TaxTMI 
TaxTMI 
2017 (8) TMI 171
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....rought forward and current losses of Rs. 1,53,96,722 and Rs. 21,03,278 respectively. The Assessing Officer observed that since the additional income surrendered under section 132(4) of the Income-tax Act, 1961 (in short 'the Act') was in addition to the assessee's regular income and no satisfactory explanation about the nature and source was given by the assessee, it could not be classified under any heads of income under section 14 of the Act and consequently the same was not allowed to be set off against the brought forward business losses as per the provisions of section 72 of the Act. Thus, the total income of the year was taken and assessed at Rs. 1.75 crores. 3. Aggrieved by the same, the assessee carried the matter in appeal before the learned Commissioner of Income-tax (Appeals) contending that it had fully explained the nature and source of the surrendered income as being collections from his build-operate-transfer project and thus was nothing but its business income and the decision of the hon'ble Punjab and Haryana High Court in the case of Kim Pharma (P.) Ltd. v. CIT (I. T. A. No. 106 of 2011) [2013] 1 ITR-OL 137 (P&H) supported its stand. It was furthe....
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....ature and source of the surrendered income during the recording of the statement, or even subsequently. This was not done. It is undisputable that the amount surrendered was not reflected in the books of account and neither the nature nor its source was declared by the assessee. The surrender was admittedly over and above the assessee's regular income. Hence, such income surrendered from unknown sources could not be regarded as business income ; and so the same is to be treated as deemed income and such deemed income cannot be considered even under the head 'Income from other sources'. Therefore as elucidated in Kim Pharma (P.) Ltd. (supra), 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. . . Thus, the action of the Assessing Officer in disallowing the set-off of brought forward business losses as well as the current business loss against the surrendered Income of Rs. 1,75,00,000 is confirmed. The assessee fails on this ground." 4. Aggrieved b....
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.... heads as also the set off of business losses under sections 70 and 71 of the Act are not allowable against such incomes. 10. Having said so, we find that first question to be addressed in the present case before us is whether this surrendered income of Rs. 1.75 crores could be attributed to the business of the assessee and thus assessed under the head "business income". 11. The learned counsel for the assessee in support of its above contentions drew our attention to the letter addressed to the Assistant Commissioner of Income-tax, Central Circle-II, Chandigarh dated July 20, 2012 during the course of assessment proceedings placed at paper book page No. 18 and disclosing the source of the surrendered income as being from the normal business collections from the build-operate-transfer project under taken by it of the construction of Kangra Bus Stand and Mcleodganj Bus Stand. The relevant submissions made by the assessee vide its letter are as under : "A sum of Rs. 1.75 crores was surrendered as income from normal business as collections from the build-operate-transfer project utilised in construction through the promoter Sh. Vijay Kumar Sood and duly declared in the computation....
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....was no contradiction in its explanation, as the explanation clearly stated that the collections from the bus stand were invested in the build-operate-transfer project which was what was stated by the directors also in their report and thus there was no contradiction between the explanation given by the assessee to the Assessing Officer and that stated by the directors in their report. The learned counsel for the assessee contended that no other source of income of the assessee had been pointed out by the Assessing Officer and further stated that the assessee had discharged its onus of proving the nature and source of income and surrendered income and the onus now rested on the Department to prove that the surrendered income related to some other source of income. 15. Having heard both the parties, we find that one fact which emerges undoubtedly from the above arguments made before us is that the surrender is on account of excess/undisclosed amount invested in the build-operate-transfer project under taken by the assessee. The learned Departmental representative drew our attention to the directors' report annexed to the audited balance-sheet for the impugned year in this regard....
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.... at the time of survey, in the trading account prepared by the survey team, there were losses incurred by the assessee. all these facts have not been disputed by the Assessing Officer. Further, the surrender made by the assessee was on account of cash found during the course of survey, discrepancy in the cost of construction of building, discrepancy in stock and discrepancy in advances and receivables. By no stretch of imagination, any of these incomes apart from cash can be considered as income under any head other that the 'business income'. 14. Nowhere in his order the Assessing Officer has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of the assessee. Also nowhere he has objected to the heads under which the assessee had surrendered these amounts, i .e. cash, construction of building, discrepancy in stock and discrepancy in advances and receivable. Further even the survey team has not found any source of income except the business income. Now, following the judgment of the jurisdictional High Court, in the background of the facts of the present case, we can safely infer that apart from cash al....