TaxTMI 
TaxTMI 
2022 (4) TMI 1564
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.... was revealed that the assessee was maintaining a bank account in Merill Lynch Bank, New York. Notices u/s. 153A of the Act were issued to the assessee in response to which returns were filed for all the impugned assessment years i.e. A.Y. 2009 10 to 2014-15, i.e six years prior to the year in which search was conducted. The assessee declared income under different heads including income from salary, house property, income from other sources, income from business and profession and capital gains. The income from business and profession disclosed related to transaction revealed in the aforesaid foreign bank account. For the first two years i.e. A.Y 2009-10 and 2010- 11, the assessee returned losses from business and profession, which since could not be set off against current years income comprising majorly of salary income, were carried forward for set off against profits of business returned in the subsequent years. Computation for A.Y 2009-10 and 2011-12 is reproduced hereunder for clarity: A.Y 2009-10 Computation of Total Income Income Heads Income Before set off Income After set off Income from salary 13425427 13425427 Income from House Property 37....
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....come from Business & Profession Details Trading in foreign shares and securities 0 (Foreign Assets) Net Loss As per P&L A/c -75454914 Total of Business & Profession 0 Loss adjusted with House Property 37470 Loss adjusted with Other Income 21720 Current Year Losses Carry Forward Nature of Loss Assessment Year Loss C/F Business income (Ordinary) Cannot C/F 2009-10 75395724 Capital Loss (ST) Cannot C/F 2009-10 48829 A.Y. 2011-12 Computation of Total Income Income Heads Income Before set off Income After set off Income from salary 20534840 20534840 Income from House Property 45097 45097 Income from Business of Profession 8547101 0 Income from Capital Gains -2089 0 Income from other sources 4286177 4286177 Gross total income &nb....
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....sequence their set off against business income in subsequent years also and also made addition made u/s. 68 of the Act of the credits in the foreign bank account of the assessee. Briefly summarized the assessments framed for each year is as under: Particulars Income declared in the return u/s. 153A Disallowance of loss Disallowance of set off loss Addition of Unexplained credits Total Income assessed A.Y. Amount Amount Amount Amount Amount 2009-10 1,33,25,430/- 7,54,54,914/- -------- 30,80,31,610/- 32,13,57,040/- 2010-11 2,52,16,680/- 56,61,579/- --------- 15,04,94,322/- 17,57,11,000/- 2011-12 2,47,61,110/- ----------- 85,47,101/- 27,02,68,615/- 30,35,76,830/- 2012-13 1,98,40,220/- ------------- 1,32,25,391/- 16,57,62,670/- 19,88,28,280/- 2013-14 2,27,37,640/- ------- 46,12,131/- 64,56,398/- 3,38,06,170/- 2014-15 44,26,850/- ---------- 1,40,04,621/- 66,50,702/- 2,50,82,170/- 5. All the above additions were deleted by the ld. CIT(A), against which the present appeals have been filed by the Revenue raising identical grounds in all the year....
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....either before or during the course of hearing of the appeal. 5.1 Since the issues involved in all the appeals are identical and interlinked, we shall be dealing with them vide a common consolidated order. 6. Coming to the specific facts of the case leading to the aforestated additions/disallowances, it transpires from the order of the lower authorities that during search action on the assessee u/s 132 of the Act on 12/02/2015 and in post search enquiry it was gathered that Shri Rakesh Agarwal, the assessee, was maintaining a bank account (ICA03C46) with Merill Lynch Bank, New York in the name of M/s Pinky Ltd. During another search on 05/01/2012 at the residence of one Shri Satish Sawhney at Sainik Farm, New Delhi it was further gathered that there were few transactions between his foreign bank account No. ICA03A13, in the name of Prime Trade Ltd., with the foreign bank account of M/s Pinky Ltd. The assessee denied the existence of any foreign account in his name or in the name of any family member or any group entity and also denied any transaction with the bank account of Shri Satish Sawhnay, but later on in the month of September 2015 he declared the foreign assets i.e. fo....
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....ed about credit of US $50,000/- on 25/06/2010 in the foreign bank account of Pinky Ltd. but the assessee could not explain the source of this amount also and did not file any evidence in support of his claim of fraudulent entries passed through the account of Pinky Ltd. Accordingly the AO held that calculation of income on account of the foreign bank account given by the assessee for the year under consideration could not be relied upon particularly in view of the fact that the assessee had failed to give any documentary proof to explain the source of credit entries in the said bank account and therefore the entire credit in the bank account during the years under consideration, was added to the total income of the assessee in the respective years as unexplained credits in the bank accounts of the assessee u/s 68 of the Income Tax Act. The AO has discussed various issues related thereto at paragraphs 12 to 12.5 from pages No. 12 to 15 of the assessment order. 8. With regards to the issue raised in ground no. 1 by the Revenue challenging the order of the Ld. CIT(A) for deleting the disallowance of business loss in the first two assessment years before us and their carry forward a....
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....ess loss in the succeeding years. 3.6.8 Reliance has been placed on the decision of Chennai ITAT in the case of ACIT vs. V.N. Devedoss [2013] 57 SOT 67 wherein the ITAT held that return filed u/s 153A shall be treated as returns filed u/s 139(1) and accordingly deduction claimed in return filed u/s 153A shall be allowed. 3.6.9 The Appellant for the current year i.e. AY 2015-16, had claimed the set off of loss in the revised return of income filed on 02-03-2016. The revised return of income was filed within the time allowed u/s 139(5) of the Act i.e. before the completion of 1 year from the end of relevant assessment year. The issue is directly covered in favour of the Appellant by the recent decision of the Hon'ble Gujarat High Court in the case of PCIT vs. Babubhai Ramanbhai Patel [2017] 84 taxmann.com 32. The observations of the High Court are as under: Under sub-section (1) of section 139, every person whose income for the previous year exceeds the maximum amount not chargeable to tax, is required to file a return before the due date. Sub-section (3) of section 139 provides that any person who has sustained a loss and claims that the loss should be car....
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....turn must be allowed. The High Court also observed that section 139(5) does not envisage a situation whereupon revising the return if a case for loss arises which the assessee wishes to carry forward, the same would be impermissible. Similarly, section 153 A also does not envisage a situation that the loss claimed in the return of income filed u/s 153A would be disallowed. In fact, section 153A provides that the all the provisions of the Act shall be applicable to return filed u/s 153A as if the return is filed u/s 139(1). Hence, we request your kind office to allow the set off of brought forward business loss. 3.6.11 The Appellant further submits that the AO blows hot and cold in the same breath. The AO while does make addition of the income earned in the said bank account but when it comes to computing the losses in the said bank account, he suddenly refuses to recognize the said bank account as the account belonging to the Appellant. It is submitted that the said stand of the AO is self contradictory. If the AO denies losses to the Appellant on the ground that the said bank account is not in the name of the Appellant, or the Appellant has not owned up the said bank. Can....
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....he losses should be allowed. In contrast to these judgements, it is also located that in Jai Steel (India) Vs. ACIT (2013) 36 taxmann.com 523 (Raj) it has been held that it is not open for assessee to seek deduction to claim expenditure which has not been claimed in original assessment, which assessment already stands completed, only because assessment u/s 153A in pursuance of search or requisition is required to be made. Then this was pointed out to the Ld. ARs; this issue also has been responded to by the appellant as reproduced earlier (in para 3,8). 3.9.7 Apart from mentioning that the loss which had not been claimed in original return filed u/s. 139(1) cannot be claimed in the return u/s. 153A and in view or no evidence having been filed in respect of claim of loss the AO has also opined that the Black Money Act mandates that the losses are not allowable under the Inconel Tax Act also and that the Black Money Act only governs the provisions of the said Act and does not have ant overriding effect In this context the Appellant submits that the Black Money Act expects the income for the subsequent period or the period not covered by the compliance window to be computed a....
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....t. Accordingly, the A.O. is directed to delete the disallowance of loss of Rs. 7,54,54,914/-. The appeal succeeds on this ground. 11. Briefly stated, the Ld. Counsel for the assessee relied on the findings of the Ld. CIT(A) while rejecting all the basis of the AO for denying the claim of carry forward and set off of business losses, holding that having accepted income as profits from the said transactions in succeeding years the AO could not have denied losses in earlier years stating that the account does not belong to the assessee, that the provisions of the Benami Act had no overriding effect and could not apply to the Income Tax Act and taking a holistic view on the issue that if an assessee is required to disclose income revealed from /emanating from the incriminating material/evidences found, he should also be entitled to claim deductions/setoffs emanating from the same evidences. 12. After hearing both the parties and going through the orders of the authorities below we concur with the Ld. CIT(A) that the disallowances of business losses and their carry forward and set off against business losses in succeeding years could not have been denied to the assessee. 13. We....
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....allowance of losses for A.Y 2009-10 and 2010-11 and their carry forward and set off against profits in subsequent years. 16. Taking up first the contention of the Revenue that the losses were disallowable for the reason that the bank account did not belong to the assessee, we concur with the Ld. CIT(A) that there is patent fallacy in this argument, being that profits on account of transactions in this very same bank account returned by the assessee in A.Y 2011-12 to A.Y 2014-15 have been accepted by the Department and also the fact that the assessee has disclosed this very bank account under the Black Money Act upto A.Y 2009-10, which has been accepted and nothing has been pointed out at any stage by the department showing revocation of the acceptance. Also noting this fact of disclosure made by the assessee of the foreign bank account under the Black Money Act, the reassessment proceedings initiated by the AO on the assessee for A.Y 1998-99 to 2008-09, resulted in no addition being made on account of transactions in the said foreign bank account, accepting the assesses plea that for the said years the assessee had made disclosure of the bank account in the window period provide....
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.... documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [^4589][but on or before the 31st day of March, 2021], the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years ^4590[and of the relevant assessment year or years] referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (emphasis supplied by us) (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made ^4591[and of the relevant assessment year or years]: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years ^459....
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....ssess the income of each such years. And it is further provided that where assessments are pending on the date of search such assessments shall abate and assessments u/s 153A carried out. These are the plain provisions of law with regard to search assessments as per section 153A of the Act. 23. Courts have had the occasion to interpret the scope of assessments for all the years involved, whether the entire case is open to scrutiny u/s 153A for all the years involved and the more or less consistent view has been that in case of assessment years where the assessments stood completed, the scrutiny /addition was to be restricted only with respect to incomes emanating from incriminating material, while where assessments stood abated the entire case was open to scrutiny. Almost all the Hon'ble High Courts have taken this view, including the Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income Tax vs Saumya Constructions P. Ltd (2016) 387 ITR 529(Guj). 24. Taking a cue from this proposition of law and going forward, Courts have also dealt with the issue of fresh claim of expenses/ deduction in the return filed u/s 153A of the Act, not claimed in the orig....
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....e course of original assessment and, found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or reassessing the total income under the provisions of Section 153A of the Act. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said section has to be read in the context of Sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. The underline purpose of making assessment of total income under Section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The purpose of second proviso is also very clear, inasmuch as, once a assessment or reassessment is 'pending' on the date of initiation of search ....
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....uld be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:- "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, howev....
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....ers in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed du....
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....urse of search, the notice and consequential assessment under Section 153A have to be undertaken. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lea....
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....e that absurdity and mischief may be avoided." The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made. 26. In the case of Shirke Constructions (supra) the facts before the Hon'ble Bombay High court was regarding a new claim made in return filed u/s 153A of the Act in the year in which search was conducted and where the assessment proceedings stood abated. In this backdrop the Hon'ble high court held it was ....
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....le b) Where returns filed u/s 153A of the Act related to years where assessment stood abated, the entire assessment was open and hence fresh claims of allowances/deduction could be made in returns filed u/s 153A of the Act in such cases treating them as returns filed u/s 139 of the Act for allowance of.( Shirke construction(supra), 28. Having said so we find that in the facts of the present case, the assessments were not abated, and the claim of business losses admittedly emanated from incriminating material i.e the foreign bank account of the assessee. Income from incriminating material is to be considered after defraying all expenses that are incurred for earning such income. The decision of the Hon'ble apex court in the case of CIT vs Piara Singh 124 ITR 40(SC) is relevant for the same. The business losses therefore qualified as being in the nature of Income from incriminating material required to be assessed to tax in such cases. There is no provision of law, pointed out to us, debarring claim of expenses or losses emanating from incriminating material. To put it otherwise, there is no provision of law requiring only positive incomes emanating from incriminating mat....
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....larify that set off of these business losses from any other income originally returned, other than profits from this business, would have qualified as a fresh claim and to which the assessee would not be entitled. The proceedings u/s 153A of the Act, being in consequence to search undertaken u/s 132 of the Act, cannot be utilized by the assessee to seek relief not claimed earlier. The proceedings are analogous to proceedings u/s 147 of the Act, as being for the benefit of the Revenue and not the assessee. The decision of the Hon'ble apex court in the case of CIT vs Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 (SC) is relevant for the purpose. 31. Having held so, that the claim of losses emanating from incriminating material, made in returns filed u/s 153A of the Act are to be treated as filed u/s 139 of the Act and noting that the said returns undisputedly were filed within the stipulated time, the assessee, we hold, was entitled to the benefit of carry forward and set off of the same in subsequent years, as per law. The findings of the Ld. CIT(A) in this regard are also upheld. 32. The order of the Ld. CIT(A) deleting the disallowance of losses and their carry forward ....
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....ng: i) Bank Statements of the said Bank Accounts; ii) Portfolio Statements included as part of the Bank Statements of the said Bank Accounts; iii) Computation of gains/losses computed on account of securities transactions as stated in the said Bank Statements; iv) Items of income in the form of Dividends, Interest or Distribution as disclosed in the said Bank Statements; v) Linking the said credits in the said Bank Accounts with the amount calculated for filing the Declaration; vi) Explaining the provisions of the Black Money Act, 2015 Black Money Rules and various clarifications and circulars issued by the Board in connection with filing of declaration and computation of income for the period subsequent to the period to which the Declaration pertained, vii) Reconciling completely the amounts in the Bank Statements with the computation made by the Appellant for declaring income/loss for the year under consideration; viii) Giving evidences including the evidences of subsequent recovering of the sum for the incorrect credits in the said Bank Accounts. 3.6.2 Further, the Appellant also submitted a complet....
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....he Appellant from outside India in the return filed on 02-03-2016. Since the income is already a part of the total income of the Appellant, the provisions of section 68 cannot be made applicable to the case of the Appellant. 3.6.5 Appreciate that the purpose of section 68 is to tax the credit items which have escaped taxation. For example, credits in the balance sheet in the form of unsecured loan, which does not form part of the total income, is required to be explained u/s 68. If such credit items are not explained by the Assessee, addition can be made u/s 68 of the Act. In case of the Appellant, the credit in the foreign bank account is already a part of the total income of the Appellant for the year under consideration (Pg. No. GEN 9). The Appellant has already offered the income earned outside India to tax in the return filed on 02-03-2016. Since the income is already subject to tax, provisions of section 68 cannot be made applicable to the case of the Appellant. 3.9.1 I have perused the assessment order and considered the appellants' submission. It is noted that during the course of search the Department made enquiries in respect of a foreign bank account ma....
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....Shri Satish Sawhney (standing in the name of M/s. Prime Trade Ltd.). From the re-assessment orders for A.Yrs. from 1998-99 to 2008-09, it is seen that the submissions of the assessee are in line with the submission made during the assessment proceedings u/s 153A for the A.Yrs. 2008-09 to 2015-16 and that AO, after examining the facts in the case and the submission of the assessee, has accepted that the assessee has offered bank credits in foreign bank Ayr, account for taxation in the Black Money Act and has accepted the returned incomes of the assessee for the A, Yrs 1 998-99 to 2008-09 with the remarks that if anything contrary to facts or any adverse information is received against the assesses in future, suitable action under the relevant provision of the IT Act may be taken against the assesses. Based on these, the Ld. AR in the submission filed on 11/12/2017 has asserted that "the AO has accepted the correctness of the computation of declaration based on the foreign bank account statements and portfolio statements and therefore, there is no reason why the income computed by the appellant for the A. Yrs. 2009-10 to 2015-16 which are pending [in appeal before the CTT(A) should n....
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....ed to the double taxation of the amount qualifying as gross business receipts. Secondly, the adverse inference on credits in the account ignoring altogether the debits in the same account cannot be held tenable. Thirdly, the AO is willing to draw adverse inference on credits in the hands of the appellant but is not accepting the business loss being not in the hands of the appellant. I find that the submission of the appellant is acceptable and the AO has failed to appreciate the facts of the case and the law in this regard. The summary addition of entire amount of Rs. 30,80,31,610/- on account of unexplained credits cannot be sustained fully, as it is, per se. The reconciliation thereof by the appellant has to be examined. 3.9.5 In the context of foreign Bank account it is seen that gross business receipt comprising of sale of securities, dividend income, distribution from funds, income cash in lieu, interest income and gain on sale of securities is $47,93,285 against which out go of $62,74,229 has been claimed leading to loss of $ l4,80,944 (Rs.7,54,54,929/-). This gross receipt $47,93,285 offered to tax is part of total credit of $222,685.14 computed by the AO for t....