TaxTMI 
TaxTMI 
2019 (5) TMI 8
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....in the nature of business income and further whether the set off of losses against the same was allowable or not. It was pointed out that while in one case the issue had been decided against the assessee, the other had been decided in favour of the assessee and hence, the above appeals by the assessee and the Revenue respectively. Both the appeals were therefore taken up together for hearing. 3. Taking us through the facts of the case in ITA No.408/Chd/2018 it was pointed out that the assessee in this case was deriving income from manufacturing and sale of different types and sizes of auto parts. That during the impugned assessment year the assessee's premises was surveyed under the provisions of section 133A of the Act on 14.9.2012, whereupon it was noticed that there were unaccounted receivables of Rs. 1.25 crores. The same was surrendered by the assessee. However, at the time of finalization of the accounts, as at the close of the year, though the additional income surrendered during survey proceedings was credited as income, the same was offset by debit entries resulting in net profit of Rs. 49,12,262/-. This amount was entirely set off with the brought forward business loss....
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.... earlier assessment year from the surrendered income assessed under the provisions of sections 69A and 69B of the Act and accordingly, allowed the assessee's appeal. 5. In the case of appeal filed in ITA No.1494/Chd/2017, it was pointed out that the assessee had surrendered the additional income of Rs. 4 crores during survey operations carried out on the assessee u/s 133A of the Act on 02-01-14 on account of the following: i) investment of Rs. 60 lacs in Kothi at Sukhmani Enclave in the name of Smt.Rekha Miglani; ii) Sundry creditors and advances received from customers amounting to Rs. 132 lacs; iii) Gross profit on sale out of books amounting to Rs. 198 lacs and; iv) Surrender to cover miscellaneous discrepancies in loose papers etc. amounting to Rs. 10 lacs. 6. In this case also, the assessee had set off debit entries against the aforesaid surrender showing net profit of Rs. 96,31,647/- and also set off business loss of Rs. 3,39,85,902/-. The A.O. in this case also had assessed the entire surrendered income to tax and denied the set off of losses. The Ld.CIT(A) treated the entire surrendered income as deemed income as per the provisions ....
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....0.01.2017 makes it clear that the said amendment in section 115 BBE has been made only to convey the desired intention of the legislature and to avoid unnecessary litigation? 2. Whether the Ld.CIT(A) was justified in relying upon the decision of Hon'ble Tribunal, Jaipur Bench, in the case of Sainjay Bairathi [ITA No. 157/JP/17, dated 08.08.2017], whereas, the decision of the jurisdictional High Court in the case of Kim Pharma Ltd., Vs. CIT, in ITA No. 106 of 2011, has held that the "deemed income covered under the scheme of section 69, 69-B and 69 -C of the Act is to be treated separately and it is not income from salary, house property, profit and gains from business or capital gain, nor it is income from other sources. No setoff is allowable against this income? 3. That the order of the Ld. CIT (A) be set aside and that of the Assessing Officer be restored. 4. That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off." 8. The arguments and contentions made by both the parties in both the appeals were identical. 9. Briefly stated, the contentions of the Ld. counsel for assessee were that the income s....
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....ings, whether from disclosed or undisclosed sources, and the allowability of claim of set off of losses ,both current and brought forward ,against the same. 13. The controversy arises on account of the scheme of the Act which mandates incomes to be categorized under specific heads depending on their nature/source, for computation purposes under chapter IV and thereafter provides for setting off of losses in a specific manner under chapter VI of the Act. If it is from any of the sources as specified in the heads for taxation under Chapter-IV of the Act, the income therefrom it is to be computed as per the provisions provided thereunder. Therefore, if the source/nature of the income is from business and profession, the income to be subjected to tax is to be assessed as provided u/s 28 to 44DB of the Act and the set off of current/ brought forward losses is to be allowed as per the provisions of sections 70 to 80 of the Act, which allows set off of business losses against current year business losses subject to fulfillment of certain conditions. There is no dispute about the above position of law. 14. Further the Act also provides for treating certain credits, investments, expen....
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....s behalf in the books of account maintained by the assessee for any about such excess amount or the explanation offered by him is not, in the opinion of the [2021][Assessing Officer], satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.] SECTION 69C [2022][Unexplained expenditure, etc. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [2023][Assessing Officer], satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year:] [2024][Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.] SECTION 115BBE [3052][Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. [3052]["(1) W....
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....omes of the assessees. Thus, the amounts to be treated as deemed incomes are investments, moneys, or expenditure fulfilling the twin criteria of: a) not being recorded in the books if any maintained and, b) the source of which the assessee is unable to explain satisfactorily. 16. In other words, to put it simply, the unrecorded investments/assets/expenditures made out of unexplained sources are treated as deemed incomes of the assessee. The onus is on the assessee to establish the source of the surrendered income failing which it is to be categorized as deemed income u/s 69/69A/B/C of the Act. And establishing the source of income is a factual matter. The Ld.DR ,had drawn our attention to the decision of the Hon'ble jurisdictional High Court in the case of Pr.CIT vs Khushi Ram & Sons Foods (P) Ltd in ITA No.126 of 2015 dated 29-07 16,wherein the assessee had set off unabsorbed losses u/s 70 & 71 against income surrendered on account of building renovation, office equipment and sundry receivable, to which ,the Hon'ble High Court had held that it is for the assessee to establish that the source of the surrendered income was from business to claim it as such and s....
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....ince the company is incurring losses in current F.Y.2012-13, the surrendered income will be adjusted against these losses." [Extracted from the impugned assessment order; pages 5 &6]." 20. Clearly, it is evident from the above that the surrender was on account of debtors/receivables relating to the business of the assessee only. The Revenue has accepted the surrender as such, as being on account of receivables. It follows that the debtors were generated from the sales made by the assessee during the course of carrying on the business of the assessee, which was not recorded in the books of the assessee. Though the said income was not recorded in the books of the assessee but the source of the same stood duly explained by the assessee as being from the business of the assessee. Even otherwise no other source of income of the assessee is there on record either disclosed by the assessee or unearthed by the Revenue. The preponderance of probability therefore is that the debtors were sourced from the business of the assessee. Therefore, there is no question of treating it as deemed income from undisclosed sources u/s 69, 69A, 69B and 69C of the Act and the same is held to be in the na....