TMI Blog2019 (11) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... is to avoid unnecessary litigation and to expressly provide that no set off of any loss shall be allowable in respect of income under Section 68. Therefore, it has to be held that, as on the relevant date of the assessment, there was no bar existed with respect to allowing set off against the carried forward unabsorbed depreciation on fixed assets, with respect to income under Section 68. Therefore, we are of the view that, Tribunal had committed an illegality in coming to the conclusion that the deemed income will not fall even under the head of income from other sources and therefore the deductions and set off applicable to income under other heads will not be attracted in the case of deemed income covered under the provisions of Section 68 - Decided in favour of assessee - I.T. Appeal No. 20 OF 2019 - - - Dated:- 7-3-2019 - JUSTICE C. K. ABDUL REHIM AND JUSTICE R. NARAYANA PISHARADI, JJ. For The Appellant : ADVS. SRI.A.KUMAR, SRI.P.J.ANILKUMAR, SMTG.MINI(1748), SRI.P.S.SREE PRASAD, SRI.AJAY V.ANAND AND JOB ABRAHAM For The Respondent : SC, (GOVERNMENT OF INDIA)TAXES- SRI JOSE JOSEPH JUDGMENT Abdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) which directed the AO to allow the set off of the current year's business loss as well as brought forward business loss and unabsorbed depreciation, against the income assessed under Section 68, has to be reversed. 4. The Tribunal also relied on a judgment of the Gujarat High Court in Fakir Mohmed Haji Hasan v. CIT [(2001) 247 ITR 290] in order to arrive at a finding that, the source of unexplained cash credit is not known and hence they cannot be linked to any known source/head of income, including the 'income 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 source cannot therefore be considered or taxed as 'income from other sources'. In view of the principle laid based on the decisions mentioned as above, the appeal of the assessee was dismissed. The assessee is approaching this court challenging the order of the Tribunal. The following are the questions of law framed; A. Whether in the facts and circumstances of the case the Commissioner of Income Tax erred or not in exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself had distinguished the decision in Fakir Mohmed Haji Hasan's case( supra ). The counsel had also placed reliance heavily on the decision of this court in CIT v. P.D. Abraham @Appachan[48 Taxman 352] . 7. The appeal of the assessee was rejected by the Tribunal on the basis that, the income under Section 68 of the Act, which arose out of unexplained source of cash credit, cannot be termed under any of the heads of the income, including 'income from other sources'. Therefore such income cannot be classified under any of the heads contemplated under Section 14 of the Act. Any deductions or set off, which corresponds to such income cannot be allowed with respect to the undisclosed income assessed under Section 68. 8. We may refer to the decisions cited above at the first instance. First among in point of time is the decision of the High Court of Gujarat in Fakkir Mohmed Haji Hasan ( supra ). It is held that the provisions of Sections 69, 69A, 69B or 69C applies when no source is disclosed at all. It would not be possible to classify the deemed income under anyone of the heads specified under Section 14. Therefore such deemed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the current year business loss, as the current year business loss is allowed to be set off against the current year income under any other head, by virtue of Section 71. In CIT v. Chensing Ventures ( supra ) it was held that, the income tax is only one tax levied on the sum total of the income classified and chargeable under various heads. Section 14 has classified different heads of income and the income tax under each head is separately computed. The income which is computed in accordance with law is one income and it is not a collection of distinct tax levied separately on each head of income and does not a category of various tax computed with reference to each of the different sources separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee is subject to the income tax of his total income, though his income under each head may be well below the taxable limit. Hence, the law sustained in any year under any heads of income will have to be set off against income under any other head. Based on the above principal it was held that set off cannot be declined. 10. This Court while deciding the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as erroneous. In Lakhmi Chand Baijnath ( supra ) the apex court found that, even if the explanation given by the assessee as to how the amount came to be received is rejected as untenable, the credits were treated as business receipt which are chargeable. It was found that, in view of such a proposition held by the Honourbale Supreme Court, the exercise made under Section 263 by the Commissioner was unsustainable. 12. On the basis of the contentions as mentioned above, it was argued on behalf of the appellant that, the income assessed, with respect to which it was found that there is no proper explanation forthcoming and which was found credited in the books of accounts, need to be treated as 'income from other sources' with respect to which set off can be permitted under Section 72 of the Act against the unabsorbed portion of depreciation, which will fall within the category of Section 32(2) of the Act. It is further contended that the carry forward unabsorbed portion of depreciation can be allowed set off against the profit and gains of any business and going by sub section (2) of Section 72, such carry forward amounts coming within the purview of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of computation of income tax the income need to be classified under any one of the heads contained in Section 14. But, apart from the classifications contained in Section 14, there are other groups or class of income for which separate method of computation is provided under different provisions of the Act. For example, it is pointed out that, Section 158(b) provides special procedure for assessment of undisclosed income unearthed through search or seizure conducted under Section 32 of the Act. It is pointed out that Section 115BBE is a similar special provisions introduced with respect to any undisclosed income coming within the purview of Sections 68, 69, 69A, 69B, 69C and 69D. It is pointed out that Section 115BBE was introduced in the statute book through Finance Act, 2012, with effect from 1.4.2013. Subsection (2) of Section 115 BBE as it stood with effect from 1.4.2013 provides that, notwithstanding anything contained in the Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provisions of this Act in computing his income referred to in clause (a) of sub-section (1). Therefore it is clear that, with respect to any sum for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any deductions from such income, by virtue of Section 115BBE, as it stood unamended. The amendment declining set off was introduced only with effect from 1.4.2017. Therefore, question whether set off permissible under Section 72(2) read with Section 32(2) of the Act would apply with respect to the said income, assumes importance. There again, the crucial aspect relevant for consideration is the nature of the said income. In one of the oldest cases decided by the Honourable Supreme Court, Govindarajulu Mudaliar v. Commissioner of Income Tax [(1958) 34 ITR 307] it is held that, there is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amounts of cash received during the accounting year, the Income Tax Officer is entitled to draw an inference that the receipts are of an assessable nature . Following the said observations in Lakhmi Chand Baijnath ( supra ) the Honourable Supreme Court observes that, when an amount is credited in the business books, it is not an unreasonable inference to draw that it is a receipt from business . Even though Standing Counsel contended that the said observations of the apex cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The intention of the legislature in introducing the amendment, as stated in the explanatory note, is to avoid unnecessary litigation and to expressly provide that no set off of any loss shall be allowable in respect of income under Section 68. Therefore, it has to be held that, as on the relevant date of the assessment, there was no bar existed with respect to allowing set off against the carried forward unabsorbed depreciation on fixed assets, with respect to income under Section 68. Therefore, we are of the view that, Tribunal had committed an illegality in coming to the conclusion that the deemed income will not fall even under the head of income from other sources and therefore the deductions and set off applicable to income under other heads will not be attracted in the case of deemed income covered under the provisions of Section 68. Accordingly we answer the question of law under clause (F) in favour of the Assessee and as against the Revenue. In view of the decision of the said question of law, other questions framed are not of consequence and become irrelevant. 15. Hence, the above appeal is hereby allowed and the impugned order of the tribunal is set a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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