TaxTMI 
TaxTMI 
2019 (7) TMI 1413
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....udicial to the revenue and set aside the assessment order directing it to be framed afresh as per the directions given in the order u/s 263 of the Act. In compliance thereto Ld. A.O initiated the assessment proceedings afresh by serving u/s 143(2) and 142(1) of the Act to the assessee. 3. During the year under appeal on 12.7.2011 survey u/s 133A of the Act was conducted at the business premises of the assessee. During the survey proceedings it was found that unaccounted investment was made out of books in the construction of hotel. Assessee agreed to declare the unaccounted investment as income at Rs. 1,25,01,135/- in the Income Tax return. In the Income Tax return filed by the assessee as per audited profit and loss account, net profit was shown at Rs. 81,91,990/- which was arrived at after considering income declared during the income tax survey at Rs. 1,25,01,135/-. Apart from showing the income from regular business operations, assessee also claimed the expenses towards interest, remuneration to partners and deprecation. The income declared during Income Tax survey was shown as business income and after claiming necessary expenses including the set off of brought forwarded d....
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....sidering the evidentiary value of the partner of the assesses firm during the course of survey u/s 133A. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date the appeal is finally heard for disposal. 6. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O. 7. Per contra Ld. Counsel for the assessee relied on the submissions made before the lower authorities and findings of Ld. CIT(A). Reliance was also placed on the recent decision of Coordinate Bench of ITAT, Jaipur Bench in the case of ACIT V/s Sanjay Bairathi Gems Ltd, Jaipur ITA No. 157/JP/17. 8. We have heard rival contentions and perused the records placed before us. Though the revenue has raised two grounds of appeal but the sole issue is against the finding of Ld. CIT(A) allowing the claim of deduction of Rs. 91,75,248/- being the expenses on account of depreciation, interest, remuneration and other expenses claimed against the income of Rs. 1,25,01,135/- surrendered by the assessee as unaccounted investment in hotel building during the course of survey u/s 133A of the Act conducted on 12.7.2011. 9. We observe that during the course of survey ....
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....e Hon'ble Punjab & Haryana High court in the case of Kim Pharma (P) Ltd.(supra), assessee was found to have failed to explain the source of the cash found during the course of survey, which was offered as an additional income, and, therefore in the absence of the nature of source of cash being proved it was held not to be assessable as income from business. We may also refer to a judgement of the Hon'ble Karnataka High Court in the case of CIT vs. S. K. Srigiri and Bros. (2008) 298 11R 13 (Kar), which has been rendered in the context of section 40(b )(iii) of the Act. In the case before the Hon'ble Karnataka High Court, the Tribunal had come to a factual finding that the additional income declared in the course of survey was from business and' therefore the remuneration paid to the partners was held liable to be deducted.".. Hon'ble Supreme Court has laid down a principle that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee: must be adopted". This principle has been consistently followed by. the various authorities as also by the Hon'ble Supreme Court itself. In another Supreme Court judgme....
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....e-tax calculated on the income referred to in clause(a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income tax with which the assessee would have been chargeable and his total income been reduced by the amount of income referred to in clause(i) (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) f subsection (1). (2) ) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 46a (or set off of any loss) shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1). The sub-section (2) provides that notwithstanding anything contained in the Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provisions of the Act in computing his income referred to in clause (a) of sub-section(1). With effect from AY 2017-18, sub-section (2) prohibits setting off any loss against income of the nature referred to in specified sections....
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....income. The assessee shall be entitled to pay remuneration to its partners as per clauses of partnership deed. Therefore, we allow this ground of appeal of the assessee". In view of above, the claim of deduction on account of :- 1. Depreciation - Rs. 47,73,363/- 2. Interest -Rs. 9,16,419/- 3. Remuneration to the partners -Rs. 9,00,000/- 4. Expenses -Rs. 25,64,726/- 5. Carry forward depreciation -Rs. 20,740/- Total Rs. 91,75,248/- is an allowable expenditure. Therefore, the addition made by the AO amounting to Rs. 33,25,887/- is confirmed. The appellant will get the relief of Rs. 91,75,248/-. Therefore the appeal on these grounds is partly Allowed. 11. We further find that the similar issue was dealt by the Coordinate Bench, Jaipur in the case of M/s. Sanjay Bairathi Gems Ltd, Jaipur vide ITA No.157/JP/17(supra) wherein also the Tribunal after considering the various judgments of Hon'ble courts held that the assessee is eligible for set off of business loss against the income brought to tax u/s 69B r.w.s 115 BBE of the Act. The relevant portion of the judgment is reproduced below; "6. Per contra, the ld AR drawn our reference to the decis....
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....ainst the income which has been brought to tax under section 69B read with section 115BBE of the Act. 8. Firstly, regarding the contention of the ld CIT DR that the provisions of section 115BBE comes under Chapter-XII providing for determination of rate of tax in certain special cases and accordingly, it relates to quantification of the amount of tax and not to the computation of total income and therefore, the amendment brought in by the Finance Act 2016 would not affect the computation of total income. It was accordingly contended that the business losses in the instant case cannot therefore be allowed set off against the amount brought to tax under section 69B in terms of undisclosed investment in stock of stones, gold and jewellery. 9. It is noted that by the Finance Act, 2016, an amendment has been brought-in in section 115BBE(2)wherein it has been provided that "notwithstanding anything contained in this Act, no set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income as referred to clause (a) of subsection (1) of the Act. If we were to accept the contentions of the ld CIT(DR), the question that arises is would that inte....
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.... case, set off of business losses against income brought to tax under section 69B cannot be denied. 12. Now, we refer to various judicial pronouncements quoted by both the parties. We find that the decision of Hon'ble Gujarat High in case of Fakir Mohmed Haji Hasan (supra) and subsequent decision of the Hon'ble Madras High Court in case of Chensing Ventures (supra) are two earliest decisions on the subject where the Hon'ble Courts have taken a divergent view in the matter. As per the decision of Hon'ble Gujarat High Court, the addition on account of unexplained investment would be considered as total income of the previous year without allowing set-off of business loss. As per Madras High Court's decision, the addition would be set-off against the business loss and the balance addition, if any, would form part of the total income and attract tax. 13. It is noticed that the Hon'ble Gujarat High Court in case of CIT vs Shilpa Dyeing & Printing Mills (P) ltd (supra) had an occasion to consider an identical issue where the said divergent view has been reconciled. In that decision, the Hon'ble High Court has considered its earlier decision rendered in c....
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....d with reference to each of the different sources separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee is subject to income-tax on his total income though his income under each head may be well below the taxable limit. Hence the loss sustained in any year under any heads of income will have to be set off against income under any other head. In this case, the Assessing Officer made addition of Rs. 28,50,000/- as undisclosed income under Section 69 of the Act. Once the loss is determined, the same should be set off against the income determined under any other head of income. In the assessment, no reasons were given by the Assessing Officer to deny the benefit of Section 71 of the Act. The benefit provided under Section 71 of the Act cannot be denied and the learned Standing Counsel appearing for the Revenue is also unable to explain or give reasons why the assessee is not entitled to the benefit of Section 71 of the Act. The reasons given by the Tribunal are based on valid materials and evidence and the same is in accordance with the provisions of Section 71of the Act. We find no error or legal infirmity in the imp....
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....thority, the value of the said stock was Rs. 13,33,485/-, however, as per the books of account, the value of stock was to the tune of Rs. 3,26,498/- i.e. amount to the tune of Rs. 10,06,987/- was not recorded in the books of account. However, it is admitted by the assessee himself that he has not completely disclosed the stock in the books of account. Now, considering the proviso of Section 69(B) of the act, we are of the opinion that the assessee had not fully disclosed the stocks in the books of account and therefore, the Assessing Officer as well as the CIT (Appeals) have rightly observed that the case of the assessee would fall under the proviso of Section 69(b) of the act. We are also of the opinion that the submissions made by the learned advocate is that the case would fall under the proviso of Section 69(c) of the act does not apply to the facts of the present case. It is not the case of the revenue that there is an unexplained expenditure, which would cover under the proviso of this Act and therefore, the assessee would not be entitled for the set off under the proviso of Section 71 of the act. As far as applicability of the case of Shilpa Dyeing & Printing Mills (P.) Lt....