TaxTMI 
TaxTMI 
2018 (8) TMI 1247
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....of Rs. 1,76,24,221/- was set off against this cash credit. ii) As per section 115BBE, where the total income of an assessee includes any income referred to in section 68, section 69,section 69A, section 69B, section 69C or section 69D, the income tax payable shall be the aggregate of a) the amount of income tax calculated on income referred to in section 68, at the rate of 30% and b) the amount of income tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). As such, the above unexplained credit u/s. 68 should be taxed at 30%. iii) The Hon'ble High Court of Kerala in the case of M/s. Kerala Sponge Iron Ltd. held that unexplained cash credit cannot be treated as business income because it is not an income classifiable under any head of income as per section 14 and such incomes are not eligible for set off of brought forward business loss and unabsorbed depreciation. On the basis of this judgment unexplained cash credit of Rs. 186,00,000/- is not eligible for set off of business loss of Rs. 1,76,24,221/-. 3. On appeal, the CIT(A) observed that the Assessing Officer has not applied his mind to th....
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....d. AR relied on the judgment of Madras High Court in the case of Chensing Ventures (291 ITR 258) wherein it was held that the Assessing Officer has not given any reason whatsoever to deny the set off of the business loss against the income declared under the head "other sources". Section 71 deals with set off loss against income under any other head. After setting off losses against the income under the same head, if the net result is still a loss, the assessee can set off the said loss under section 71 of the Act against income of the same year under any other head, except for losses which arise under the head "capital gains". The Ld. AR also relied on the following judgments: i) CIT vs. Walfort Share & Stock Brokers in Civil Appeal No. 4927 of 2010 dated 06/07/2010 (SC). ii) ACIT vs. M/s. Sanjay Bairathi Gems Ltd. in ITA No. 157/JP/2017 dated 08/08/2017 (ITAT, Jaipur Benches) iii) Neo Sports Broadcast Pvt. Ltd. vs. CIT(TDS) in ITA Nos. 4010&4011/Mum/2014 dated 19/02/2016 (ITAT, Mumbai Benches) iv) Lakshya Seth vs. ITO in ITA No. 218/Del/2015 dated 07/10/2015 (ITAT, Delhi Benches) v) Akr Poly Industries vs. Department of Income Tax in ITA No.1042/Mds/2012 dated 29/01/201....
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....une of Rs. 1.86 crores which was credited to the capital account as unexplained income u/s. 68 of the Act and thereafter, set off the net business loss of Rs. 1,76,24,221/- against that unexplained income. The AO allowed the set off of business loss out of unexplained income and completed the assessment u/s. 143(3) of the Act. The AO discussed this issue in para 4 of his order. It appears that the Assessing Officer has not enquired into and no proper efforts were made to find out whether the unexplained income u/s. 68 of the Act could be set off against business loss. Without making any enquiry at all to ascertain whether the income of the assessee was assessed under the proper head or not, the AO accepted the assessee's claim. As such, the AO allowed excess relief to the assessee which is prejudicial to the interest of the Revenue. In other words, the failure on the part of the AO to make necessary enquiry rendered the assessment order erroneous which also resulted in allowing excess relief which rendered the assessment order prejudicial to the interest of the revenue. As such, the CIT remitted the issue back to the file of the AO to examine the issue afresh. 6.2 Before us, the L....
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.... be treated as assessee's business income. We notice that the case law of CIT vs. Abdul Rahman Industries (2007) 293 ITR 475(Mad.) and Chensing Ventures (supra) has been relied upon by the assessee which is sought to be distinguished by the Revenue. We notice the facts of the said case are entirely different. In the said case, unclaimed balance in question emanated from trading transactions and findings had also been recorded that the transactions were very much connected or closely linked with the assessee's business activities and the receipt had arisen only of assessee's trading transactions, which were held to be rightly assessed under the head 'business'. When we apply the said case law in the facts of the instant case, we find the factual position is entirely different as the assessee has not proved the source of unexplained credit, the identity, capacity, genuineness and credit worthiness of the transactions in question and further, it has also not shown the amount in its duly audited accounts as its business income. This leads to the inference that once the assessee has not shown the receipt as its business income, there is no reason as to how the accoun....
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....o the provisions of the Act. It will be seen from section 69A that where the bullion, jewellery or other valuable article is not recorded in the books of account and there is no explanation about the nature and source of its acquisition, or the explanation is not satisfactory, the value thereof may be deemed to be the income of the assessee of the financial year immediately preceding the assessment year in which the assessee is found to be the owner of such bullion, etc. 6.1 The scheme of sections 69, 69A, 69B and 69C of the Act would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion etc., owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then the value of such investments and money, or value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such 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....
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.... of such investment or acquisition and the value of such gold was not recorded in the books of account, nor the nature and source of its acquisition explained, there could arise no question of treating the value of such gold, which was deemed to be the income of the assessee, as a deductible trading loss on its confiscation, because such deemed income did not fall under the head of income 'Profits and gains of business or profession'. 8. In our opinion, therefore, the Tribunal was perfectly right in holding that the value of the gold was liable to be included in the income of the assessee as the source of investment in the gold or of its acquisition was not explained and that the assessee was not entitled to claim that the value of the gold would be allowed as a deduction from his income." Similarly in the case law of ITO Vs Dulari Digital Photo Services (P) Ltd. ( [2012] 24 Taxman.com.31(CHD) ), the question before the Co-ordinate Bench was whether unexplained cash credit under section 68 of the Act can be considered for set-off against losses under various heads of income. After examining the relevant provisions in detail, Co-ordinate Bench has held that since the set....
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.... income of the previous year and not the head of income which is chargeable to income-tax under section 4, Opening words of section 14 are "Save as otherwise provided by this Act", all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the heads of income specified therein. Thus, section 14 is subject to the other provisions of the I.T. Act. Taxability of income under the specific provisions of the I.T. Act outside Chapter IV is not affected by heads of income as classified in section 14. As a corollary, it follows that income liable to be taxed under the specific provisions of the I.T. Act outside Chapter IV can be taxed without bringing the same under a head of income as specified under section 14/Chapter IV. At this stage it may be relevant to consider Chapter VI in general and the provisions of Sec.68 in particular, They read as under;- Chapter VI Aggregation of income and set off or carry forward of loss Cash credits: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offer....
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....otal income referred to in the principal charging section. Section 14 classifies the heads of income while sections 15 to 59 provide for its quantification. Chapter VI of the Income tax Act provides for aggregation of income and set off or carry forward of loss. Thus Chapter VI is in two parts; first part deals with aggregation of income while the second part deals with set off or carry forward of losses. Chapter has been placed after Chapter IV and V, It comes into play only after the computation of total income under the various heads of income in terms of in terms of Chapter IV has been done. Income falling under Chapter VI is taxed by aggregating the same with the income quantified in terms of Chapter IV. Chapter VI is not subservient to Chapter IV. Besides, section 14 allows the taxability of income under specific provisions of the I.T. Act outside Chapter IV. For the reasons aforestated, the income assessable under section 68 cannot be assessed as income from other sources under section 56. 15. Thus what is taxed under Chapter IV is income from a known source including income from other sources. A source of income means a specific source from which a particular income sprin....
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....sessment as per the provisions of the Act. However, when these provisions apply because no source 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 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 opening words of section 14 are "Save as otherwise provided by this Act" clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, beca....