TMI Blog2017 (2) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... treated at par with the expenses / allowances and such business loss can be set off against any type of income as section 71 do not debar from setting off such losses. - I.T.A. No. 4413/Mum/2014 - - - Dated:- 23-11-2016 - Shri B.R. Baskaran (AM) and Shri Pawan Singh (JM) For The Assessee : Shri Rakesh Joshi For The Department : Shri B.S. Bist ORDER Per B.R. Baskaran (AM) :- The appeal filed by the Revenue is directed against the order dated 10.4.2014 passed by the learned CIT(A)-37, Mumbai and it relates to A.Y. 2011-12. Grounds of appeal urged by the Revenue read as under :- (i) Whether on the facts and circumstances of the case and in law, the learned CIT(A) erred in allowing the set off of loss incurred on sale of polished diamond goods against deemed income assessed u/s. 69A. (ii) Whether on the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the sales on account of undisclosed stock of diamond goods added u/s. 69A was business sales. (iii) Whether on the facts and circumstances of the case and in law, the learned CIT(A) erred in treating the loss on sale of the diamonds as genuine without appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d jewellery The main object of the assessee firm is to carrying out the business of import, export, manufacturing, wholesale and retail dealing in diamonds, gems and jewellery. The partnership business was of importers, exporters, manufacturers, processors, investors, wholesalers, distributors, retailers, dealers and indenting agent of diamonds, synthetic stones, gems and jewellery, precious and semi precious metals and miners and ornaments and article made thereof including jewellery, decorative and precious objects of arts and crafts and to cut, design polish rough diamond, gems and precious stones and that of investment and lending and to do any other business as may be mutually agreed upon by the partners. In the return of income filed for the year under consideration, the assessee has shown income under the head profit and gains of business and profession and other sources. In the search action, three loose papers were found and seized as part of Annx - 5 of the panchnama prepared on 29.10.2011 at the office premises of 114/116, Mittal Court, C-Wing, 11th floor, Nariman Point, Mumbai - 400021. These documents mention the carat value, rate per carat and total value of diamonds. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to how this undisclosed income is generated? Ans: it is through unrecorded trading of diamonds. It is clear from the above facts that the declaration was related to business stock in trade hence it is evident that the declaration amount is required to be assessed under the head' Income from Business or profession. Thus, the undisclosed income of ₹ 13,47,63,640/- declared voluntarily by the assessee for A.Y. 2011-12, is undisclosed stock held under the customary trading of the business and hence should be treated as the business income of the assessee firm and not as undisclosed investment as held by the AO. If all the three conditions of Section 69 exist together, the unrecorded investment or value of assets can be deemed to be assessee's income of the relevant financial year. In the present case all three conditions as required under section 69 are not fulfilled because the appellant has offered explanation and nature of source of acquisition as undisclosed stock received from the unaccounted trading of diamond as source of income. The partner of the firm has time and again stated in his statement that diamond found in the premises during the search is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt as submitted by the learned counsel for the Revenue. The same stand was re-affiremed by the Hon ble Gujarat High Court in the case of CIT-II Vs. Shilpa Dyeing Printing Mills Pvt. Ltd. (Tax Appeal No.290 of 2013. 10. In view of the above and relying on the decision of various high court and tribunal as cited by ld. AR it is clear that the stock of diamond declared during the .search is taxable under the heads of income as defined in section 14 read with section 56 and not taxable separately. As there cannot be taxable income of income out of the 5 heads of income as specified in section 14 of the Act. Hence the stock of diamond of ₹ 13,47,63,640/- is taxable either under Income from Business Profession or under income from other sources. 11. With regard to AO s action for rejection of books of account u/s.145(3), we found that assessee s books of accounts are consistent with the applicable accounting standard and there are no qualifications by the auditors of the assessee with regards to the method of accounting or accounting policies. Furthermore, the accounts for the above mentioned assessment year are complete and accurate as it includes the undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Co. P Ltd., 279 ITR 457. Considering facts and circumstances prevailing in the present case, we are of the view that learned CIT (A) was right in deleting the addition made by A.O. 13. The CIT(A) has given categorical finding to the effect that the AO has considered gross profit based on SEZ Unit on A Star Exports at Surat. We found that SEZ Unit operates on fiscal benefits available to SEZ unit and is a manufacturing activity cannot be compared with trading activity. The loss has arisen because of the value considered as its cost. However, there is no evidence of cost in the books of accounts. Further the valuation made at the time of search is a mere one page summary which gives no description of the diamonds and is merely total value of 5-6 packets. Thus, no meaningful comparison can be made. The CIT(A) has categorically dealt with each and every documents and after giving detailed finding in para 4.11, reached to the conclusion that rejection of books of accounts and estimation of gross profit by the AO was not justified on the facts of this case. The findings recorded by CIT(A) are as per material on record and do not require any interference on our part. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read on Section 115BBE reads as under :- Under the existing provisions of the Income-tax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate. In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment, expenditure, etc., which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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