, the said assessment has been rightly considered by the Commissioner as erroneous in so far as it is prejudicial to the interests of the Revenue within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, or where two views are possible and the Assessing Officer has taken one view which the Commissioner does not agree with, such order cannot be treated as erroneous insofar it is prejudicial to the interests of the Revenue, unless and until it is demonstrated that the view taken by the Assessing Officer is un-sustainable in law. Further, as per the Hon'ble Supreme Court, even an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of an order being erroneous. It is to be understood that failure to make an enquiry, which in the circumstances of the case is prudent, would also render an order "erroneous" within the meaning of Section 263 of the Act because it would reflect non-application of mind by the Assessing Officer. 9. In the background of the aforesaid, we may now examine the facts of the instant case. In this case, as per the. Commissioner, income surrendered during the survey was assessable in terms of Sections 69, 69A/69B of the Act and the same is not eligible to be set-off against the brought forward business loss/un-absorbed depreciation in terms of the judgement of the Hon'ble Gujrat High Court in the case of Fakir Mohmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the failure of the Assessing Officer to examine the source of unexplained investments in stock and cash surrendered by the assessee, certainly renders the order dated 28.12.2007 as "erroneous" within the meaning of Section 263 of the Act. In our considered opinion, when circumstances justify making of an enquiry and it is prudent to do so, then the failure to make such an enquiry renders an order "erroneous" within the meaning of Section 263 of the Act. This position, in our view is clearly manifested in the impugned order by the failure of the Assessing Officer to enquire about the sources of surrendered amount and therefore, in our considered opinion, the assessment order dated 28.12.2007 was erroneous in so far as it is prejudicial to the interests of the Revenue within the meaning of Section 263 of the Act. This action of the Commissioner is upheld. 12. Next, the Commissioner concluded that the surrendered income is liable to be assessed u/s 69/69A/69B of the Act. In our opinion, the said conclusion could be drawn only after making necessary enquiries and culling out the relevant fact situation. For this objective, in our view, the Commissioner should have set-aside the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of income and, therefore, it is unnecessary to consider whether if falls under any head of charge a unumerated in s.6 (Section 6 of 1922 Act which is similar to section 14 of the 1961 Act). Section. 6 of- the Indian IT Act opens with the words save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income-tax in-the manner hereinafter appearing." The words "save as otherwise provided by this Act" obviously do not make any exceptions to the provisions of s.6, but refer only to the exemptions dated under the Act. The meaning of the opening words of s.6, therefore, is clear that the charge of income-tax shall be only on the enumerated heads of income. Profits and gains, that is to say, on the heads of the income falling under one or more of the six heads mentioned in the sections. We do not thinks, therefore, that it would be permissible to hold having regard to the provisions of the section and to the entire scheme of the Act that there can be some other sources of income other than the six heads enumerated in s.6, such as income which is statutorily liable to income-tax in the hands of an assessee, nor do any of the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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