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TMI Blog2019 (6) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... l, profit was worked out. The same, together with the unexplained stock and cash, was surrendered as income in the hands of the different family members, including the assessee, at an aggregate of Rs. 1025 lacs for the relevant assessment year, i.e., AY 2014-15. The assessee's share in the disclosure, made thus, was at Rs. 615 lacs, i.e., Rs. 310.72 lacs by way of profit and Rs. 304.28 lacs by way of unexplained assets (PB pg. 28). The assessee and the other family members honored the disclosure, also paying tax due thereon. As, however, some of the seized material pertained to the current year, the immediately preceding year, notice u/s. 153A was issued to the assessee on 23.01.2014. The assessee replied on 16.12.2014, stating that the return filed on 23.01.2014 be treated as the return filed in response to the notice u/s. 153A. The question therefore arose as to his undisclosed income (as per the seized material) pertaining to the current year. The assessee, failing to obtain the manner of working of the undisclosed income, i.e., as per the seized material - including that for the current year, from the Assessing Officer (AO), i.e., even after repeated requests, attempted the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranslate into cash, which has been taken into account while assessing the undisclosed (unexplained) income for AY 2014-15, to the extent taxed for AY 2013-14 (current year), should be deducted from the income assessed for that year (AY 2014-15) by giving a suitable direction. In other words, as far as the assessee is concerned, it is a zero-sum game, i.e., when both the years are taken together. Discussion & Findings 5. We have heard the parties, and perused the material on record. 5.1 Our first observation in the matter is that each year is a separate and independent unit of assessment, and income for a particular year is to be assessed for that year only (CIT vs. Isthmian Steamship Lines reported at [1981] 20 ITR 572 (SC); Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC); Reliance Jute & Industries Ltd. v. CIT [1979] 120 ITR 921 (SC)). The law in the matter is trite and income assessed in the hands of another, or for another year, is no ground for it being not assessed in the hands of the right person and/or for the right year [ITO v. Ch. Atchaiah [1996] 218 ITR 239 (SC); CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC); Jamnaprasad Kanhaiyalal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... telescoping of the lower amount against the higher amount. For example, if profit and asset-based income is at Rs. 10 lacs and Rs. 8 lacs respectively, it is the former (Rs. 10 lacs) that shall prevail, while the latter would if it exceeds Rs. 10 lacs, as (say) Rs. 12 lacs. No assets have been found for the current year (Period 1) in the instant case, so that profit becomes the only basis of income determination. Now, if the undisclosed income for the following year (P2) is asset-based, being higher than the profit worked out for that year, telescoping shall apply. If, however, it is, again, the profit which is the basis of income for that year, telescoping may not have application. 5.2 We, next, proceed to examine the assessee's working (PB pgs. 91, 92, 139- 140), based as it is on the seized material. This assumes relevance for two reasons. First, the nature of the transactions and, two, the quantification of income. As regards the former, while the assessee claims them to be rate cut transactions, i.e., where the purchase is settled against sale, so that only the rate difference obtains, the Revenue claims it to be purchase and sale transactions, albeit wholesale in nature (pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's working shows a complete matching (both for gold and silver) of the quantity purchased and sold during the financial year, involving a volume of nearly Rs. 48 crores over a period of a year. This in fact obtains for the succeeding year as well. Now, it is highly improbable, nay, almost impossible, in the regular course of business, that the purchase and sale quantities match, which is only an incidence of a speculative trade, i.e., where the deal is cut before the close of the day. In fact, the assessee has in this regard clearly stated (vide letter dated 25/2/2016) that the purchase and sale rates agree, and accordingly may be verified, with the published rates of the stock exchange (MCX), i.e., where the commodities are traded in; the relevant part of the letter in fact finding reproduction at para 2.1 of the assessment order. Couple this with the fact that no material qua sale receivables (i.e., the amounts due from customers against sales) was found during search. The non-acceptance of the assessee's claims, i.e., as to the nature of the transactions, as well as the results thereof, becomes quizzical; the Revenue admittedly not pointing out any defect therein. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of search, agrees, save for a minor difference of Rs. 2850, with the unaccounted cash found during search, i.e., Rs. 49.58 lacs (PB pgs. 139-140), establishing the veracity of the said working. What better proof, then, could the assessee furnish, both as to the nature of the transactions as well as the income (loss) arising therefrom? On the Bench making an inquiry with Sh. Mahajan in this regard, as there is no mention of the said working, either in the assessment or the appellate order, he would make a categorical submission that the same forms part of the assessment and the appellate record, toward which in fact certification (in terms of Income Tax (Appellate Tribunal) Rules, 1963) stands made by him. We, accordingly, have no hesitation in accepting the assessee's claim of having in fact incurred a trading loss of Rs. 16.91 lacs on the undisclosed turnover of gold (Rs. 4570 lacs) and silver (Rs. 194 lacs). 5.5 The next issue is the adjustment, if any, that would ensue to the assessee's returned income on account of the said undisclosed transactions. The assessee has admittedly suffered a loss of Rs. 16.91 lacs therein. The same, however, being in speculative trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the assessee's regular (disclosed) business. This, apart from being without evidence, would amount to falsifying the assessee's regular books of account. Thus, while the assessee is not entitled to set off the admitted loss of Rs. 16.91 lacs - which is on account of it being of a speculative business as well as not returning the same, an addition to that extent on account of unexplained cash balance, which is proved by his own working for the relevant year, arises. We hold so. At the same time, the additional profit of Rs. 110 lacs on the undisclosed turnover, as estimated by the Revenue, is deleted. We decide accordingly. (also refer para 5.6) 5.6 The next issue is of the addition of Rs. 50 lakhs on account of the estimated investment involved in the undisclosed business. The same would be, as found by us, in cash in-as-much as the difference between the purchase and sale is closed and settled the same day, receiving or, as the case may be, paying, cash. Liquid capital to some extent would be required, as where the transactions result in a loss. This in fact gets exhibited by the assessee's working, put paying his claim that no capital is required or otherwise involved. We' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing year (up to the date of search). A loss of Rs. 20 for the current year would, on the contrary, imply a profit of Rs. 120 for the following year. That is, the profit for the following year would in fact stand to increase by the amount of loss admittedly incurred for the current year in-as-much as that only would result in the total profit for the entire period amounting to that determined and assessed (Rs. 100 in our example). True, the loss for the current year does not lead to, as found, a reduction in the cash balance to that extent. That, however, is as there can be no negative cash balance, so that cash to that extent is otherwise available to the assessee, and not because there is no cash depletion to that extent, which rather would be a contradiction in terms. The same ought not to be confused with the profit from trading operations. As such, rather than a reduction in profit for the following year as assessed, the same stands to be increased by the amount of loss incurred in the current year (Rs. 16.91 lacs). No telescoping benefit qua the addition sustained, which is thus on account of unexplained cash, and not on account of profit - which only would translate into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. (supra). Where, for example, an addition has been made on the basis of investment, the Tribunals' refusal to allow the benefit of telescoping was upheld by the Hon'ble Court in P.C. Moondra v. CIT [2004] 191 CTR 213 (Raj), a decision relied upon by the assessee. 6. In the result, the assessee appeal is partly allowed. Order pronounced in the open court on March , 2019 Separate order Sd/- 08/4/2019 (N. K. Choudhry) (Sanjay Arora) Judicial Member Accountant Member 1. I have gone through the order passed by Hon'ble A.M., wherein Ld. Brother partly allowed the appeal of the assessee. I am in agreement with the conclusion of appeal, however as the Hon'ble A.M. also decided the issue qua adjustment if any, which was neither raised or pressed by the Assessee nor in issue or grounds of appeal of the instant case, hence I do not endorse the same. (Kindly refer para 5.5 page 9 to 10 of the order passed by Hon'ble A.M.) However, in my view, non-concurrence to the decision on issue qua adjustment if any, does not impact the conclusion/result, because in principle, I am in agreement with the conclusion/result of the appeal. 2. In the result, the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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