TMI Blog2018 (5) TMI 1872X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared before the Revenue Authorities. AO has also fairly treated the income as profits from business profession and the assessee has also surrendered this income as profits over and above its regular business income. Hence with the arguments taken before us by the Ld. DR, we hereby hold that the surrendered income under the heads pertaining to the profits of the business and profession are allowed to be set off against the business loss / depreciation loss and since the no satisfactory explanation has been given by the assessee for the cash portion, proving its sources the same is not to be allowed to be set off against business / deprecation losses. - Decided in favour of assessee. - ITA No.57/Chd/2017, Cross Object ion No. 11/Chd/2017 Assessment Year : 2013-14 - - - Dated:- 22-5-2018 - Smt. Diva Singh And Dr. B.R.R. Kumar, JJ. Assessee By: Sh. Y.K. Sud Department By: Smt. Renu Amitabh ORDER PER BENCH: The present appeal has been filed by the Revenue and Cross Objection filed by the Assessee against the order of the Ld. CIT(A)-1, Ludhiana dt. 27/10/2016. 2. The Revenue has raised only one effective g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit of the business after deducting surrendered income considering it as deemed income. The AR submitted that as per the decision in the case of Liberty Plywood (P) Ltd. vs. Asst. CIT 2013 Tax Pub (DT) 0831 (Chd-Trib) 0293, the unabsorbed depreciation can be set-off against the deemed income , as the company has current year depreciation of ₹ 1,23,61,513/- which can also be set off against the balance taxable income of ₹ 1,06,09,974/- after at after deducting surrendered amount of ₹ 3.50 crore from the returned business income of ₹ 2,43,90,026/-. The AO was not satisfied with the reply of the assessee and not allowing to set-off the business losses against deemed income which had been surrendered during the survey. 2.1 During the course of the appellate proceedings, the AR submitted his reply as under: The Appellant has challenged the surrendered Income of Rs-3,50,00,000 represents Business Income and claimed set off of current year business loss against the said Income. However the A.O considered the said Income as Income from other sources u/s 69 and 69A of the Income Tax Act, 1961 The brief facts are that a Survey u/s 133 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the present Business Income there would have been a loss of ₹ 1 04,40,504 The AO could not point out even a single defect in the books of account nor he has rejected the books of accounts in support of his contention. To support his view the A 0 relied on the judgment of Dulari Digital Photo Services Private Limited vs CIT in ITA No 189 of 2012 but the copy of judgment was not provided to the assessee. However, from the extracts of the judgment which the AO has reproduced in his order it is clearly distinguishable and cannot be applied to the assessee for the reasons that the Hon'ble High Court has held that while analyzing Income from other sources, it would be taxed under that Head only of the relatable source known otherwise if the Head is not known it would be taxed u/s 68. This judgment cannot be applied to the assessee since the assessee has made the surrender by specifying the Heads which are all business heads and the surrender was duly accepted by the department and the Tax on the Income was also charged on the Income which is clear from the surrender letter reproduced on page 4 of the Assessment Order. Further the A 0 relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was on account of cash found during the survey, discrepancy in the cost of construction of building, discrepancy in stock and discrepancy in advances and receivables. By no stretch of imagination, any of these incomes apart from cash can be considered as income under any head other than business income. (Copy of Judgment enclosed Pg 13-18) Your kind attention is drawn to the judgment of ITAT Chandigarh in the case of Kumar Enterprises vs DCIT., Chandigarh IT A No.525/Chd/2014 wherein the Tribunal while quashing the orders of Commissioner of Income Tax held. The Commissioner of Income Tax has also relied on the judgment in the case of M/s Kim Pharma (P) Ltd. (supra). We wish to stale here that in that case, the only issue was with regard to the cash surrendered at the time of survey and no other incomes. Since other incomes were already treated by the Assessing Officer himself as business income, therefore, the proposition of that case is not applicable to the present case. Another point raised by the Commissioner of Income Tax in his order, while distinguishing the case of Karnataka High Court in the case ofS.K. Srigiri Bros.(supra), he has stated that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income under section 69 would not be find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then it should be considered as deemed income under section 69,69A,69B, 69C as the case may be. It is because when assessee fails to explain satisfactorily the source of such investment then it should be taxed under section 69,69A,69B, 69C as the case may be. It should not be done at the first instance without giving opportunity to the assessee to establish nexus. Therefore, there is n confilict with the decision of Hon. Gujarat High Court in the case of Fakir Mohmed Haji Hasan(supra) where investment in an asset or expenditure is not identifiable and no ITA No.531/Ahd/2008 Asst. year 2004-05 nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, we hold that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ITAT Ahmadabad in the case of DCIT vs. Shah Khodidas Co. ITA no. 531/Ahd/2008 wherein it was held that it is only where no nexus is established with any head that it should be considered as deemed income u/s 69, 69A, 69B and 69C as the case may be. 7. Ld. CIT(A) deleted the addition by placing Reliance in the case of M/s Khurana Rolling Mills (P) Ltd. in Appeal No. 518/ IT/CIT(A)-l/Ldh./2014-15 dated 31.03.2016 for A.Y. 2012-13 as under: I have carefully considered the facts of the case, the basis of the addition made and the argument of the AR. During the course of the survey operations conducted at its business premises, the appellant surrendered an amount of ₹ 1 crore. The said income has been shown in the P L account by the appellant. The Assessing Officer assessed the surrendered income as deemed income u/s 69 and 69B by relying on the judgment of M/s Kim Pharma Pvt. Ltd. ITA no. 106 of 2011 (P H) Fakir Mohamad Haji Hasan in ITA no. 165 CTR 1011 (Guj). Thus, the business losses were not allowed to be set off against the surrendered income. The AR contended that the appellant is maintaining all the statutory records required under the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Charan Singh recorded during the survey operations, the amount of ₹ 1 crore was surrendered as income of the company over and above the normal business income. The AR has rightly pointed out that in the case of Kim Pharma Ltd. vs. ITO, IT AT Chandigarh bench, the amount surrendered on account of cash was not allowed to be assessed as business income since the source has not been explained and the same was assessed u/s 69A of the Act whereas in the appellant's case mode and manner has been applied to the surrendered income as applied to the income earned during the regular course of the business. No evidence has been found during the survey operations and the discrepancies found were related to the assessee's business and not to any other source of income. The said submissions of the AR were not controverted in the remand report. Reliance has been placed by the AR on the decision of Sh. Kuldeep Kumar vs. CIT, Hon'ble ITAT Chandigarh bench in ITA 1015/CHD/2009 for A.Y. 2006-07 wherein it has been held,after considering the case of the Hon'ble Gujarat High Court in the case of Fakir Mohamad Haji Hasan,that income cannot fall beyond the five heads made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money, bullion etc. owned by the assessee or the source of expenditure incurred by the assessee are not explained, then the value of such investments or money and the value of articles not recorded in the books or the unexplained expenditure may be deemed to be the income of such assessee and that the moment a satisfactory explanation is given about the nature and source by assessee, the income would be treated under the appropriate head of income. However, in the appellant's case, the Assessing Officer could not established that payments received as per the slips were from sources other than the business of the appellant. Therefore, apart from the cash, all other income surrendered is to be brought to tax under the head business income while the cash is to be taxed under the head deemed income u/s 69A of the Act. Moreover, the Assessing Officer has not disputed the business losses of the appellant. The Assessing Officer has not found any disallowable expenditure to show that the appellant has manipulated its books of accounts to bring down its total income. No such evidence has been brought on record to show that the assessee has booked any bogus expenditure and there is ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) and also Sant Steel Alloys Pvt. Ltd. in ITA No. 2808 and 2809/Del/2013 dt. 02/06/2016 and also the case of Fakir Mohamman Hazi Hasan Vs. CIT 247 ITR 290. 9. We have gone through the entire facts of the cases relied upon by the Ld. DR in the case of Kim Phamra (supra) wherein the Hon ble High Court 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 such 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 under the appropriate head of income for assessment as per the provisions of the Act. However, when ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
