AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1705
X X X X Extracts X X X X
X X X X Extracts X X X X
....2005-06 are extracted here as under : "1. On facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be held that, the Learned Assessing Officer as well as the first appellate authority erred in taxing the additional income of Rs. 58,00,000/-, declared by the appellant in the course of survey u/s.133A of the Act and returned by it as business income, as deemed income u/s.69A of the Act. It further be held that all the consequential provisions available for business income should have been allowed to the Appellant. The Appellant be granted just and proper relief in this respect. 2. The Appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing." 3. Background facts on Additional income of M/s. CPPL & M/s. GDPL : The facts include that the assessee is a company and is engaged in the development of properties. There was survey action u/s.133A of the Act on the assessee on 24-01-2007. The said action resulted in the discovery of incriminating information as well as the papers/ documents relating to the assessee under consideration and the same were impounded for use in making of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....business income" for such set off. After giving reasonable opportunity and also after considering the reply of the assessee, the AO extracted the relevant questions and answers from the sworn statement of Mr. K.P. Gera, MD, disposed during the said survey action. As per the discussion given in Para Nos.2.1 to 2.3 of the assessment order, the AO held that the said additional income offered by the assessee over and above the regular income and was treated as unexplained money and the same was taxed as "income from other sources". As per the AO, such deemed income is not available for set off of the brought forward losses as claimed by the assessee in the revised return of income. For the sake of completeness, Para No.2.2 is reproduced herein below : "2.2 In the light of the above, the income, which the assessee has disclosed during the survey over and above the regular income, is treated as assessee's unexplained money and is taxed under the head income from other sources without allowing the set off of brought forward business losses as claimed by the assessee in the revised return of income." Similarly, the AO made addition of Rs. 78 lakhs which was disclosed by the assessee as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ipts which were brought to tax and not receipts as well as expenditure and therefore there is no double addition in respect of the same amount. Further, in this case, as discussed earlier, the expenditure far exceeded the receipts shown in the impounded documents. In such circumstances, the said decision of ITAT, Pune has no application to the facts of the present case. 4.3.6 The other contention of the appellant is that overall declaration was made by the MD of the company for the entire group and the declaration of such additional income has been considered & assessed as business income in the hands of GDPL while framing the assessment order. But, for the A.Y. 2005-06, as already mentioned, additional amount declared during the survey was brought to tax under sec.69C of the I.T. Act in the hands of GDPL. For the A.Y. 2006-07, the additional income was separately considered and added to the total income by the Assessing Officer in the final computation of total income. Further, it is also noticed that in case of GDPL, there was no brought forward business loss for set off against the income admitted during the survey and therefore the issue therein is only academic in nature. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entire group. As such, in the case of the sister company of the Appellant, the AO had accepted the declared income as business income. Thus, there is no reason that the closing stock declared by the Appellant for the assessment year under consideration should be assessed as deemed income u/s. 69A of the Act. 2.4. Once it has been established that the income declared by the Appellant is its business income, there would not be any reason for disallowing the set-off of unabsorbed depreciation pertaining to A.Y. 2000-01 and A. Y. 2001-02 against such income. 2.5. Without prejudice to the above, even if the income is held to be deemed income, section 32(2) of the Act was amended by Finance Act, 2001 w.e.f. 1st April, 2002, whereby the old position (as it stood until A.Y. 1996-97) that un absorbed depreciation becomes the current depreciation under section 32(2) of the Act was restored. 2.6. Thus, w.e.f. 1st April, 2002, the unabsorbed depreciation is brought forward and treated as a part of the current year allowance for depreciation. That being so, in case where the business profits are lesser than the depreciation allowance, then the same is deducted from income under any other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nced to have been earned out of business activities of the assessee and of course, outside the books of account. We also need to adjudicate whether the same can be considered as business income of the assessee and consequential deductions or set off as per the provisions of section 70, 71 and 72 of the I.T. Act can be allowed or not. As discussed in the preceding paragraphs of this order, Rs. 58 lakhs and Rs. 73 lakhs was offered as additional income of the assessee for the A.Yrs. 2005-06 and 2006-07 respectively. These amounts were offered on the basis of the impounded documents collected during the survey action conducted on 24-01-2007 on the assessee. These documents clearly reflect the unexplained expenditure and unexplained receipts relates to sale of flats to the parties. Assessee is a Builder and his business is to construct the flats and sell the same to the customers. All these details clearly indicate the business nexus of the receipts/expenditure to the core business activities of the assessee. It is not the case that there was any cash impounded or seized in this case to deny such claim of set off as the source of the same becomes very vague issue. The entries available....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her items relatable to the business activities of the assessee are found eligible for set off of the brought forward losses against the said business activities/additional income. For the sake of completeness, the operational paragraphs are extracted here as under : "9. We heard both the parties on these 3 items. On going through the facts and considering the details available on record, we find the said items at Sl.Nos.1, 3, and 4 of the table being gross profits and the unrecorded purchases, we are of the opinion that the same should constitute business income and they should be available for set off of the losses in question. To that extent, the order of CIT(A) and the AO are required to be reversed and therefore, the AO is directed to grant set off of benefit accordingly. 10. Regarding the excess cash of Rs. 4,93,290/- mentioned at Sl.No.2 of the table, it is the case of the assessee that the same was found at the business premises of the assessee, which was surveyed by the Revenue. The said cash was offered by the assessee during the survey action as the business income of the assessee. The same was shown in the return of income as additional income in the profit an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other sources". The Tribunal did not allow the benefit of set off against the business losses of the assessee against the said income. Considering the above legal propositions, we are of the opinion that the excess cash of Rs. 4,93,290/- being deemed income is not to be treated as "business income" of the assessee. Further, regarding the investment in the residential house, we find it is the case of appropriation of income earned by the assessee. Thus, the claim of the assessee is unsustainable. Therefore, these parts of the claim of the assessee are dismissed. Thus, the only amount which is available for set off against the current year is brought forward loss amounts to Rs. 4,81,252/-, i.e. sum of 3 items of income mentioned at Sl.Nos. 1, 3 and 4 of the table above. AO is directed to grant the benefit of set off of the balance of current year loss of Rs. 2,65,457/- and the brought forward business losses to the extent of Rs. 2,15,795/- (i.e. Rs. 4,81,252 - Rs. 2,65,457). The balance of brought forward business loss is allowed to be carried forward to the subsequent assessment years for set off. Accordingly, the grounds raised by the assessee are partly allowed." 11.2 On fa....