TMI Blog2022 (4) TMI 1564X X X X Extracts X X X X X X X X Extracts X X X X ..... nly positive incomes emanating from incriminating material to be disclosed/added to the incomes of the assessee in assessment framed u/s 153A of the Act denying claim of expenses and losses emanating therefrom. The legislature, we are aware has debarred claim of losses/expenses against incomes assessed u/s 68/69/69A /69B/69C of the Act specifically so providing u/s 115BBE of the Act, which provides for levy of taxes at special rates on such incomes. The returns filed u/s 153A of the Act disclosing losses emanating from incriminating material is therefore as per law to be treated as filed in returns u/s 139 of the Act and entitled to be set off against profits from such incriminating material in subsequent years. And to this extent of set off, they certainly do not qualify as fresh claim made in return filed u/s 153A of the Act, since they were necessarily to be disclosed at the same time and alongwith the positive incomes arising from the incriminating material. These losses cannot be considered in isolation from the profits to qualify as fresh claim , not originally claimed in the return filed u/s 139 of the Act. We may clarify that set off of these business losses from any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee that the said entries could not be taxed as unexplained, having been returned as business income or explained otherwise. All these evidences were also filed before us in voluminous paper book. The Ld. DR was unable to point out any infirmity in the finding of the Ld.CIT(A). He was unable to point out any credit entry wrongly accepted by the Ld.CIT(A) as duly explained. Thus no merit in the ground raised by the Revenue for treating the impugned credits as unexplained and thus taxable u/s 68 - Decided against revenue. - Ms. Annapurna Gupta, Accountant Member And TR Senthil Kumar, Judicial Member For the Appellant : Shri Milin Mehta, A.R. For the Respondent : Shri Sanjeev Jain, CIT/DR. ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeals relate to the same assessee and have been filed by the Revenue against common order of the Ld. Commissioner of Income Tax (Appeals)- 8, Ahmedabad, (in short referred to as CIT(A)), dated 07-06-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the Act ) pertaining to Assessment Year 2009-10 to 2014-15. 2. At the outset itself, it was pointed out that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13325430 Income taxable at Normal Rate 13325430 Income Taxable at Special Rate 0 Income from Business Profession Details Trading in foreign shares and securities 0 (Foreign Assets) Net Loss As per P L A/c -75454914 Total of Business Profession 0 Loss adjusted with House Property 37470 Loss adjusted with Other Income 21720 Current Year Losses Carry Forward Nature of Loss Assessment Year Loss C/F Business income (Ordinary) Cannot C/F 2009-10 75395724 Capital Loss (ST) Cannot C/F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income declared in the return u/s. 153A Disallowance of loss Disallowance of set off loss Addition of Unexplained credits Total Income assessed A.Y. Amount Amount Amount Amount Amount 2009-10 1,33,25,430/- 7,54,54,914/- -------- 30,80,31,610/- 32,13,57,040/- 2010-11 2,52,16,680/- 56,61,579/- --------- 15,04,94,322/- 17,57,11,000/- 2011-12 2,47,61,110/- ----------- 85,47,101/- 27,02,68,615/- 30,35,76,830/- 2012-13 1,98,40,220/- ------------- 1,32,25,391/- 16,57,62,670/- 19,88,28,280/- 2013-14 2,27,37,640/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d credit in foreign bank account u/s. 68 of the Act without considering the fact that the assessee failed to give any documentary proof to explain the source of credit entries in the said bank account. (3) It is, therefore, prayed that the order of the Ld .CIT(A)-12, Ahmedabad may be set-aside and that of the A.O. may be restored to the above extent. (4) The appellant craves leave to add, alter, amend and/or withdrawn any ground(s) of appeal either before or during the course of hearing of the appeal. 5.1 Since the issues involved in all the appeals are identical and interlinked, we shall be dealing with them vide a common consolidated order. 6. Coming to the specific facts of the case leading to the aforestated additions/disallowances, it transpires from the order of the lower authorities that during search action on the assessee u/s 132 of the Act on 12/02/2015 and in post search enquiry it was gathered that Shri Rakesh Agarwal, the assessee, was maintaining a bank account (ICA03C46) with Merill Lynch Bank, New York in the name of M/s Pinky Ltd. During another search on 05/01/2012 at the residence of one Shri Satish Sawhney at Sainik Farm, New Delhi it was further g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. The assessee stated his ignorance about the said transactions from M/s Prime Trade Ltd. to M/s Pinky Ltd., that they were probably incorrect entries in the account (possibly made fraudulently) without knowledge of the assessee and also claimed that the sum of US $525,094/- had been subsequently removed from the account by the Bank on account of the credit from Prime Trade Ltd. and some other incorrect debits. The assessee was also asked about credit of US $50,000/- on 25/06/2010 in the foreign bank account of Pinky Ltd. but the assessee could not explain the source of this amount also and did not file any evidence in support of his claim of fraudulent entries passed through the account of Pinky Ltd. Accordingly the AO held that calculation of income on account of the foreign bank account given by the assessee for the year under consideration could not be relied upon particularly in view of the fact that the assessee had failed to give any documentary proof to explain the source of credit entries in the said bank account and therefore the entire credit in the bank account during the years under consideration, was added to the total income of the assessee in the respective year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led U/s, 153A, the provisions of the Act shall apply as if such return is the return required to be filed U/s. 139, Considering the fact that the Appellant has filed his original return of income and also the return in furtherance of notice U/s. 153 A in time, by virtue of Section 80 of the Act, the Appellant is entitled to claim the set off of losses under the other heads of income and carry forward and set off the said business loss in the succeeding years. 3.6.8 Reliance has been placed on the decision of Chennai ITAT in the case of ACIT vs. V.N. Devedoss [2013] 57 SOT 67 wherein the ITAT held that return filed u/s 153A shall be treated as returns filed u/s 139(1) and accordingly deduction claimed in return filed u/s 153A shall be allowed. 3.6.9 The Appellant for the current year i.e. AY 2015-16, had claimed the set off of loss in the revised return of income filed on 02-03-2016. The revised return of income was filed within the time allowed u/s 139(5) of the Act i.e. before the completion of 1 year from the end of relevant assessment year. The issue is directly covered in favour of the Appellant by the recent decision of the Hon ble Gujarat High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee flowing from sub-section (5). No such language or intention flows from such provision. In view of the above, there is no error in the view of the Tribunal The revenue's appeal is, therefore, dismissed. [Emphasis Supplied] 3.6.10 On perusal of the above decision, it is noticed that the High Court held that if the return of income u/s 139(5) is filed within the time, loss claimed in such return must be allowed. The High Court also observed that section 139(5) does not envisage a situation whereupon revising the return if a case for loss arises which the assessee wishes to carry forward, the same would be impermissible. Similarly, section 153 A also does not envisage a situation that the loss claimed in the return of income filed u/s 153A would be disallowed. In fact, section 153A provides that the all the provisions of the Act shall be applicable to return filed u/s 153A as if the return is filed u/s 139(1). Hence, we request your kind office to allow the set off of brought forward business loss. 3.6.11 The Appellant further submits that the AO blows hot and cold in the same breath. The AO while does make addition of the income earned in the said bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the foreign bank account with Merrill Lynch Bank, NY, it is submitted by the appellant that following the case laws ACIT Vs. V N Devedoss (supra) [wherein the Hon. ITAT Chennai held that deduction u/s 80-IB(10) claimed in return u/s 153A cannot be denied on the ground that said claim was not made earlier in return u/s 139(1) and PCIT Vs. Babubhai Ramanbhai Patel (supra), the claims of the losses should be allowed. In contrast to these judgements, it is also located that in Jai Steel (India) Vs. ACIT (2013) 36 taxmann.com 523 (Raj) it has been held that it is not open for assessee to seek deduction to claim expenditure which has not been claimed in original assessment, which assessment already stands completed, only because assessment u/s 153A in pursuance of search or requisition is required to be made. Then this was pointed out to the Ld. ARs; this issue also has been responded to by the appellant as reproduced earlier (in para 3,8). 3.9.7 Apart from mentioning that the loss which had not been claimed in original return filed u/s. 139(1) cannot be claimed in the return u/s. 153A and in view or no evidence having been filed in respect of claim of loss the AO has also opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility, I find that the case laws relied upon by the appellant are against the treatment meted out by the AO. I hold that there being no bar in the Black Money Act, the loss on account of the foreign bank account claimed in the returns u/s 153A for the year under consideration is admissible and will be eligible for set off in subsequent years as per the provisions of the Income Tax Act. Accordingly, the A.O. is directed to delete the disallowance of loss of Rs. 7,54,54,914/-. The appeal succeeds on this ground. 11. Briefly stated, the Ld. Counsel for the assessee relied on the findings of the Ld. CIT(A) while rejecting all the basis of the AO for denying the claim of carry forward and set off of business losses, holding that having accepted income as profits from the said transactions in succeeding years the AO could not have denied losses in earlier years stating that the account does not belong to the assessee, that the provisions of the Benami Act had no overriding effect and could not apply to the Income Tax Act and taking a holistic view on the issue that if an assessee is required to disclose income revealed from /emanating from the incriminating material/evidences found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for A.Y 2009-10 2010-11 have been disallowed, while the profits returned have been accepted. For A.Y preceding A.Y 2009-10, i.e A.Y 1999- 2000 to A.Y. 2008-09, the case of the assessee was reopened to bring to tax income from the said foreign bank account, but no addition was made accepting the assesses plea, after verification, of the bank account having been disclosed upto A.Y 2008-09 under the Black Money Act. 14.1 The above fact, at the cost of repetition, we may state are undisputed. 15. Based on the aforestated undisputed facts, we shall now point out the reasons for rejecting each contention of the Revenue for upholding the disallowance of losses for A.Y 2009-10 and 2010-11 and their carry forward and set off against profits in subsequent years. 16. Taking up first the contention of the Revenue that the losses were disallowable for the reason that the bank account did not belong to the assessee, we concur with the Ld. CIT(A) that there is patent fallacy in this argument, being that profits on account of transactions in this very same bank account returned by the assessee in A.Y 2011-12 to A.Y 2014-15 have been accepted by the Department and also the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s returned within due date of filing return u/s 139(1) of the Act is allowed to be carried forward for setoff. But the assesses contention, accepted by the Ld. CIT(A), is that return filed u/s 153A of the Act is to be treated for all purposes as return filed u/s 139 of the Act, based on the provision of section 153A(1)(a) as under: SECTION 153A. Assessment in case of search or requisition. 4587 [ 4588 [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [ 4589 ][but on or before the 31st day of March, 2021], the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years 4590 [and of the relevant assessment year or years] referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to search conducted u/s 132 of the Act, in response to notice u/s 153A of the Act, as per the specific scheme for assessment in search cases provided u/s 153A to 153D of the Act. Section 153A, reproduced above, begins with a non obstante clause vis a vis section 139,147,148 149,151 and section 153 of the Act and requires notices to be issued to asseesees searched, for filing returns of income for six years prior to the year of search and the searched year also,. It further states that to such returns filed all provisions of the Act would thereafter apply treating them as filed u/s 139(1) of the Act. The AO is required to assess or reassess the income of each such years. And it is further provided that where assessments are pending on the date of search such assessments shall abate and assessments u/s 153A carried out. These are the plain provisions of law with regard to search assessments as per section 153A of the Act. 23. Courts have had the occasion to interpret the scope of assessments for all the years involved, whether the entire case is open to scrutiny u/s 153A for all the years involved and the more or less consistent view has been that in case of assessment years whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made at the Bar in the context of the present case and the substantial question of law framed, the scope of 'assessment and reassessment of total income' under Section 153A(1)(b) and the first and second proviso have to be considered. Further, for answering the above issues, guidance will have to be sought from Section 132(1) of the Act, as Section 153A of the Act cannot be read in isolation, inasmuch as, the same is triggered only on account of any search/requisition under Sections 132 or 132A of the Act. If any books of accounts or other documents relevant to the assessment had not been produced in the course of original assessment and, found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or reassessing the total income under the provisions of Section 153A of the Act. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said section has to be read in the context of Sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:- 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings shall abate . The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty. (emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. Income Tax Officer : (1981) 131 ITR 597 that it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). Consequently, it is held that it is not open for the assessee to seek deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of the Act would equally apply. 27. The upshot of the proposition laid down in the said decisions we find is complementary, to the effect that: a) where returns filed u/s 153A of the Act related to years in which assessment stood completed, the only scope of assessment was limited to making addition on account of incriminating material and in its absence reiterating the assessments. That therefore no fresh claims/allowances could be entertained in returns filed u/s 153A of the Act in such cases. ( Jai Steel (supra)), while b) Where returns filed u/s 153A of the Act related to years where assessment stood abated, the entire assessment was open and hence fresh claims of allowances/deduction could be made in returns filed u/s 153A of the Act in such cases treating them as returns filed u/s 139 of the Act for allowance of.( Shirke construction(supra), 28. Having said so we find that in the facts of the present case, the assessments were not abated, and the claim of business losses admittedly emanated from incriminating material i.e the foreign bank account of the assessee. Income from incriminating material is to be considered after defraying all expenses tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd entitled to be set off against profits from such incriminating material in subsequent years. And to this extent of set off, they certainly do not qualify as fresh claim made in return filed u/s 153A of the Act, since they were necessarily to be disclosed at the same time and alongwith the positive incomes arising from the incriminating material. These losses cannot be considered in isolation from the profits to qualify as fresh claim , not originally claimed in the return filed u/s 139 of the Act. 30. We may clarify that set off of these business losses from any other income originally returned, other than profits from this business, would have qualified as a fresh claim and to which the assessee would not be entitled. The proceedings u/s 153A of the Act, being in consequence to search undertaken u/s 132 of the Act, cannot be utilized by the assessee to seek relief not claimed earlier. The proceedings are analogous to proceedings u/s 147 of the Act, as being for the benefit of the Revenue and not the assessee. The decision of the Hon ble apex court in the case of CIT vs Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 (SC) is relevant for the purpose. 31. Having held so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly held that the calculation of income submitted by the assessee with respect to the said foreign bank account could not be relied upon as it was an after thought and therefore the entire credits in the bank account relating to the impugned years was rightly made as under: A.Y 2009-10 Rs. 30,80,31,610/- A.Y 2010-11 Rs. 15,04,94,322/- A.Y 2011-12 Rs. 27,02,68,615/- A.Y 2012-13 Rs. 16,57,62,670/- A.Y 2013-14 Rs. 64,56,398/- A.Y 2014-15 Rs. 66,50,702/- 34. The ld. Counsel for the assessee on the other hand relied on the submissions made by him before the ld. CIT(A) reproduced at para 3.6.1 to 3.6.5 of the order and the findings of the Ld. CIT(A) at para 3.9.1 to 3.9.5 of the order is as under: 3.6.1 The Appellant during the course of the assessment submitted all the details pertaining to the credit entries in the foreign bank account, The Appellant explained completely the basis of computation of the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reversed by passing a journal entry 385 Policy Settlement . We submit that these facts were submitted to the AO, Refer Pg, No. FBA 87, The AO held that the explanation provided by the Appellant as to credit of $540,500 in the bank account, is an afterthought and hence the entire submission of the Appellant cannot be relied upon, Appreciate that the AO has not found any fault or discrepancy in the explanation provided by the Appellant. Further, there is no finding by the AO that the Appellant's explanation is not satisfactory. The AO has not controverted the explanation provided by the Appellant. The AO has wrongly made an addition of all credits in the bank account merely on the basis of an entry of $540,500. 3.6.4 Attention is invited to Pg. No. GEN 7-12 (of the General Paperbook), wherein the Appellant has submitted the revised return of income along with the computation of income. On perusal of Pg. No. GEN 9, it will be noticed that the Appellant has offered to tax Rs. 89,00,144/- as business income earned from outside India. The computation of Rs. 89,00,144/- has been given on Pg. No. FBA 11, On the perusal of the said details, it will be noticed that the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are as per the table below: Particular s FINANCIAL YEAR 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Income in $ 47,93,285 18,80,200 44,11,140 26,08,475 91,397 1,10,589 2,22,660 Expenditure in $ 62,74,229 20,05,830 42,19,642 23,49,947 50,886 44,412 80,464 Profit in $ (-) 14,80,944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss on account of the foreign bank account and investments through that account for the A.Y. 2009-10 to A.Y. 2015-16 are correct on facts and computations. 3.9.3 The common submission of the appellant in context of addition made on account of unexplained credit entries in the foreign bank account with M/s. Merrill Lynch Bank, NY in the name of M/s. Pinky Ltd. has been considered diligently. In total 5 entries - 2 entries aggregating to US $310,000 for F.Y. 2010-11 and 3 entries aggregating to US $230,000 for A.Y. 2011-12 were identified by the AO and they were found made from M/s. Prime Trade Ltd. of one Shri Satish Sawhney of Sainik Farm, Delhi. Neither the appellant nor Shri Satish Sawhney (who also was searched separately) explained the transactions and the connections among them. Only contention supported by proof from the appellant is that these entries might be fraudulent and that the Bank had subsequently reversed the entries to the extent of US $525,094. As the appellant could not explain the source of this amount also and did not file any evidence in support of his claim of fraudulent entries passed through the account of Pinky Ltd., the AO held that calculation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 as part of profit and loss on account of foreign bank account and total credit of $222,685.14 adopted by the AO for the purpose of section 68. It has been further clarified by the appellant that $2,03,092 shown in the reconciliation as sales credited in bank but not in transaction summary and offered under Black Money Act . It has been further explained that the appellant has excluded these credits (F.Y. 2008-09 2009-10) on account of the fact that the said investments were made prior to 01/04/2008. It has been pointed out that the appellant had made declaration u/s 59 of the Black Money Act and disclosed therein all the investments held as on 31/03/2008 including the investment concerned (circular No. 13 of 2015 dated 06/07/2015) and that as per provisions of section 64 of the Black Money Act it is explicitly provided that once the investment declared u/s 59 of the Black Money Act, to the extent of value of security already offered under the Black Money Act and credited during the period under consideration, such credits are required to be deducted from the impugned additions made on accounts of unexplained credit u/s. 68 of the Income Tax Act, Further the difference of $742 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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