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2015 (11) TMI 631 - ITAT CHANDIGARH

2015 (11) TMI 631 - ITAT CHANDIGARH - [2015] 43 ITR (Trib) 414 (ITAT [Chand]) - Treatment of surrendered income - whether the income surrendered is to be taxable as business income or income from other sources or as deemed income under sections 69A, 69B and 69C - Held that:- Assessing Officer has nowhere disputed the business losses incurred by the assessee. The books have not been rejected. It was stated at the Bar that even at the time of survey, in the trading account prepared by the survey t .....

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his order the Assessing Officer 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. Further, even the survey team has not found any source of income except the business income. Now, following the judgment of .....

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dered, as per the mandate of section 71 of the Act. No loss can be set off against the cash surrendered as the same has already been held to be taxed under a different head. The Assessing Officer is hereby directed to set off business losses suffered by the assessee out of the surrendered income except the element of cash surrendered. - Decided partly in favour of assessee. - I. T. A. No. 1080 /Chd/ 2014 (assessment year 2011-12). - Dated:- 17-9-2015 - H. L. KARWA (Vice-President) and MS. RA .....

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n upholding the contention of the Assessing Officer in adopt ing the amount surrendered during survey as deemed income at ₹ 70 lakhs and making addition in the income assessed. 2. a). That the worthy Commissioner of Income-tax (Appeals) has failed to appreciate the fact that the surrendered income of ₹ 70 lakhs had been reflected in the profit and loss account and at the time of survey even, there was loss to the assessee on the basis of trading account submitted as on the date of su .....

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at as per section 14 of the Income-tax Act, the income can be taxed only under 5 heads as provided in that section and income cannot be taxed under any other head which is not given in the Income-tax Act. 4 a). That the decision of the hon'ble Income-tax Appellate Tribunal in the case of Kim Pharma P. Ltd. v. CIT [2013] 1 ITR-OL 137 (P&H), Ambala Cantt, is not applicable in the case of the asses see. 4 b). Notwithstanding the abovesaid ground of appeal, the learned Commissioner of Income .....

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by the Assessing Officer under section 36(1)(iii), the worthy Commissioner of Income-tax (Appeals) has erred in directing the Assessing Officer to limit the disallowance to the proportionate interest in the ratio of debt funds, i.e., in the debt, equity ratio as per findings given by him in para 5 of the order. 6. That submissions filed during the course of hearing has not been considered properly." 3. Learned counsel for the assessee during the course of hearing preferred not to press grou .....

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come of ₹ 23,04,500 on September 23, 2011. The Assessing Officer noted that as per the profit and loss account, the income of ₹ 70 lakhs surrendered by the assessee during the course of survey conducted at its premises on October 6, 2010 was shown by the assessee as its business income. The Assessing Officer observed that the additional income surrendered is on account of investments, cash, expenses, which could not be explained or which were not reflected in the books of account. Th .....

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ing Officer was that the surrendered income should be treated as business income. However, the Assessing Officer rejected the contention of the assessee and treated the surrendered income as deemed income and not as business income. The effect of the said finding was that the Assessing Officer did not allow the benefit of the set off of business losses incurred by the assessee during the year amounting to ₹ 58,19,120 against the income surrendered at the time of survey. 6. The assessee wen .....

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hat section and any income cannot be taxed under any other head which is not given in the Act. The assessee referred to the judgment of the hon'ble Supreme Court in the case of CIT v. D. P. Sandu Bros. Chembur P. Ltd. [2005] 273 ITR 1 (SC) and that of the hon'ble Bombay High Court in the case of Kevalchand Nemchand Mehta v. CIT [1968] 67 ITR 804 (Bom). The assessee also referred to a recent decision of the hon'ble Gujarat High Court in the case of CIT v. Shilpa Dyeing and Printing Mi .....

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ction 14 of the Act, is not a legally tenable position. Further, he relied again on the judgment of the Punjab and Haryana High Court in the case of Kim Pharma P. Ltd. v. CIT [2013] 1 ITR-OL 137 (P&H) which he also supported by the order of the Income-tax Appellate Tribunal, Chandigarh Bench in the case of Smt. Promila Jain v. Deputy CIT in I. T. A. No. 1449/ Chd/2010. As per the learned Commissioner of Income-tax (Appeals), in this decision, the Income-tax Appellate Tribunal had held that t .....

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against the said order of the learned Commissioner of Income-tax (Appeals). 8. Learned counsel for the assessee during the course of hearing before us submitted that during the course of survey surrender of ₹ 70 lakhs was made under the following heads : (i) Discrepancy on account of cash found ₹ 9 lakhs (ii) Discrepancy on cost of construction of building ₹ 21 lakhs (iii) Discrepancy in stock ₹ 10 lakhs (iv) Discrepancy in advances and receivable ₹ 30 lakhs 9. He f .....

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essee and also the income was outside the books of account and the surrender so made has been made in some different head not relatable to the business of the assessee. Learned counsel for the assessee also invited our attention to section 71 of the Act, whereby business loss of current year can be set off against the income under any of the other heads. As per him, even if the surrendered income is taxed under the head "Income from other sources", the business losses suffered during t .....

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Gujarat High Court in the case of CIT v. Shilpa Dyeing and Printing Mills P. Ltd. [2014] 100 DTR 381 (Guj). Further, in the case of Shilpa Dyeing and Printing Mills (supra), the hon'ble Gujarat High Court has relied on the case of CIT v. Chensing Ventures [2007] 291 ITR 258 (Mad) of the hon'ble Madras High Court. In this way, it was submitted that the judgment of Kim Pharma Pvt. Ltd. (supra) stands distinguished by the latest judgment of the hon'ble Gujarat, Madras and Rajasthan Hig .....

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ses suffered by the assessee during the year may be allowed to be set off against the surrendered income. 10. The learned Departmental representative relied upon the order of the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals). 11. We have heard the rival contentions and perused the material available on record. This is a fact on record that the assessee surrendered an amount of ₹ 70 lakhs as additional income during the course of survey conducted at its premi .....

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eemed income under sections 69A, 69B and 69C of the Act as held by the Assessing Officer. A number of judicial pronouncements have been cited during the course of hearing, however, we have to bow down to the proposition laid down by the jurisdictional Punjab and Haryana High Court in the case of Kim Pharma Pvt. Ltd. (supra) since this is the only judgment of the jurisdictional High Court which were brought to our notice. 13. On perusal of the said judgment, we find ourselves in agreement with th .....

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puted the business losses incurred by the assessee. The books have not been rejected. It was 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 Assessing Officer. Further, 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 .....

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ding, discrepancy in stock and discrepancy in advances and receivable. Further, 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 under section 69A of the Act. 1 .....

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