TaxTMI 
TaxTMI 
2021 (4) TMI 905
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....ted as business income. II. The learned CIT(A) has grievously erred in law and on facts in not allowing set off of business loss of Rs. 77,15,133/- against income of Rs. 1,10,00,000/- disclosed u/s. 133A of the Act as loss from business is eligible for set off against profit from business u/s. 71 of the Act. The loss of Rs. 77,15,133/- should therefore, be allowed set off. III. The learned CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 31,93,411/- on account of construction expenses claimed against construction receipts disregarding all evidences. The addition should therefore, be deleted. IV. The learned CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 2,55,743/- by estimating profit on construction expenses disregarding the evidences of expenses already eligible for deduction against receipts. The addition of Rs. 2,55,743/- should therefore, be deleted. The appellant reserves the right to add, alter, modify, amend or withdraw any of the grounds of appeal before hearing." 2. At the outset itself, the Learned Counsel for the assessee informs the Bench that assessee does not wish to press Ground Nos.3 and 4....
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....y the assessee that the receipts are fictitious and the diary is prepared as on the date of survey. The assessee prepared an affidavit after four months of survey and such affidavit was filed before the assessing officer on 06-06-2010. 7. The assessing officer rejected the contention of the assessee. The assessing officer observed that 'had the diary been fictitious the assessee would never have offered income declared during the survey'. The affidavit has been filed after four months from the date of survey, so it is an after-thought (planning) to avoid the payment of income tax, hence the contention of the assessee was therefore treated by the assessing officer, as wrong and misleading. In respect of difference in income declared during the course of survey and income declared in the return of income, the assessee has not offered any explanation, therefore, the assessing officer treated this sum of Rs. 10,00,000/- as an income of the assessee under section 69 of the Act, as an Unexplained Investment in form of unaccounted receivables. The assessing officer relied on the judgment of jurisdictional High Court of Gujarat in the case of Fakir Mohmod Haji Hasan V/s CIT (2001)(247 IT....
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....refore the order passed by the assessing officer is not in accordance with law. We note that this issue has been dealt with by the Hon'able Gujarat High Court in the case of Fakir Mohammed Haji Hasan 247 ITR 290 ( Gujarat). We note that Hon`ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan(supra) has answered the following questions which were referred by the Tribunal under Section 256(1) of the Income-tax Act, 1961, for the opinion of the court : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee had been found in possession of gold valued at Rs. 48.72 lakhs and as such he was the owner of the said gold and the value of the said gold was liable to be included in the income of the assessee because of the fact that no explanation regarding source from which investment in the said gold had been made, had been given by the assessee? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that no deduction in respect of the value of the gold which had been confiscated was allowable from the income of the assessee?" 13. The Hon`ble Court has answered....
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....nvestment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head "Income from other sources". Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of Sections 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions. 9. It is, therefore, clear that, when the investment in or acquisition of gold, which was recovered from the assessee was not recorded in the books of account and the assessee offered no explanation about the nature and source 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 professi....
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.... the head "other sources" do not mean that incomes of these sections are headless income. The intention of the Hon'ble Court is that once these deemed income under sections 69, 69A, 69B and 69C etc., are assessable under the head "other sources" then the assessee will not get deduction of the expenses incurred by him to earn said income, if he has failed to prove the source of these incomes. Hence, we note that the judgment of the Hon, able Gujarat High Court has been misunderstood by the assessing officer. Thus, we note that the deemed income would be assessable under the head "income from other sources" but the assessee will not be able to claim the deductions from these incomes as the assessee has failed to explain the sources thereof, (that is, whether it is income from business or income from property). We also note that assessing officer, in his assessment order, (vide page 6) has rightly mentioned in the computation of income, the income disclosed during the course of survey under section 69 of the Act at Rs. 1,10,00,000/- which is under the head "Income from other sources" and the assessee would not able to claim deduction and set off of loss, as the source of the said inco....
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....does not apply to the assessee`s facts under consideration, as it has been decided in the context of section 263 of the Income Tax Act. On merit also, the ratio of this judgment is not applicable to the assessee`s facts under consideration. 17. We note that ld CIT(A) confirmed the action of the assessing officer, observing as follows: "15. After examining all the above facts, it is apparent that the appellant has been trying to mislead the department. As per the remand report of the Assessing Officer no payment of demolition charges has been paid by the assessee. The demolition of the construction was ordered way back in February 1985, while fresh permission for construction was given by the SMC in October 2005. After construction the building has been given on rent and the demolition of earlier construction has no co-relation with new construction. The income from the building constructed has been shown under the head income from 'house property' and not as business income. Therefore, the expenditure incurred in respect of construction of the said building or demolition of earlier building is not allowable, even otherwise, under u/s 37(1) of the Income Tax Act. Moreover, demoli....