TMI Blog1991 (12) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO added a sum of Rs. 5,11,680 as the undisclosed concealed income of the assessee under the head "other sources". For this, he relied on the entries made by the assessee in its Cash Book as on 31-3-1985 claiming that there was not cash of Rs. 10,61,680 available on that date. The ITO pointed out that the assessee had accumulated book loss of Rs. 5,11,680, that it had added back this amount of loss to the settlement profit at Rs. 7,60,000 for the assessment years 1979-80 to 1983-84 and that this was not correct. According to the ITO, this loss should have been ignored as it represents intangible assets and that instead of ignoring the said loss, the amount was taken into account in computing total cash available. The ITO held that, in fact, during the said years there had been no loss suffered by the assessee as admitted by it in the settlement of income, instead, there had been a profit of Rs. 7,60,000 and that the assessee had just to offset the loss, introduced of Rs. 5,11,000 in cash. The ITO held that for this reason the explanation as to the source of cash was not justifiable. He further held that since this cash of Rs. 5,11,680 represented by investment in transferring par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n increased by the amount of Rs. 10,61,680. Hence, he deleted the addition made by the ITO and allowed the appeal. The Revenue has come up on further appeal to the Tribunal objecting to this order of the CIT (Appeals) on the ground quoted above. 4. Shri J.Mukhopadhyay, the learned Departmental Representative, relied on the findings of the ITO and submitted that the reasoning of the Commissioner to delete this addition of Rs. 5,11,680 was not justified and tenable. He submitted that this loss of Rs. 5,11,680 was a fictitious loss on the assessee's own admission when it came forward in settlement of its income-tax assessments for the five assessment years 1979-80 to 1983-84 agreeing to be assessed on a total income of Rs. 7,60,000 for those five years, that this loss did not exist after the aforesaid settlement of the assessments and that the assessee was not entitled to reintroduce some other amount of Rs. 5,11,680 in the guise of introducing the income finally settled as per the settlement entered into by it with the IT Department. Shri Mukhopadhyay argued that this loss of Rs. 5,11,680 was an intangible asset which was no longer available with the assessee and that at any rate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to the assessment proceedings of the assessee-firm and its partners for the various years. It further requested for a spread over of the said net profit offered by the assessee over the period of five years 1979-80 to 1983-84 as indicated in its petition. Shri Poddar submitted that on the basis of this petition, the CIT examined the position and ultimately directed that the assessments should be made by estimating the net profit at the rate of 10 per cent instead of 8 per cent offered by the assessee on the gross receipts of Rs. 76,00,000 to which the assessee agreed before the Commissioner. He further submitted that the other terms regarding the spread over and apportionment of the profits over the five years as proposed by the assessee were accepted by the Commissioner. The learned counsel pointed out that in the light of this agreement entered into between the assessee and the Commissioner, the income-tax assessments for these five years 1979-80 to 1983-84 were completed by the ITO on the same day, i.e., 22-3-1985 in terms of the settlement entered into by the assessee with the Department, as could be seen from the assessment orders at pages 9 to 35 of the assessee's pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have carefully examined the contentions set out above in the light of the materials placed before us and the authority cited above. We set out below the entry recorded in the assessee's Cash Book as on 22-3-1985, a copy of which appears at page-36 of the assessee's paper book : " Cash Balance as per Cash Book on 1-3-1985/21-3-1985 ..... Rs. 2,376.76 Add: Receipt Side 22-3-1985 Book Loss for earlier years A/c. Being the net loss for the earlier Assessment years 1979-80 to 1983-84 shown in the books now adjusted on settlement before CIT Loss for Asst. year 1980-81 Rs. 3,34,501.02 1981-82 Rs. 1,03,715.77 1982-83 Rs. 1,07,360.21 1983-84 Rs. 1,04,503.03 -------------------------------- Rs. 6,50,080.03 Less : Profit for Asst. Rs. 1,38,400.00 -------------------------------- Year 1979-80. Rs. 5,11,680.03 22-3-1985 Profit as per settlement Being the profit for earlier years 1979-80 to 1983-84 as per settlement with IT Deptt. For Asst. Year 1979-80 Rs. 2,66,000.00 1980-81 Rs. 3,04,000.00 1981-82 Rs. 76,000.00 1982-83 Rs. 38,000.00 1983-84 Rs. 76,000.00 --------------------------------- Rs. 7,60,000.00 --------------------------------- R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss in all those years; but it did not mean that the amounts represented by these debits in the current accounts of the partners were intact and still available with them for reintroduction in the firm's books as on 22-3-1985. According to the summarised statement of capital (fixed) and current account of the partners with the firm during the period of construction from April 1978 to March 1983, the total of the closing balances in the current accounts of the partners amounted to Rs. 5,57,021.39 vide page 45 of the assessee's paper book. This debit balance of Rs. 5,57,021 was explained by the assessee's learned counsel as arising out of (i) withdrawals to the extent of Rs. 3,04,000 by the partners and (ii) loss of Rs. 5,11,680 as per the books of account. Thus, it would be seen that all these amounts amounting to Rs. 5,57,021 had gone out of the offers of the assessee-firm by 31-3-1983 and were no longer available with the firm. It is also for this reason that this amount of Rs. 5,57,021 appears as a debit on the asset side of the Balance Sheet of the firm as on 31st March, 1983 under the head "partners' current account" vide page 43 of the assessee's paper book. Though the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arprasad Co. (P.) Ltd. at page 124: " From the charging provisions of the Act, it is discernible that the words "income" or "profits and gains" should be understood as including losses also, so that, in one sense "profits and gains" represent "plus income" whereas losses represent "minus income". In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although section 6 classifies income under six heads, the main charging provision is section 3 which levies income-tax, as only one tax, on the "total income" of the assessee as defined in section 2(15). An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the "total amount of income, profits and gains referred to in section 4(1)". Secondly, it must be "computed in the manner laid down in the Act". If either of these conditions fails, the income will not be a part of the total income that can be brought to charge." [Emphasis supplied]. This passage has been relied on by the learned counsel for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed income. A number of circumstances of vital significance may point to the conclusion that the cash credit or cash deficit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of undisclosed income earned during the assessment year under consideration. It is open to the revenue to rely on all the circumstances pointing to that conclusion. What these several circumstances can be is difficult to enumerate and indeed, from the nature of the enquiry, it is almost impossible to do so." [Emphasis supplied]. The above passage from the decision of the Supreme Court would show that it is for the assessee on the facts of the present case to explain and establish the true nature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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