TaxTMI 
TaxTMI 
2012 (9) TMI 958
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....ng account and thereby upholding the addition of Rs. 1,07,278/- which is arbitrary & unjustified. 3. That the Ld. Commissioner of Income Tax (Appeals) has further erred in not telescoping the two additions of Rs. 1,07,278/- and Rs. 4,00,000/- lacs surrendered at the time of survey which is arbitrary & unjustified. 4. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the disallowance of interest amounting to Rs. 19,630/- out of the interest paid to the relatives holding that interest @ 12% could be reasonable in place of interest paid at 15%. 5. That the Ld. Commissioner of Income Tax (Appeals) wrongly relied upon the judgment of the Abhishek Industries which is also arbitrary & unjustified. 6. That the order of the Ld. Commissioner of Income Tax (Appeals) is erroneous, arbitrary, opposed law and facts of the case and is, thus, untenable." 3. In the course of present appellate proceedings, ld. 'AR' gave brief fact-situation of the case and stated that search was conducted at the business premises of the assessee and during the course of survey, the assessee declared additional income of Rs. 4,00,000/- which was duly reflected in the re....
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....uch assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. When the income cannot be so classified under any one of the heads of income under section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. The provisions of sections 69, 69A. 695 and 69C, treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head "Income from other sources". Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of sections 69, 69A, 69....
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....the decision of Hon'ble Gujrat High Court (supra) as the facts of the two cases are entirely different. It has been further stated that the surrender made during the course of survey operation on the business premises consequent to detection of discrepancies is a normal feature of such survey operations and the surrender was accepted on account of these discrepancies. 4.2. I have carefully considered the submission made by the appellant. The appellant has challenged the AO's action of treating the additional income as deemed income mainly stating that the facts of the case in the case of Fakir Mohd. Hazi Hassan (supra) relied upon by the A.O. are different from the facts of the case under appeal. It has been further stated that the surrender made during the survey was due to the difference found in the cash, stock and other discrepancies and therefore has to be treated as the business income of the appellant. The AO on the other hand categorically mentioned that the additional income does not relate to the business of the appellant and has to be treated as deemed income. 4.3 It is seen that the surrender has been made because of the excess stock found during the course ....
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....he scheme of sections 69, 69A, 69B and 69C being treated separately, because deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from "other sources" because the provisions of sections 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head "Income from other sources". Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions." In the absence of any satisfactory explanation/evidence regarding the sources of the additional income declared by the appellant during survey on account of discrepancy in stock, cash and investment and applying the ratio of Hon....
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....lowances and the total loss declared by the assessee at Rs. 5,37,300/- was reduced to Rs. 2,22,765/-. The said loss was assessed as 'income from business' and the surrendered income was assessed as an income under Section 69A of the Act. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short "the CIT(A)"] who vide order dated 16.12.2009 dismissed the appeal. On further appeal by the assessee, the Tribunal vide order dated 30.4.2010 upheld the order of the CIT(A) and dismissed the appeal which gave rise to the assessee to approach \this Court by way of the instant appeal. 3. We have heard learned counsel for the assessee. 4. Learned counsel for the assessee submitted that the amount surrendered by the assessee was business income and assessable as such. He relied upon a decision of the Karnataka High Court in Commissioner of Income-Tax and another v. S.K. Srigiri and Bros. [2008] 298 ITR 13 (Karn). 5. The point for determination in this appeal is, whether Rs. 5,00,000/- which was surrendered by the assessee during the course of survey under Section 133A of the Act would form part of business income or was assessable under....
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....satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no sources is disclosed at all on the basis of which the income can be classified under one of the heads of income under section 14 of the Act, it would not be possible to classify such deemed income under any of these heads including income from "other sources" which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of sections 69.69A, 69B and 69C will not apply, in which event, the provisions regarding deductions etc. applicable to the relevant head of income under which such income falls will automatically be attracted. The....
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....is reproduced hereunder : " COMPARATIVE CHART Asstt .Yr . Sales Gross Profit G.P . Rate Net P rofit % 2005-06 57,60,455/- 4,11,873/- 07.15% 3,82,178/- 4.70 2006-07 64,17,921/- 4,80,702/ - 07.48% 3,15,113/- 4.90 2007-08 81,27,187/- 5,01,094/- 06.16% 2,76,329/- 4.79" 11. Ld. 'AR', further pointed out that books of account were wrongly rejected and no addition is called for in the matter. However, ld. 'DR' placed reliance on the order passed by the lower authorities. The AO, rejected books of account by invoking the provisions of Section 145(3) of the Act, by observing that the discrepancies in stock constitute specific defect in maintenance of regular books of account by the appellant. The AO compared the GP rate, as shown by the appellant during the year under consideration, vis-à- vis GP rate shown by the appellant in the previous year. The GP rate and the NP rate, in assessee's case, had shown declining trend, as is evident from the Chart, reproduced above. The books of account of the appellant have been rightly rejected by the AO and upheld by ld. CIT(A). As there was specific defect and discrepancy, noticed by the reve....