TaxTMI 
TaxTMI 
2018 (5) TMI 1646
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....n 115BBE of the Act. 4. At the outset, the ld AR of the assessee has contended that the issue is covered by the decision of Hon'ble Rajasthan High court. 5. I have considered the rival contentions and gone through the orders of the authorities below. From the record, I found that a survey u/s. 133A was carried out at assessee's business premises on 09- 01-2014. During the course of survey proceedings, the assessee offered an amount of Rs. 10,90,000/- for taxation on account of discrepancy in stock, incriminating documents and excess cash found. Subsequently, the assessee filed his return of income for AY 2014-15, declaring the total income at Rs. 10,15,000/-. During the course of assessment proceedings, the AO noted that though the assessee in his return filed for AY 2014-15 included the surrendered amount of Rs. 10,90,000/- as income from business, however, while calculating the tax on this income, it had calculated / paid tax at normal rate instead of 30% as per the provisions of sec. 115BBE of the Act. Accordingly, the AO issued a show-cause notice on 23-11-2016 requiring the assessee as to why tax may not be calculated @30% as per provisions of sec. 115BBE of the Act. The ass....
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....re finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/ loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of Rs. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/ loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/ loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee's bringing such transactio....
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....ther contended that the Hon'ble ITAT, Jodhpur Bench, Jaipur Bench and Hon'ble ITAT, Mumbai Bench has allowed the appeal on identical facts: - i. ACIT v/s Sanjay Bairathi Gems Ltd., ITAT Jaipur Bench. The relevant finding recorded by the Hon'ble ITAT at para 4.1 to para 4.3 page 8 to 11 of the order reads as under: - "4.1 In this background of the scheme of the Act, the question which arises for the determination is that under which head of income the excess stock/investment found in search and offered by the assessee for tax is to be assessed. According to the assessee such excess stock/investment is a business stock/investment which has arisen out of the unrecorded business activity of the assessee and therefore the same needs to be assessed under the head profit & gain of business. For this purpose reliance is placed on the decision of ITAT Ahmedabad Bench in case of Chokshi Hiralal Maganlal vs. DCIT 141 TTJ (Ahd) 1 dt. 21/01/2011 wherein the Tribunal held that excess stock found during the survey is not separately and clearly identifiable but is part of mixed lots of stock found at the premises which included declared stock as per books and also the excess stock ....
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....hority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon'ble Gujarat High Court in the case of Fakir Mohd. Haji Hasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon'ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of ....
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....cumstances in order to determine as to under what head the said income should be assessed." (vi) We also rely on the following citation as submitted and as referred in CIT (A) Order Page 34 in this regard: CIT vs. Sheth Developer (P) Ltd in appeal No. 3724 of 2010 dated 27.07.2012: The Bombay High Court held that in case of where undisclosed income found in form of cash was explained as having been acquired while carrying on the business as builder and on such income deduction u/s 80IB was claimed by holding that in the case before it the undisclosed income was received in the course of carrying out the business activity as a builder which is assessed as income from business. (vii) We further rely on following citationsa. Lakhmichand Baijnath v. CIT [1959] 35 ITR 416, the Supreme Court has observed 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. It was also observed that as the credits were found in the business accounts of the assessee and the explanation as to how the amounts came to be received was rejected by the Income-tax authorities, the Income-tax authorities were entitled to trea....
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....ce of any other corroborative/ seized documents before the department as the provisions of clause (i) of sub section (1) of section 72 which clearly provide for set off brought forward business losses in the subsequent year against the profits nad gains of business or profession. Therefore, we hereby request to direct the department to (i) consider receipts as business receipts as part of amount is already accepted as business receipts during the year (ii) there is no other source to get such receipts by the company and (iii) as per above judicial pronouncements instead of considering it as "income from other sources" and allow the set off of brought forward business losses in absence of any other corroborative documents before the department and dismiss the departmental appeal on this ground. Thus ground of revenue is dismissed. Ground No. 2 Whether on the facts and in the circumstances of the case the CIT (A) was right in directing to allow adjustment/ set off towards brought forward business loses of earlier year to the extent of Rs. 2,67,62,208/- despite holding that said sum are chargeable to tax under the head "income from other sources" and in contravention of provisio....
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....ndment by Finance Bill 2016 for adjustment against deemed income taxed under the head income from other source is w.e.f. 01.04.2017 and for the AY 2015-16, the same is not applicable." 2. It was also submitted that even the denial of such set off by section 115BBE was brought on the statue by Finance Act, 2016 w.e.f. 01.04.2017 i.e. for and from the A.Y. 2017-18. Therefore, when the specific denial of the set off was brought prospectively by the legislature in section 115BBE, the set off of loss under the head 'business' against the 'income from other sources' cannot be denied to the assessee. 3. Amendment to the effect that the sub-section (2) of section 115BBE so as to provide that the set off of any loss shall also be not allowable in respect of income under the aforesaid sections. This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years. Aforesaid amendment can not be applied retrospective otherwise there is no rationale to effect aforesaid amendment. It is also settled position of law that restrictive amendments are applicable prospectively." iii. The Hon'ble I....
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.... day of April, 2013. When the legislature itself provided that the particular provisions are applicable prospectively then submission of Ld D.R. that the section is applicable retrospectively without any basis is not tenable. Further, it is not a matter of insertion of explanation or clarification to some existing provisions of law. It is a new section inserted barring claim of expenses/ allowance against particular income. Therefore any bar or restrictions of a claim cannot be applied retrospectively. It is wellsettled rule of interpretation allowed by time and sanctified by judicial decisions that retrospective operation should not be given toa statute so as to effect, alter or destroy an existing right or create a new liability or obligation. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only as per ratio of Hon'ble Supreme Court in the case of Govinddas Vs. ITO, (1976) 103ITR 123 (SC). A statue which deals with matter of substantive law and taxation is matter of substantive law-would not be construed to have retrospective operation unless such a construction appears very clearly in the terms o....