Terrastonne Tiles (Old), CHENNAI V. ACIT, Coimbatore

ITA 1011/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4657 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN C BHARAT
• Assessee Lawyers: R KUMAR
• Section: 69C; 40A(3); 143(3); 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A. NO. 1011/MDS/2013 ASSESSMENT YEAR : 2008-09 M/S. TERRASTONNE TILES (OLD), DOOR NO. 24, ERANKATTU JUBILEE NAGAR, CIVIL AERODROME POST, COIMBATORE-641 014. [PAN: AAEFT 9606 M] (APPELLANT) VS ACIT, CENTRAL-II, COIMBATORE. (RESPONDENT) APPELLANT BY : SHRI R. KUMAR, ADVOCATE RESPONDENT BY : SHRI ARUN C. BHARAT, CIT DATE OF HEARING : 19-08-2013 DATE OF PRONOUNCEMENT : 29-08-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(CENTRAL)-III, CHE NNAI DATED I.T.A. NO. 1011/MDS/2013 2 28-03-2013 PASSED U/S. 263 OF THE INCOME TAX ACT, 1 961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE-FIRM WAS MANUFACTURING PAVEMENT, DE SIGNER AND CONCRETE TILES. A SURVEY WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 17-09-2008 AND NOTICE U/S. 153C WAS ISS UED TO THE ASSESSEE ON 30-04-2010. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2008-09 ON 01-09-2010 DECLARING ITS NEGATIVE INCOME OF ` 20,08,609/-. NOTICE U/S. 143(2) WAS ISSUED ON 02-09-2010. THE ASSESSIN G OFFICER WHILE FINALIZING THE ASSESSMENT ORDER DATED 20-12-2 010 U/S. 153C R.W.S. 143(3) OF THE ACT MADE ADDITIONS ON ACCOUNT OF UNDER INVOICE SALES, NEGATIVE CASH BALANCE, UN-EXPLAINED SUNDRY C REDITORS AND VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE AC T. THE ASSESSING OFFICER AFTER MAKING ADDITIONS, ASSESSED THE INCOME OF THE ASSESSEE AS `( -)11,51,302/-. THE CIT(CENTRAL)-CHENNAI FORMED AN OPINION THAT THE ASSESSMENT ORDER SUFFERS FROM CERT AIN ERRORS AND IS THUS PREJUDICIAL TO THE INTEREST OF THE REVENUE. A NOTICE U/S. 263 DATED 01-03-2013 WAS ISSUED TO THE ASSESSEE. THE R ELEVANT EXTRACT OF THE NOTICE IS AS UNDER: I.T.A. NO. 1011/MDS/2013 3 THE ASSESSMENT IN YOUR CASE FOR THE ASST. YEAR 200 8- 09 WAS COMPLETED U/S. 153C R.W.S. 143(3) OF THE IT ACT, 1961 ON 20.12.2010 AT NIL INCOME AS AGAINST LOSS OF ` 20,08,609/- RETURNED BY THE ASSESSEE. THE TOTAL LOSS WAS DETER MINED AT ` 11,51,302/-. ON A PERUSAL OF THE RECORDS FOR THE ASST. YEAR 2008 -09, IT IS NOTICED THAT A SUM OF ` 4,97,248/- HAS BEEN ADDED TOWARDS NEGATIVE CASH BALANCE. THE SAME HAS BEEN SET-OFF A GAINST THE LOSS INCURRED ON KNOWN SOURCE OF INCOME, UNDER OTHER HEADS. HOWEVER, THE BENEFIT OF SET OFF OF SUCH INC OME AGAINST THE KNOWN SOURCE OF INCOME IS NOT AVAILABLE AS HELD IN THE CASE OF FAKIR MOHAMMED HAJEE HUSSAIN VS. CIT (247 I TR 290). THE CIT HELD THAT THE NEGATIVE CASH BALANCE IS IN T HE NATURE OF UN- EXPLAINED EXPENDITURE AND THUS ATTRACTS THE PROVISI ON OF SECTION 69C OF THE ACT. THE CIT RELIED ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHAMMED HAJEE HUSSAIN VS. CIT REPORTED AS 247 ITR 290 TO SAY THAT IN THE SCHEME OF SECTION 69, 69A, 69B & 69C OF THE ACT, IN CASE WHER E THE NATURE AND SOURCE OF INVESTMENT MADE OR IN THE NATURE AND SOURCE OF ACQUISITION OF MONEY BULLION ETC., OR THE SOURCES O F EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT SATISFACTORILY EXP LAINED THEN, THE VALUE OF SUCH INVESTMENTS AND MONEY OR THE VALUE OF ARTICLES NOT I.T.A. NO. 1011/MDS/2013 4 RECORDED IN THE BOOKS OF ACCOUNT OR THE UN-EXPLAINE D EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF SUCH ASSESSEE. AGGRIEVED AGAINST THE ORDER OF CIT, THE ASSESSEE H AS COME IN APPEAL BEFORE US. 3. SHRI R. KUMAR, ADVOCATE APPEARING ON BEHALF OF T HE ASSESSEE SUBMITTED THAT THE ASSESSEE FIRM WAS START ED ON 26-08-2006 AND HAS BEEN DISSOLVED ON 31-01-2008. T HE LD. COUNSEL SUBMITTED THAT NO UN-EXPLAINED CASH WAS FOU ND EITHER DURING THE SURVEY OR DURING THE ASSESSMENT PROCEEDI NGS. THE NEGATIVE CASH BALANCE OF ` 4,97,248/- IS FOR THE REASON THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT AUDITED. THE DISCREPANCY COULD HAVE BEEN RECTIFIED IF REGULAR AU DIT WOULD HAVE BEEN CARRIED OUT. THE LD. COUNSEL FURTHER CONTENDE D THAT THE CIT HAS CHANGED THE HEAD OF THE INCOME WHICH IS BEYOND HIS JURISDICTION. IN ORDER TO SUPPORT HIS CONTENTIONS, THE LD. COUNSEL RELIED ON THE JUDGMENT OF THE HONBLE MADRAS HIGH C OURT IN THE CASE OF CIT VS. CHENSING VENTURES REPORTED AS 291 ITR 258(MAD) . I.T.A. NO. 1011/MDS/2013 5 4. ON THE OTHER HAND, SHRI ARUN C. BHARAT, APPEARIN G ON BEHALF OF THE REVENUE SUBMITTED THAT THERE IS NO TECHNICAL FLAW IN THE ORDER OF THE CIT PASSED U/S. 263 OF THE ACT. THE S UBMISSIONS MADE BY THE ASSESSEE BEFORE THE TRIBUNAL CAN BE RAI SED BY HIM BEFORE THE ASSESSING OFFICER. THE LD. DR FURTHER C ONTENDED THAT THE RATIO OF THE CASE RELIED ON BY THE COUNSEL FOR THE ASSESSEE IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF TH E CASE IN HAND. THE LD. DR STRONGLY SUPPORTED THE IMPUGNED ORDER AN D PRAYED FOR THE DISMISSAL OF THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE IMPUGNED ORDER. THE CIT VIDE HIS IMPUGNED ORDER HAS DIRECTE D THE ASSESSING OFFICER TO TAX THE NEGATIVE CASH BALANCE OF ` 4,97,248/- . THE CIT IS OF THE OPINION THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ALLEGED AMOUNT FROM UN-DISCLOSED SOURCES CAN BE SET-OFF AGA INST LOSS. TO SUPPORT HIS CONTENTIONS, THE AR HAS RELIED ON THE J UDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHENSING VENTURES (SUPRA). THE HONBLE HIGH COURT IN THE AFORESAID C ASE HAS HELD AS UNDER: I.T.A. NO. 1011/MDS/2013 6 6. HEARD COUNSEL. THE ASSESSING OFFICER HAS NOT GI VEN ANY REASON WHAT-SOEVER TO DENY THE SET OFF OF THE B USINESS LOSS AGAINST THE INCOME DECLARED UNDER THE HEAD OT HER SOURCES. SECTION 71 DEALS WITH SET OFF OF LOSS AGA INST INCOME UNDER ANY OTHER HEAD. AFTER SETTING OFF LOSSES AGAI NST THE INCOME UNDER THE SAME HEAD, IF THE NET RESULT IS ST ILL A LOSS, THE ASSESSEE CAN SET OFF THE SAID LOSS UNDER SECTION 71 OF THE ACT AGAINST INCOME OF THE SAME YEAR UNDER ANY OTHER HEA D, EXCEPT FOR LOSSES WHICH ARISE UNDER THE HEAD CAPIT AL GAINS. THE INCOME-TAX IS ONLY ONE TAX AND LEVIED ON THE SU M TOTAL OF THE INCOME CLASSIFIED AND CHARGEABLE UNDER THE VARI OUS HEADS. SECTION 14 HAS CLASSIFIED THE DIFFERENT HEAD S OF INCOME AND INCOME UNDER EACH HEAD IS SEPARATELY COMPUTED. INCOME WHICH IS COMPUTED IN ACCORDANCE WITH LAW IS ONE INC OME AND IT IS NOT A COLLECTION OF DISTINCT TAX LEVIED SEPAR ATELY ON EACH HEAD OF INCOME AND IT IS NOT AN AGGREGATE OF VARIOU S TAXES COMPUTED WITH REFERENCE TO EACH OF THE DIFFERENT SO URCES SEPARATELY. THERE IS ONLY ONE ASSESSMENT AND THE SA ME IS MADE AFTER THE TOTAL INCOME HAS BEEN ASCERTAINED. T HE ASSESSEE IS SUBJECT TO INCOME-TAX ON HIS TOTAL INCO ME THOUGH HIS INCOME UNDER EACH HEAD MAY BE WELL BELOW THE TA XABLE LIMIT. HENCE THE LOSS SUSTAINED IN ANY YEAR UNDER A NY HEADS OF INCOME WILL HAVE TO BE SET OFF AGAINST INCOME UNDER ANY OTHER HEAD. IN THIS CASE, THE ASSESSING OFFICER MADE ADDI TION 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 CA NNOT BE DENIED AND THE LEARNED STANDING COUNSEL APPEARING F OR THE I.T.A. NO. 1011/MDS/2013 7 REVENUE IS ALSO UNABLE TO EXPLAIN OR GIVE REASONS W HY THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF SECTION 71 OF THE ACT. THE REASONS GIVEN BY THE TRIBUNAL ARE BASED ON VALI D MATERIALS AND EVIDENCE AND THE SAME IS IN ACCORDANC E WITH THE PROVISIONS OF SECTION 71 OF THE ACT. WE FIND NO ERROR OR LEGAL INFIRMITY IN THE IMPUGNED ORDER. A PERUSAL OF THE DECISION OF THE HONBLE HIGH COURT MAKES IT CLEAR THAT THE LOSS SUSTAINED IN ANY YEAR UNDER ANY HEAD OF THE INCOME CAN TO BE SET-OFF AGAINST INCOME UNDER ANY OTHER HE AD. THUS, THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F NEGATIVE CASH BALANCE CAN BE SET-OFF AGAINST THE LOSS SUSTAI NED BY THE ASSESSEE DURING THE RELEVANT AY. WE DO NOT AGREE W ITH THE VIEW OF THE CIT THAT THE AFORESAID AMOUNT HAS TO BE TAXE D. IN OUR CONSIDERED OPINION, THE ASSESSMENT ORDER IS NOT ERR ONEOUS. IT IS A WELL SETTLED LAW THAT FOR INVOKING THE PROVISIONS O F SECTION 263, ORDER OF ASSESSING OFFICER SHOULD BE ERRONEOUS IN S O FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE HONBL E SUPREME COURT OF INDIA IN THE CASE OF CIT VS. MAX INDIA LTD., REPORTED AS 295 ITR 282 (SC) HAS HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUENC E OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. I.T.A. NO. 1011/MDS/2013 8 IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE S UCCEEDS AND THE IMPUGNED ORDER PASSED BY THE CIT IS SET ASI DE. ORDER PRONOUNCED ON THURSDAY, THE 29 TH AUGUST, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 29 TH AUGUST, 2013 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR