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TMI Blog2013 (1) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... his does not appear under any of the heads of income. 4. The learned CIT(A) has failed to notice that the deduction under section.80 IB of the Income tax is allowable and eligible against income earned from the business under Chapter IV D of the Income tax Act, 1961." In the course of hearing, the D.R representing Revenue has reiterated the above said pleadings and vehemently argued that the CIT(A) has wrongly held that unexplained cash credits in question deserve to be treated as assessee's business income. In support of the arguments, he has placed reliance on the case law of CIT Vs.Abdul Rahman Industries ( [2007] 293 ITR 475 (Mad.) ) Fakir Mohmed Haji Hasan Vs. CIT ( [2001] 247 ITR 290(Guj.) ) and of ITO Vs Dulari Digital Photo Services (P) Ltd. ([2012] 24 Taxman.com.31(ITAT CHD)) and prayed for acceptance of the appeal. 3. On the other hand, the assessee has chosen to support the CIT(A)'s order on the basis of reasons contained therein. In support thereof, the A.R has referred to case law in the case of CIT Vs. Margaret's Hope Tea Co. Ltd. ( [1993] 201 ITR 747(Cal.) CIT Vs. Abdul Rahman Industries (293 ITR 475(Mad.) ) and prayed for rejection of the appeal. 4. Undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80-IB of the Act, the addition in question under section 68 of the Act is liable to be treated as 'business income'. 5.1. In this backdrop of the facts, the Revenue is aggrieved by the second portion of the CIT(A)'s order wherein the addition/s 68 of the Act has been ordered to be treated as 'business income'. It is also revealed that there is no pleading to challenge the relief of Rs. 4,55,355/- granted to the assessee. 6. We have heard both parties at length, perused the relevant findings of the Assessing Officer as well as the CIT(A) and the case laws cited by both parties have also been gone through. It emerges that in the assessment proceedings, the Assessing Officer has returned categorical finding that the assessee has not treated the sundry credits in question as its income from income derived from the industrial undertaking in question. It had also failed to prove the identity, capacity and credit worthiness of the creditors in question, which led to the addition under section 68 of the Act to the tune of Rs. 11,86,758/-(supra). Now, the only issue between the parties is that per Revenue; since the addition in question under section 68 of the Act is not inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case law of Fakir Mohmed Haji Hasan Vs. CIT ( [2001] 247 ITR 290 (Guj.) ) cited by the Revenue wherein the addition was under the Chapter VI of the Act (under section 69A). The scheme of the Act makes it clear that Sections 68, 69, 69A to 69D deal with cash credits, unexplained investments, unexplained money, amount of investments not fully disclosed in the books of account, unexplained expenditure and amount borrowed or repaid at hundi. A perusal of the above provisions make it clear that same language, although in different spheres of additions, has been used by the legislature. In this backdrop, we proceed to deal with the case law of Hon'ble Gujarat High Court regarding addition had been made under section 69A held that the deemed income under section 69A of the Act does not fall under the head of income 'Profits and gains of business or profession' as well as any other head. The relevant portion of the aforesaid judgement is reproduced as under:- "6. Under section 4 of the Act, income-tax is to be charged in accordance with the provisions of the Act in respect of the total income of the previous year of every person. As provided by section 5 of the Act, total income of any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69,69A and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these case, the source not being known, such deemed income will not fall even under the head 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69,69A, 69B & 69C in view of the scheme of those provisions. 7. It is therefore, clear that, when the investment in or acquisition of gold, which was recovered from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " under various heads of income. Section 14, which enumerates head of income, falls under Chapter IV and reds as under: Heads of income. 14. Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income :- A.-Salaries. B.-[omitted by the Finance Act 1989] C.-Income from house property. D.-Profits and gains of business or profession. E.-Capital gains. F.-Income from other sources. 11. Some of the salient features of section 14 insofar as they have maerial bearing on the issue under appeal are as under:- (i) Section 14 merely classifies the income under various heads of income for the purpose of computation of total income under them. Section 14 does not deal with aggregation of income; it merely deals with classification of income under various heads of income. 'Computation of total income under various heads of income' under Chapter IV is altogether different from 'Aggregation of income" under Chapter VI of the Income-tax Act. They do not mean one and the same thing. They are fundamentally different from each other. (ii) Section 14 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. It brings the entire sum to the charge of income-tax and thus there is no element of 'computation' of income under Chapter VI as in the case of income falling under specific heads in terms of Chapter IV. It could be for this reason that the sums taxed under Chapter VI have been kept outside the computational provisions of Chapter IV. (iii) Amounts are taxed under the provisions of Chapter VI for the reason that their nature and sources are not known. Once their nature and source are known, they have to be pegged to that source / head of income and taxed under the respective heads of income as enumerated in Chapter IV and not under the provisions of Chapter VI. Conversely, if the nature and source of such amounts are not known, they have to be taxed under the specific provisions of Chapter VI. It therefore necessarily follows that what is taxed under the specific provisions of Chapter VI cannot be pegged to any of the sources/heads of income as specified in Chapter IV. 14. The aforesaid view is supported by the scheme of taxation under the Income tax Act. Section 2(45) defines 'total income' as 'the total income referred to in section 5, computed in the manner laid down in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from other sources. In order to constitute 'income from 'other sources', the source, namely, the "other sources", has to be identified. Income from unexplained or unknown sources cannot therefore be considered or taxed as income from other sources. The aforesaid view is fortified by the judgement of the Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan V. CIT [2001] 247 ITR 290 in which the Hon'ble High Court has held as under:- "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 money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of the assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th's case (supra) and Kevalchand Nemchand Mehts's case (supra). We have carefully gone though them. They have been rendered in the context of old India Income-tax Act of 1922 in which there was no provision corresponding to section 68 or Chapter VI of the Income-tax Act 1961. In the absence of any specific provision in the old Indian Income-tax Act of 1922, a view was taken that unexplained cash credits would be assessable as income from other sources. Section 68 under Chapter VI has been inserted in the present Income-tax Act to provide that any sum found recorded in the books of the assessee would be taxed as income of the assessee if he failed to satisfactorily explain the nature and source thereof. In this view of the matter, unexplained cash credits have to be brought to tax under section 68 and not under section 56. Both the aforesaid sections operate in the fields reserved for them. It cannot therefore be said that what is assessable as income under section 68 must be assessed as income from other sources under section 56.Judgements rendered in the context of the old Income tax Act are therefore hardly relevant to decide the issue under appeal. 18. The assessee claims set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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