TaxTMI 
TaxTMI 
2020 (1) TMI 686
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...., notice u/s. 143(2) of the Act was issued by ITO, Ward-36(4), Kolkata on 12.09.2017 and the same was duly served upon the assessee. Thereafter, the case was transferred from ITO, Ward-46(4), Kolkata to ACIT, circle-36, Kolkata. Thereafter, notice u/s. 142(1) of the Act along with detailed questionnaire was issued on 02.11.2017 and the same were served upon the assessee. During the financial year relevant to assessment year under consideration, the AO noted that the assessee derives his income from salary, house property, business or profession, capital and income from other sources. The AO while completing the assessment observed that during the course of survey operation on 22.08.2014 the assessee's statement was recorded u/s. 133A of the Act and subsequently on oath u/s. 131 of the Act on 25.08.2014 was also recorded. In such statement, assessee had disclosed a sum of Rs. 3,00,00,000/- as his undisclosed income over and above his regular income. And on 27.08.2014 assessee had submitted a disclosure petition in the office of the DIT (Inv.), Kolkata wherein he had stated as under: "In the course of statement recorded under section 133A earlier I had voluntarily and in good f....
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....sentative (AR), filed the assessee's submission, the relevant content has been recorded by AO in the assessment order which is as follows:- "Post, survey proceeding at my premises, my name was highlighted by the media, news channels and other agencies. As a result of which, I lost my reputation and credibility among all business groups with which I had good relations and from whom I was supposed to receive the commission income. Also, as a consequence to the survey proceedings at my premises the Income Tax Department consecutively, conducted search and survey operations in almost all business groups in which I had given entries. As a result of which most of the business groups from whom I was supposed to received my commission income, refused to pay me the balance amounts. The amounts which were received in actual were offered for taxation for the A. y. 2015-16. As I failed to recover any further amount and the same seems no more recoverable, hence only the amount actually received by me was shown as 'Income Disclosed to IT'." 5. According to AO, the above reply of the assessee is clearly a story for non-payment of the disclosed amount. But, according to AO, even....
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.... filed return of income he offered only Rs. 1,38,00,000/-. On being asked why he has brought down his undisclosed income from Rs. 3 cr. to Rs. 1,38,00,000/-, the assessee had offered an explanation which states that after the survey action by the department at his office premises, his name was adversely highlighted by the media and news channels and other agencies. As a result of the adverse publicity/media glare, he lost his reputation and credibility as an entry-operator among all business groups with which he had good relations and from whom he was supposed to receive the commission income (for the service he rendered to give accommodation entry). Also, as a consequence to the survey proceedings at his premises, the Income Tax Department consecutively, conducted search/survey operations in almost all business groups in which he had given accommodation entries, which action in turn annoyed and enraged them and so they consequently distanced from him and refused to pay the commission for his service. Resultantly, most of the business groups beneficiaries from whom he was supposed to receive his commission income, refused to pay him the balance due amounts. According to assessee, t....
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....of providing accommodation entry and in that back-lash he could realize only Rs. 1.38 cr. in place of Rs. 3 cr. as estimated earlier. Therefore, in this back ground, we note that the assessee while filing the return of income had offered his undisclosed income only at Rs. 1.38 cr. in place of Rs. 3 cr. which he estimated to be his income while filing the disclosure petition. However, his claim of realizing only Rs. 1.38 cr. from the market was not believed/accepted by the AO/Ld. CIT(A). According to AO, it was an afterthought to wriggle out of the commitment made by filing disclosure petition wherein assessee on his own volition disclosed his undisclosed income to the tune of Rs. 3 cr. So he was pleased to add the difference of Rs. 1.62 cr. to the total income of the assessee, which action of AO has been upheld by the Ld. CIT(A). We do not countenance this action of the authorities below in the back-drop of facts and circumstances discussed (supra). Though we acknowledge that admission is a best piece of evidence, here on the facts of the case, admission alone cannot be the basis for mulcting the addition. We have to note that the survey took place on 22.10.2014, and the assessee w....
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....tention, which resulted in putting a full stop to the assessee's business/profession of illegal activity of providing accommodation entry and thus he was out of business/profession and the income expected did not come into his coffers, had to be accepted in the given facts and circumstances discussed (supra) and, therefore, the income which came into the hands of assessee which ITA No. 1099/Kol/2019 Uday Shankar Mahawar, AY 2015-16 he has offered in his ITR can only be taxed in the absence of any evidence to disprove the explanation rendered by the assessee. So, resultantly even if it is accepted that the assessee's estimate of Rs. 3 cr. as his undisclosed income is correct, still, since he could retrieve only Rs. 1.38 cr. this year and there is no possibility to recover the balance of Rs. 1.68 cr., this balance amount non-recoverable to the tune of Rs. 1.68 cr. is loss suffered by the assessee which is incidental to his illegal activity of providing accommodation entry. We also note that during assessment proceeding, the assessee's plea that balance of the income could not be recovered and the same to be treated as bad debt could not find favour with the AO, who did no....
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....SINESS LOSS - LOSS OF STOCK-IN-TRADE - IS A BUSINESS LOSS - MEDICAL PRACTITIONER - HEROIN FORMING PART OF STOCK-IN-TRADE OF ASSESSEE SEIZED - ASSESSEE ENTITLED TO DEDUCT VALUE OF HEROIN SEIZED FROM GROSS INCOME AS BUSINESS LOSS - THAT POSSESSION OF HEROIN IS AN OFFENCE IRRELEVANT - PROVISION RELATING TO ALLOWANCE OF BUSINESS EXPENDITURE DOES NOT GOVERN DEDUCTION OF BUSINESS LOSS - INCOME- TAX ACT, 1961, s. 37 , Expln BUSINESS EXPENDITURE - PROVISION RELATING TO ALLOWANCE OF BUSINESS EXPENDITURE DOES NOT GOVERN DEDUCTION OF BUSINESS LOSS - INCOME- TAX ACT, 1961, s. 37 , Expln LEGAL PRINCIPLES - CASES TO BE DECIDED NOT ON ONE'S MORAL VIEWS - LAW DIFFERENT FROM MORALITY The assessee, a medical practitioner, claimed deduction of the value of heroin seized from his gross income. The Department denied the deduction. On appeal the Appellate Tribunal held as a fact that heroin was a part of his stock-in-trade and allowed deduction of the estimated value of the heroin seized from the gross income as a business loss. On appeal the High Court held that the rigour of the Explanation to section 37 of the Income-tax Act, 1961, was fully satisfied, that possession of heroin was an of....