Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2019 (11) TMI 410

..... sue elaborately and propounded that onus is on the assessee to establish the source of surrendered income. If it failed to demonstrate such source, then, it is to be characterized as deemed income under sections 69,69A/B/C, and if that be happened, then such income to be taxed on the gross amount without setting off any expenditure or allowance against the same under section 115BBE The stand of the assessee is that expenditure incurred for construction of building was from the routine business, and such addition of ₹ 32 lakhs ought to be treated as business income. We find force in this contention of the ld.counsel for the assessee, because the expenditure incurred for creating a business asset and it must have been generated through the business carried out by the assessee. It is pertinent to bear in mind that expenditure laid out for the purpose of business is to be allowed deduction either as expenditure or to be capitalized on which depreciation will be allowed. The assessee might have earned income from the business which has not been accounted and used for constructing the business asset, though specific details have not been discussed either in the impugned order about .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ; 21,34,700/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. According to the Assessing Officer, during the course of survey proceedings, certain discrepancies were found. To cover-up these discrepancies, the assessee voluntarily disclosed additional income of ₹ 40.00 lakhs (₹ 8.00 lakhs on account of excess cash and ₹ 32 lakhs on account of unexplained expenditure in building account) for the financial year 2011-12 relating to the Asstt.Year 2012-13. In the revised return, the assessee has shown income at ₹ 21,34,700/- including surrendered income at ₹ 40.00 lakhs. The ld.AO has passed assessment order on 19.2.2015. He made addition of ₹ 40 lakhs after giving credit of brought forward loss. He determined income of the assessee as under: Returned income ₹ 21,34,700 Less: Income disclosed during survey to be assessed separately as per parano.4.0 ₹ 40,00,000 Add: Addition as per para no.5.0 ₹ 368 Balance loss allowed to be c/f (-)₹ 18,64,932/- Deemed income u/s.69,69A,69B &69C as discussed above ₹ 40,00,000/- Total taxable inco .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... f losses was not available since the amendment made to section denying the benefit of set off of losses w.e.f. 1.4.2017 was retrospective in nature being curative in character. Alternatively it was contended that the issue was covered by the decision of the Jurisdictional High Court in the case of Kim Pharma Ltd. (supra), as per which these incomes could not be assessed under any heads as provided under the Act and therefore were not eligible to set off any losses against the same. 11. We have heard the rival contentions, perused the orders of the authorities below and have also considered various case laws referred to by both the parties before us. 12. The issues to be addressed in the present case can be summarized as relating to the categorization/characterization of income surrendered by the assessee during survey proceedings, whether from disclosed or undisclosed sources, and the allowability of claim of set off of losses ,both current and brought forward, against the same. 13. The controversy arises on account of the scheme of the Act which mandates incomes to be categorized under specific heads depending on their nature/source, for computation purposes under chapter IV and t .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [2018][Assessing Officer], satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee of such financial year.] SECTION 69B [2019][Amount of investments, etc., not fully disclosed in books of account. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery, or other valuable article, and the [2020][Assessing Officer] finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the [2021][Assessing Officer], satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.] SECTION 69C [2022][Unexplained expenditure, etc. Where in any financial year an assessee has i .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... owed to the assessee under any provision of this Act in computing his income referred to in clause (a) of subsection (1).] [3052] Omitted the words, figures and letters "for the previous year relevant to the assessment year beginning on the 1st day of April, 2012 or beginning on the 1st day of April, 2013 or beginning on the 1st day of April, 2014" by Finance (No. 2) Act, 2014 (w.e.f. 1-4-2015). Ins. by Finance Act, 2016 (w.e.f. 1-04-2017). [3052a] Ins. by Finance Act, 2018 (w.e.f. 1-04-2017). 15. As is evident from a bare reading of the above sections any investments, moneys and expenditure which are not disclosed in the books of the assessee, if any, maintained by it and the source of which has also been not explained satisfactorily by the assessee are treated as deemed incomes of the assessees. Thus, the amounts to be treated as deemed incomes are investments, moneys, or expenditure fulfilling the twin criteria of: (a) not being recorded in the books if any maintained and, (b) the source of which the assessee is unable to explain satisfactorily. 16. In other words, to put it simply, the unrecorded investments/assets/expenditures made out of unexplained sources are trea .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ed as given by the assessee, wherein it was alleged that it is for the purpose of the business. Therefore, to the extent the expenditure incurred for construction of the building, out of unexplained source is concerned, it is to be construed as earned from the business and it will take character of the business income. Once this income is to be assessed under the business income , then all incidental benefits for set off from brought forward loss or any other expenditure is to be given to the assessee. 8. In the judgments relied upon the ld.counsel for the assessee, similar treatment has been given on the amounts which were admitted as trade receivable during the course of search/survey. Respectfully following the order of the Co-ordinate Bench, we direct the Assessing Officer to treat surrendered income to the extent of ₹ 32 lakhs as business income. 9. As far as excess cash balance is concerned, the assessee failed to explain the source of such income, and it is to be treated as deemed income, and it is to be assessed on gross basis, as treated by the Assessing Officer. In view of the above discussion, the appeal of the assessee is partly allowed. 10. In the result, appeal .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||