SH. SANJAY BAIRATHI , JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JAIPUR

ITA 1343/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9487 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K GUPTA CIT DHK
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Search and seizure; Salary income; Deemed to accrue or arise in india; Retrospective amendment; Question of law; Cost of acquisition; Fair market value; Surrender of tenancy right; Retraction; Set aside
• Section: 69C; 143(3); 133A; 69B; 68; 69; 56; 132

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 1343/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14. SHRI SANJAY BAIRATHI, 4/193, JAWAHAR NAGAR, JAIPUR. CUKE VS. THE ACIT, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABFPB 2269 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06.06.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13/06/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 19 TH SEPTEMBER, 2018 OF LD. CIT (A)-4, JAIPUR FOR THE AS SESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 4,22,710/- BY IGNORING THE FACT THA T INVESTMENT IN GOLD BULLION HELD AS STOCK IN TRADE FOR WHICH ASSES SEE SURRENDERED RS. 71,57,787/- AND ALSO CONSIDERED SUC H VALUE IN THE PROFIT & LOSS ACCOUNT BUT AS IT REMAINED IN THE STOCK IN THE YEAR END AND VALUED AT COST OR MARKET PRICE WHICHEV ER IS LOWER AT RS. 67,35,077/-, THE RESULTANT LOSS OF RS. 4,22, 710/- IS ALLOWABLE IN COMPUTING THE INCOME. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DIRECTING THE AO TO EXAMINE ASSESSEES CLAIM OF SET OFF OF LOSS OF R S. 4,22,710/- AGAINST THE VALUE OF BULLION OF RS. 71,57,787/- SUR RENDERED IN SEARCH EVEN WHEN CIT (A) HAS NO SUCH POWER AS PER S ECTION 251 OF THE IT ACT, 1961. 2 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. 3. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL. 4. NECESSARY COST BE AWARDED TO THE ASSESSEE. 2. THERE WAS A SEARCH AND SEIZURE ACTION UNDER SECT ION 132 OF THE IT ACT CARRIED OUT IN CASE OF MOTISONS GROUP ON 31 ST OCTOBER, 2012 OF WHICH THE ASSESSEE IS A FAMILY MEMBER. DURING THE COURSE OF SEARCH AND SEI ZURE ACTION, CASH, JEWELLERY, VALUEABLE, STOCK-IN-TRADE AND OTHER DOCUMENTS WERE FOUND AND SEIZED FROM THE PREMISES OF THE MEMBERS OF THE MOTISONS GROUP. IN T HE STATEMENT RECORDED UNDER SECTION 132(4) OF THE IT ACT, THE ASSESSEE HAS SURR ENDERED AN AMOUNT OF RS. 71,57,787/- ON ACCOUNT OF THE VALUE OF GOLD BULLION FOUND DURING THE SEARCH NOT RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE FIL ED HIS RETURN OF INCOME ON 19.07.2013 DECLARING TOTAL INCOME AT RS. 73,37,890/ - AFTER REDUCING A SUM OF RS. 4,22,710/- BEING THE DIMINUTION OF CLOSING STOCK OF BULLION FOUND DURING THE COURSE OF SEARCH DUE TO DECREASE IN THE MARKET PRICE AS ON 31 ST MARCH, 2013 IN COMPARISON TO THE PRICE PREVAILING AS ON 31 ST OCTOBER, 2012 THE DATE OF SEARCH. THUS THE AO NOT ED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF LOSS OF RS. 4,22,710/- AGAINST THE SURRENDERED INCOME WHICH IS NOT PERMISSIBLE AS PER THE PROVISIONS OF SECTION 115BBE (1)(A) OF THE IT ACT. ACCORDINGLY, THE AO MADE THE ADDITION OF THE SAID AMOUNT OF RS. 4,22,710/- TO THE INCOME OF THE ASSESSEE. ON A PPEAL, THE LD. CIT (A) HAS CONFIRMED THE ACTION OF THE AO BY REFERRING THE SAI D PROVISIONS OF SECTION 115BBE OF THE IT ACT. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE AO HAS DISALLOWED THE CLAIM OF LOSS DUE TO DECREASE IN THE MARKET PRICE OF THE GOLD BULLION 3 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. ON THE GROUND THAT THE SAID BULLION FOUND AT THE TI ME OF SEARCH IS NOT STOCK-IN-TRADE OF THE ASSESSEE AND FURTHER AS PER PROVISIONS OF SE CTION 115BBE(1)(A), NO CLAIM OF DEDUCTION IS ALLOWABLE AGAINST THE SURRENDERED INCO ME. THE LD. A/R HAS THUS SUBMITTED THAT DURING SEARCH, GOLD WEIGHING 2279.55 GMS VALUED AT RS.71,57,787/- WAS FOUND AND SEIZED FROM THE RESIDENCE OF ASSESSEE . THE RATE OF GOLD AS ON DATE OF SEARCH (31.10.2012) IS RS.3,140/- PER GRAM. THE ASS ESSEE WHILE PREPARING HIS BOOKS OF ACCOUNTS, INCORPORATED THE GOLD SO FOUND IN HIS STOCK AS ON 31.10.2012. THEREAFTER, AS ON 31.03.2013, THE CLOSING STOCK WAS VALUED AT RS.67,49,748/- AS THE RATE OF GOLD AS ON THAT DATE WAS RS.2,961/- PER GRA M. THIS RESULTED IN LOSS OF RS.4,08,039/- (71,57,787- 67,49,748) AS THE CLOSING STOCK IS TO BE VALUED AT COST OR FMV WHICHEVER IN LOWER. THUS, THE ASSESSEE HAS CORR ECTLY INCLUDED THE UNDISCLOSED GOLD IN HIS RETURN AND HAS NOT MADE ANY RETRACTION. THE DIFFERENCE IS ONLY BECAUSE THE RATE OF GOLD AS ON 31.03.2013 IS LOWER THAN THE RATE OF GOLD AS ON THE DATE OF SEARCH (31.10.2012). THE AO HAS INCORRECTLY INTERPR ETED THAT THE ASSESSEE HAS NOT DISCLOSED THE TOTAL GOLD SURRENDERED DURING THE SEA RCH. THEREFORE THE VALUATION OF 2279.550 GMS GOLD @ RS.2961/- I.E., RS.67,49,748/- IS AS PER LAW. THUS THE REDUCTION IN THE VALUE OF THE STOCK IS DUE TO REDUC TION IN THE MARKET PRICE OF THE GOLD AS ON 31.03.2013. HENCE, THE ASSESSEE HAS CORRECTLY VALUED THE STOCK AT MARKET PRICE. ACCORDINGLY, LOSS INCURRED BY THE ASSESSEE I S ALLOWABLE AS BUSINESS LOSS. THE LD. A/R FURTHER SUBMITTED THAT THE AO HAS OBSERVED THAT THE GOLD BULLION FOUND IN SEARCH CANNOT BE TREATED AS STOCK-IN-TRADE IN AS MUCH AS A SSESSEE IN SEARCH ADMITTED THAT IT IS HIS UNDISCLOSED INVESTMENT, THE SAME WAS FOUND I N THE BEDROOM OF THE ASSESSEE AND NO PERSON HAVING BUSINESS OF GEMS & JEWELLERY W ILL KEEP HIS STOCK-IN-TRADE AT HOME. THESE OBSERVATIONS ARE ONLY ON SURMISES & CON JECTURES. THE PURCHASES MADE 4 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. ARE ALWAYS AN INVESTMENT IN BUSINESS AND WHEN A PER SON IS IN THE BUSINESS OF JEWELLERY, IT IS NATURAL TO KEEP THE STOCK OF GOLD BULLION AT RESIDENCE FOR SECURITY PURPOSE. THEREFORE, THE OBSERVATION OF THE AO IN NO T CONSIDERING THE INVESTMENT IN GOLD BULLION AS STOCK-IN-TRADE IS INCORRECT PARTICU LARLY WHEN HE HAS NOT DISTURBED THE INCOME FROM BUSINESS DECLARED IN THE RETURN AT RS.6 7,49,074/- WHICH INCLUDES THE VALUE OF GOLD BULLION FOUND IN SEARCH AND REMAINING IN STOCK AT RS.67,49,748/-. AS PER THE SCHEME OF THE ACT AND THE ACCOUNTING PRINCI PLE, WHERE ASSESSEE HAS MADE INVESTMENT IN PURCHASE OF STOCK AND ITS VALUE HAS D ECLINED AT THE YEAR END, THE LOSS ARISING DUE TO SUCH DECLINE IS A BUSINESS LOSS AND IS ALLOWABLE IN COMPUTING THE INCOME UNDER THE HEAD 'PROFITS & GAINS FROM BUSINES S'. THIS IS NOT APPRECIATED BY THE LD. CIT(A) WHILE CONFIRMING THE ADDITION THOUGH HE HAS SET ASIDE THIS ISSUE TO THE AO TO EXAMINE THE CLAIM AND ALLOW IF PERMISSIBLE AS PE R LAW. IT MAY BE NOTED THE U/S 251(1)(A) OF THE ACT, THE CIT(A) HAS NO POWER TO SE T ASIDE AN ISSUE. THEREFORE, THE DIRECTION GIVEN BY HIM TO THE AO TO EXAMINE THE CLA IM AND ALLOW IF PERMISSIBLE AS PER LAW IS BAD IN LAW AND ON THIS GROUND ITSELF THE APP EAL OF THE ASSESSEE BE ALLOWED. OTHERWISE ALSO, WHEN THE LOSS HAS ARISEN DUE TO VAL UATION OF STOCK, THE SAME IS REQUIRED TO BE SET-OFF AGAINST THE UNDISCLOSED INCO ME TAXABLE U/S 115BBE AS HELD BY THE HON'BLE ITAT IN CASE OF M/S SANJAY BAIRATHI GEM S LIMITED IN ITA NO. 157/JP/2017 DATED 08.08.2017. OTHERWISE ALSO, THE ADDITION MADE BY THE AO AT RS. 4,22,710/- IS INCORRECT IN AS MUCH AS REDUCTION IN THE VALUE OF INVESTMENT DUE TO VALUATION OF STOCK IS ONLY RS. 4,08,039/- ( 71,57,7 87-67,49,748). 4. ON THE OTHER HAND, THE LD. D/R HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT APART FROM THE BULLION FOU ND DURING THE SEARCH AND SEIZURE, THERE WAS NO TRADING BY THE ASSESSEE IN BU LLION AND, THEREFORE, ONLY FOR 5 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. TAKING THE BENEFIT OF REDUCTION IN THE GOLD PRICE A T THE END OF THE YEAR THE ASSESSEE HAS CLAIMED THE GOLD FOUND DURING THE SEARCH AS STO CK-IN-TRADE. THUS THE LD. CIT D/R HAS CONTENDED THAT THE AMENDMENT TO THE PROVISI ONS OF SECTION 115BBE IS CLARIFICATORY IN NATURE AND THERE IS A SPECIAL PROV ISION FOR NOT ALLOWING ANY LOSS TO BE SET OFF AGAINST THE SAID INCOME. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT IN THE STATEMENT RECORDED UNDE R SECTION 132(4), THE ASSESSEE HAS EXPLAINED THAT HE IS DOING TRADING IN BULLION. FURTHER, AS PER THE TRADING ACCOUNT FOR THE YEAR UNDER CONSIDERATION, APART FROM THE GO LD FOUND DURING THE SEARCH, THE ASSESSEE HAS SHOWN SOME TRANSACTIONS OF PURCHASE AN D SALE OF GOLD. THOUGH THERE WAS NO OPENING STOCK AS ON 1 ST APRIL, 2012 BUT THE ASSESSEE HAS SHOWN THE CLOSING STOCK OF THE GOLD WHICH WAS FOUND DURING THE COURSE OF SEARCH. WE FURTHER NOTE THAT THE VALUATION OF THE GOLD FOUND DURING THE SEARCH W AS DONE AT THE PREVAILING MARKET RATE AS IT IS APPARENT FROM THE STATEMENT RECORDED UNDER SECTION 132(4) WHICH HAS BEEN REPRODUCED BY THE AO AT PAGE 3, IN REPLY TO QU ESTION NO. 18 AS UNDER :- IZ'U&18 RYKKH DS NKSJKU RYKKH NY DKS GOLD BULLION WEIGHING 2279-55 GM. VKIDS BEDROOM ESA IK;H X;H FTLDH INVENTORY ANNEXURE B CUK;H X;H GS RFKK MDR BULLION INVENTORY B DS SERIOR NO. 1 RFKK 18 IJ EK% WEIGHING 2226 GM. RFKK 53-55 GM. GSA MDR BULLION DK EWY;KADU FOHKKXH; VALUER US ANNEXURE B DS SERIAL NO- 1 RFKK 18 IJ FD;K GS FTLDS VUQLKJ MDR BULLION DH VKT FNUKAD DKS VALUATION : 71]57]787@& : 69]89]640@& + 1]68]147@& EK% GSA MDR BULLION DK LR;KIU VKIDH FU;FER [KKRK CFG;KSA ESA UGHA FD;K TK LDK RFKK BLDK DKSBZ FCY HKH RYKKH NY DKS UGHA F EYKA D`I;K LIV DJSA 6 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. FD D;KSA U MDR BULLION DKS VKIDH FOR OKZ 2012&13 DK V?KKSFKR FUOSK EKU RS GQ, VKIDH DJ ;KSX; VK; ESA TKSMK TK;SA ? MRRJ MIJKSDR BULLION DK ESJS IKL DKSBZ FCY UGHA GS RFKK BLDK LR;KIU ESA ESJH FU;FER [KKRK CFG;KSA LS DJOKUS ESA VLEFKZ GWA VR% MDR BULLION DH VKT FNUKAD DKS DHER : 71]57]787@& EKURS GQ, ESA VIUH EKU FLD KKFUR GSRQ ESJH LO;A DH DJ ;KSX; VK; FORR OKZ 2012&13 ESA DJKJKS I.K GSRQ TKSMUS DS FY;S LEFIZR DJRK GWAA THUS IT IS CLEAR THAT THE VALUE OF THE BULLION WAS TAKEN AS PER THE PREVAILING RATE ON THE DATE OF SEARCH. ONCE THE VALUE WAS COMPUTED AS PER THE PREVAILING RATE ON THE DATE OF SEARCH INSTEAD OF COST OF ACQUISITION OF TH E GOLD, THEN THE VALUE OF THE STOCK AS ON 31 ST MARCH,2013 HAS TO BE TAKEN AT COST OF ACQUISITION OR REALIZABLE VALUE WHICHEVER IS LESS.THE RATE OF GOLD WAS ADOPTED AT T HE TIME OF SEARCH @ 3140/- PER GRAM WHEREAS THE PREVAILING MARKET RATE AS ON 31 ST MARCH,2013 WAS RS.2961/- PER GRAM. THE PREVAILING RATE AS ON THE DATE OF SEARCH AND AS ON THE DATE OF CLOSING OF FINANCIAL ACCOUNTS IS NOT IN DISPUTE AND, THEREFORE , THE LOSS DUE TO REDUCTION IN THE MARKET PRICE OF GOLD IN RESPECT OF STOCK-IN-TRADE H AS TO BE ALLOWED. ONCE THE ASSESSEE HAS EXPLAINED DURING THE COURSE OF SEARCH AND SEIZURE THAT HE IS DOING THE BUSINESS OF TRADING IN BULLION THEN THE CLAIM OF TH E ASSESSEE TREATING THE SAME AS STOCK-IN-TRADE CANNOT BE REJECTED WITHOUT ANY CONTR ARY MATERIAL ON RECORD. THE DEPARTMENT HAS ACCEPTED ALL OTHER FACTS EXPLAINED B Y ASSESSEE AT TIME OF SEARCH AND SEIZURE ACTION AND VALUATION OF THE GOLD. THE COORD INATE BENCH OF THIS TRIBUNAL IN CASE OF ACIT VS. M/S. SANJAY BAIRATHI GEMS LTD. A G ROUP CONCERN OF THE ASSESSEE 7 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. VIDE ORDER DATED 08.08.2017 IN ITA NO. 157/JP/2017 HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN PARA 3 TO 15 AS UNDER :- 3. WE NOW REFER TO THE RELEVANT FINDINGS OF THE L D. CIT(A) WHICH ARE UNDER CHALLENGE BEFORE US. THE SAME ARE REPRODUCED AS UNDER:- 3.1.3 I HAVE DULY CONSIDERED ASSESSS SUBMISSION AN D CAREFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED UPON. THE FACTUAL POSITION OF THE CASE IS SUMMARIZED AS UNDER: A) A SURVEY OPERATION U/S 133A OF THE ACT WAS CARRI ED OUT ON 31.10.2012 AT THE BUSINESS PREMISES OF THE ASSESSEE , WHICH WAS CONVERTED INTO SEARCH U/S 132 OF THE ACT. IN THE SW ORN STATEMENT RECORDED ON OATH U/S 132(4) OF THE ACT, ASSESSEE, I N REPLY TO QUESTION NO. 21; ADMITTED THE EXCESS STOCK OF RS. 2,43,77,00 4/-. LATER ON, AFTER VERIFICATION, THE ASSESSEE VIDE LETTER DATED 4.02.2 013 EXPLAINED THAT THE CORRECT EXCESS STOCK FOUND IN SEARCH OPERATION WORKS OUT TO RS. 231.41 LAKH AS AGAINST THE AMOUNT OF RS. 243.77 LAK H WORKED OUT AT THE TIME OF SEARCH OPERATION. THE ASSESSEE FURTHER EXPLAINED THAT THE EXCESS STOCK IS DUE TO THE VALUATION OF THE STOCK A T MARKET PRICE INSTEAD OF THE PURCHASE PRICE. B) SWORN STATEMENT RECORDED U/S 132(4) OF LKTHE ACT ON 31.10.2012 OF SH SANJAY BAIRATHI IN ANSWER TO Q NO 16,17,18 & 19 AND ANSWER TO Q NO 21 OF STATEMENT RECORDED U/S 133A OF SH RAKESH K UMAR SHARMA, MANAGER OF M/S SANJAY BAIRATHI GEMS LD ARE REPRODUC ED HERE AS UNDER:- C) AO HAS MADE THE ADDITION OF RS. 2,31,41,217/= U/ S 69B OF THE ACT AND THEREAFTER INVOKED THE PROVISIONS OF SEC 115BBE OF THE ACT AND NOT ALLOWED SET OFF OF BUSINESS LOSS AGAINST THE AD DITION MADE. THE ASSESSEE VIDE LETTER DT 09.03.2015 HAS MADE SUBMISS ION BEFORE THE AO. FORM THE ABOVE, IT IS SEEN THAT ASSESSEE HAS SHOWN NET BUSINESS INCOME RS. 1,44,44,484/= IN ITR FILED ON 28/9/2013 VIDE ACKNOWLEDGMENT NO 799563911280913 FOR THE AY 2013-1 4. D) IT IS PERTINENT TO MENTION HERE THAT APPLICABILI TY OF SET OFF PROVISION AS CONTAINED IN SEC. 115BBE OF THE ACT IS EFFECTIVE FROM 1.4.2017. 8 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. E) AO HAS RELIED ON THE DECISION OF CASES DECIDED B Y HONBLE PUNJAB & HARYANA HIGH COURT IN KIM PHARMA PVT. LTD. (CITED S UPRA) AND LIBERTY INDIA (CITED SUPRA). IT IS SUBMITTED THAT IN CASE O F KIM PHARMA (P.) LIMITED REPORT IN 258 CTR 454 AMOUNTS SURRENDERED I N COURSE OF SURVEY WAS NOT REFLECTED IN BOOKS OF ACCOUNTS AND N O SOURCE FROM WHERE IT WAS DERIVED WAS DECLARED BY THE ASSESSEE A ND THEREFORE IT WAS HELD THAT THE SAME CANNOT BE ASSESSED AS BUSINE SS INCOME. IN THIS CASE THE DECISION OF KARNATAKA HIGH COURT IN C ASE OF CIT V. S.K. SRIGIRI AND BROS 298 ITR 13 RELIED BY THE ASSESSEE WAS DISTINGUISHED BY HOLDING THAT IN THIS CASE ASSESSEE RECEIVED ADDI TIONAL INCOME FROM BUSINESS ONLY. BUT IN THE PRESENT CASE ALSO THE EXC ESS STOCK OFFERED IN SURVEY IS PART OF THE BUSINESS INCOME. THE EXCESS S TOCK IS DETERMINED BY VALUING THE BUSINESS STOCK AT CURRENT PRICE INST EAD OF THE PURCHASE PRICE. NOTHING WAS BROUGHT TO SUGGEST THAT THIS WAS NOT A REGULAR ITEM OF THE STOCK DEALT BY THE ASSESSEE. IN VIEW OF THIS , IT IS SUBMITTED THAT THE CASE LAW RELIED BY THE AO IS NOT APPLICABLE. F) ASSESSEE HAS RELIED ON THE DECISION OF FOLLOWING FAVOURABLE CASES: (I) CHOKSI HIRALAL MAGANLAL (ITAT)(AHMADABAD) (II) FASHION WORLD (ITAT) (AHMADABAD) (III) RAMNARAYAN BIRLA (ITAT JAIPUR) IN CASE OF CHOKSI HIRALAL MAGANLAL (CITED SUPRA) HO NBLE ITAT BENCH AHMADABAD HAS HELD THAT EXCESS STOCK FOUND DURING T HE SURVEY IS NOT SEPARATELY AND CLEARLY IDENTIFIABLE BUT IS PART OF MIXED LOTS OF STOCK FOUND AT THE PREMISES WHICH INCLUDED DECLARED STOCK AS PER BOOKS AND ALSO THE EXCESS STOCK AS COMPUTED BY THE AUTHORIZED OFFICER, THE PROVISIONS OF SECTION 69B OF THE ACT CANNOT BE MADE APPLICABLE AS PRIMARY CONDITION FOR INVOKING THE PROVISIONS OF SE CTION 69A, 69B OF THE ACT IS THAT THE ASSET SHOULD BE SEPARATELY IDEN TIFIABLE AND IT SHOULD HAVE INDEPENDENT PHYSICAL EXISTENCE OF ITS OWN. SIN CE EXCESS STOCK IS A RESULT OF SUPPRESSION OF PROFIT FROM BUSINESS OVE R THE YEARS AND HAS NOT BEEN KEPT IDENTIFIABLE SEPARATELY BUT IS THE PA T OF OVERALL PHYSICAL STOCK FOUND, THE INVESTMENT IN THE EXCESS STOCK HAS TO BE TREATED AS BUSINESS INCOME AS PER DETAILED REASONS GIVEN IN TH E CASE OF FASHION WORLD VS. ACIT ITA NO. 1634/AHD/2006 WHEREIN, THE H ONBLE TRIBUNAL HELD THAT, IF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY OR SEARCH AND DOES NOT HAVE ANY INDEPENDENT IDENTITY AS AN AS SET BUT AS MIXED PART OF OVERALL STOCK FOUND IN THE SURVEY/SEARCH TH EN SUCH EXCESS STOCK WOULD REPRESENT BUSINESS INCOME ONLY. FURTHER, IN CASE OF THE HONBLE ITAT BENCH JAIPUR I N CASE OF DCIT V. RAMNARAYAN BIRLA 482/JP/2015 DATED 30.09.2016 IN TH E SIMILAR FACTS 9 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. HELD THAT THE EXCESS STOCK IS TO BE ASSESSED AS PAR T OF THE NORMAL STOCK AND TO BE TAXED UNDER THE HEAD INCOME FROM BU SINESS. BY FOLLOWING THE DECISION OF COORDINATE BENCH IN THE C ASE OF CHOKSHI HIRALAL MAGANLAL VS. DCIT, 141 TTJ (AHD.) 1 HAS HEL D THAT IN A CASES WHERE SOURCE OF INVESTMENT/EXPENDITURE IS CLEARLY I DENTIFIABLE AND ALLEGED UNDISCLOSED ASSET HAS NO INDEPENDENT EXISTE NCE OF ITS OWN OR THERE IS NO SEPARATE PHYSICAL IDENTITY OF SUCH INVE STMENT/EXPENDITURE THEN FIRST WHAT IS TO BE TAXED IS THE UNDISCLOSED B USINESS RECEIPT INVESTED IN UNIDENTIFIABLE UNACCOUNTED ASSET AND ON LY ON FAILURE IT SHOULD BE CONSIDERED TO BE TAXED UNDER SECTION 69 O N THE PREMISES THAT SUCH EXCESS INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT AND ITS NATURE AND SOURCE IS NOT IDENTIFIABLE. ONCE SUCH EXCESS INVESTMENT IS TAXED AS UNDECLARED BUSINESS RECEIPT THEN TAXING IT FURTHER AS DEEMED INCOME UNDER SECTION 69 WOULD NOT BE NECESSARY. FROM THE ABOVE, IT IS SEEN THAT THE EXCESS STOCK FO UND DURING THE SEARCH OPERATION IS NOT SEPARATELY AND CLEARLY IDEN TIFIABLE BUT IS PART OF MIXED LOTS OF STOCK FOUND AT THE PREMISES WHICH INC LUDED DECLARED STOCK AS PER BOOKS AND ALSO THE EXCESS STOCK AS COM PUTED BY THE AUTHORIZED OFFICERS DURING THE SEARCH OPERATION AT THE PREMISE. SINCE EXCESS STOCK IS A RESULT OF SUPPRESSION OF PROFIT F ROM BUSINESS OVER THE YEARS AND HAS NOT BEEN KEPT IDENTIFIABLE SEPARATELY BUT IS THE PART OF OVERALL PHYSICAL STOCK FOUND, THE INVESTMENT IN THE EXCESS STOCK HAS TO BE TREATED AS BUSINESS INCOME. FURTHER, THE EXCESS STOCK SO FOUND IS PART OF THE REGULAR BUSINESS, THEREFORE, FOLLOWING DECISION OF HONBLE ITAT BENCH JAIPUR IN CASE OF RAM NARAYAN BIRLA (CIT ED SUPRA), THE SAME HAS TO BE TAXED UNDER THE BUSINESS INCOME. OTH ERWISE EVEN IF THE SAME IS TAXED U/S 115BBEOF THE ACT, THE PROVISI ONS OF NOT ALLOWING THE SET OFF HAS COME INTO EFFECT FROM 1.4.2017. 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ISSUE IN THIS GROUND IS UNDER WHICH HEAD THE UNEXPLAINED INV ESTMENT SHOULD BE TAXED. IN THIS CONNECTION IT WOULD BE RELEVANT TO REFER TO THE OVERALL SCHEME OF THE ACT WHICH IS AS UNDER:- A) SECTION 4 DEALS WITH CHARGE OF INCOME TAX. THIS SECTION PROVIDES THAT TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON SHALL BE CHARGED TO INCOME TAX AT THE RATE PROVIDED IN THE ACT. SECTION 5 PROVIDES TH AT TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A RESIDENT INCLUDE S ALL INCOME FROM WHATEVER SOURCE DERIVED. B) CHAPTER IV DEALS WITH THE COMPUTATION OF THE TOT AL INCOME. SECTION 14 OF THIS CHAPTER DEALS WITH THE HEADS OF INCOME. THI S SECTION READ AS UNDER:- 10 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. SAVE AS OTHERWISE PROVIDED BY THIS ACT, ALL INCOME SHALL, FOR THE PURPOSES OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME, BE CLASSIFIED UNDER THE FOLLOWING HEADS OF INCOME:- A.SALARIES. B.[***] C.INCOME FROM HOUSE PROPERTY. D.PROFITS AND GAINS OF BUSINESS OR PROFESSION. E.CAPITAL GAINS. F.INCOME FROM OTHER SOURCES. C) CHAPTER V DEALS WITH INCLUSION IN THE TOTAL INCO ME OF AN ASSESSEE, INCOME OF OTHER PERSONS AND CHAPTER VI DEALS WITH AGGREGAT ION OF THE TOTAL INCOME AND SET OFF OR CARRY FORWARD OF LOSSES. SECTION 69B FALLS IN CHAPTER VI. AS PER THIS SECTION WHERE IN ANY FINANCIAL YEAR ASSESSEE H AS MADE INVESTMENT OR IS FOUND TO BE OWNER OF ANY VALUABLE ARTICLE ETC. WHIC H IS NOT RECORDED IN THE BOOKS OF ACCOUNTS OR FOR WHICH NO EXPLANATION OR SA TISFACTORILY EXPLANATION IS GIVEN, SUCH AMOUNT MAY BE DEEMED TO BE THE INCOME O F THE ASSESSEE FOR SUCH FINANCIAL YEAR. D) FROM THE PLAIN READING OF ALL THESE PROVISIONS I T IS EVIDENT THAT WHATEVER INCOME IS INCLUDED IN THE TOTAL INCOME, THE SAME HA S TO BE CLASSIFIED UNDER THE FIVE HEADS OF INCOME AS PROVIDED IN SECTION 14. THEREFORE, ANY CREDIT IN THE BOOKS OF ACCOUNTS WHICH IS NOT SATISFACTORILY E XPLAINED OR ANY INVESTMENT WHICH IS NOT FOUND RECORDED OR OTHERWISE EXPLAINED AND TAXED U/S 68, 69, 69A, 69B OR 69C HAS TO BE TAXED UNDER ANY ONE OF TH E ABOVE FIVE HEADS. IF SUCH INCOME CANT BE LINKED TO ANY OF THE FIRST FOU R HEADS AS PROVIDED IN SECTION 14, IT HAS TO BE ASSESSED UNDER THE FIFTH H EAD I.E. INCOME FROM OTHER SOURCES. SECTION 56 (1) ALSO PROVIDES THAT INCOME OF EVERY K IND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS HEA D SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCE S, IF IT IS NOT CHARGEABLE TO INCOME TAX UNDER ANY OF THE HEADS SPE CIFIED IN SECTION 14, ITEM A TO E THUS EVEN AN INCOME ASSESSABLE UNDER SECTION 69B H AS TO BE GIVEN A SPECIFIC HEAD IN TERMS OF SECTION 14 AND IN CASE IT CANT BE GIVEN ANY SPECIFIC 11 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. HEAD AS PER ITEM A TO E OF SECTION 14, IT HAS TO BE GIVEN THE RESIDUARY HEAD I.E. ITEMS F OF SECTION 14. E) IT MAY ALSO BE NOTED THAT CHAPTER XII OF THE ACT PROVIDES FOR DETERMINATION OF THE TAX IN CERTAIN SPECIAL CASES. EVEN WHEN TAX IS TO BE CHARGED ON CERTAIN INCOME IN THIS CHAPTER AT A SPECIFIC RATE, STILL SU CH INCOME HAS TO BE CLASSIFIED UNDER ANY ONE OF THE HEADS PROVIDED IN SECTION 14. FOR EXAMPLE SHORT TERM CAPITAL GAIN U/S 111A IN CERTAIN CASES IS CHARGED @ 15%, LONG TERM CAPITAL GAIN U/S 112 IS CHARGED @20%, WINNING FROM LOTTERIE S, CROSS WORD PUZZLES ETC CHARGEABLE TO TAX @30%, STILL FOR THE PURPOSE OF IN CLUSION OF SUCH INCOME IN THE TOTAL INCOME OF SUCH ASSESSEE, A SPECIFIC HEAD IN TERMS OF SECTION 14 HAS TO BE GIVEN. F) SECTION 14 STARTS WITH THE WORDS SAVE AS OTHERWISE PROVIDED BY THIS ACT, ALL INCOME WOULD BE CLASSIFIED UNDER THE 5 HEADS OF INCOME MENTIONED THEREIN. THE ACT HAS NOT PROVIDED ANY HEAD OF INCOM E OTHER THAN THESE 5 HEADS OF INCOME. SECTION 69B FALLS IN CHAPTER VI WH ICH IS TITLED AS AGGREGATION OF INCOME. THEREFORE INCOME FALLING U/S 68, 69, 69A , 69B, 69C AND 69D HAVE TO BE AGGREGATED WITH ANY OF THE 5 HEADS OF INCOME MENTIONED IN SECTION 14. 4.1 IN THIS BACKGROUND OF THE SCHEME OF THE ACT, TH E QUESTION WHICH ARISES FOR THE DETERMINATION IS THAT UNDER WHICH HE AD OF INCOME THE EXCESS STOCK/INVESTMENT FOUND IN SEARCH AND OFFERED BY THE ASSESSEE FOR TAX IS TO BE ASSESSED. ACCORDING TO THE ASSESSEE SUCH EXCESS STO CK/INVESTMENT IS A BUSINESS STOCK/INVESTMENT WHICH HAS ARISEN OUT OF T HE UNRECORDED BUSINESS ACTIVITY OF THE ASSESSEE AND THEREFORE THE SAME NEE DS TO BE ASSESSED UNDER THE HEAD PROFIT & GAIN OF BUSINESS. FOR THIS PURPOS E RELIANCE IS PLACED ON THE DECISION OF ITAT AHMEDABAD BENCH IN CASE OF CHOKSHI HIRALAL MAGANLAL VS. DCIT 141 TTJ (AHD) 1 DT. 21/01/2011 WHEREIN THE TRIBUNAL HELD THAT EXCESS STOCK FOUND DURING THE SURVEY IS NOT SEPARATELY AND CLEARLY IDENTIFIABLE BUT IS PART OF MIXED LOTS OF STOCK FOUND AT THE PREMISES W HICH INCLUDED DECLARED STOCK AS PER BOOKS AND ALSO THE EXCESS STOCK AS COM PUTED BY THE SURVEY OFFICERS, THE PROVISIONS OF SECTION 69B CANNOT BE M ADE APPLICABLE AS PRIMARY CONDITION FOR INVOKING THE PROVISIONS OF SECTION 69 A, 69B IS THAT THE ASSET 12 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. SHOULD BE SEPARATELY IDENTIFIABLE AND IT SHOULD HAV E INDEPENDENT PHYSICAL EXISTENCE OF ITS OWN. SINCE EXCESS STOCK IS A RESUL T OF SUPPRESSION OF PROFIT FROM BUSINESS OVER THE YEARS AND HAS NOT BEEN KEPT IDENTIFIABLE SEPARATELY BUT IS THE PART OF OVERALL PHYSICAL STOCK FOUND, TH E INVESTMENT IN THE EXCESS STOCK HAS TO BE TREATED AS BUSINESS INCOME AS PER D ETAILED REASONS GIVEN IN THE CASE OF FASHION WORLD VS. ACIT ITA NO. 1634/AHD /2006 WHEREIN, THE TRIBUNAL HELD THAT, IF EXCESS STOCK FOUND DURING TH E COURSE OF SURVEY OR SEARCH AND DOES NOT HAVE ANY INDEPENDENT IDENTITY A S AN ASSET BUT AS MIXED PART OF OVERALL STOCK FOUND IN THE SURVEY/SEARCH TH EN SUCH EXCESS STOCK WOULD REPRESENT BUSINESS INCOME ONLY. 4.2 RECENTLY THE HONBLE ITAT JAIPUR BENCH IN CASE OF DCIT VS. RAMNARAYAN BIRLA 482/JP/2015 DATED 30.09.2016 IN TH E SIMILAR FACTS HELD THAT THE EXCESS STOCK IS TO BE ASSESSED AS PART OF THE N ORMAL STOCK AND TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS. THE RELE VANT FINDING OF THE ITAT IS AS UNDER:- WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. UNDISPUTED FACTS EMERGED FROM THE RECORD THAT AT THE TIME OF SURVEY EXCESS STOCK WAS FOUND. IT IS ALSO NOT DI SPUTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF JEWELLERY. D URING THE COURSE OF SURVEY EXCESS STOCK VALUING RS. 77,66,887/- WAS FOU ND IN RESPECT OF GOLD AND SILVER JEWELLERY. THE COORDINATE BENCH IN THE CASE OF CHOKSHI HIRALAL MAGANLAL VS. DCIT, 131 TTJ (AHD.) 1 HAS HEL D THAT IN A CASES WHERE SOURCE OF INVESTMENT/EXPENDITURE IS CLEARLY I DENTIFIABLE AND ALLEGED UNDISCLOSED ASSET HAS NO INDEPENDENT EXISTE NCE OF ITS OWN OR THERE IS NO SEPARATE PHYSICAL IDENTITY OF SUCH INVE STMENT/EXPENDITURE THEN FIRST WHAT IS TO BE TAXED IS THE UNDISCLOSED B USINESS RECEIPT INVESTED IN UNIDENTIFIABLE UNACCOUNTED ASSET AND ON LY ON FAILURE IT SHOULD BE CONSIDERED TO BE TAXED UNDER SECTION 69 O N THE PREMISES THAT SUCH EXCESS INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT AND ITS NATURE AND SOURCE IS NOT IDENTIFIABLE. ONCE SUCH EXCESS INVESTMENT IS TAXED AS UNDECLARED BUSINESS RECEIPT THEN TAXING IT FURTHER AS DEEMED INCOME UNDER SECTION 69 WOULD NOT BE NECESSARY. THEREFORE, THE FIRST ATTEMPT OF THE ASSESSING AUTHO RITY SHOULD BE TO 13 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. FIND OUT LINK OF UNDECLARED INVESTMENT/EXPENDITURE WITH THE KNOWN HEAD, GIVE OPPORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS AND IF IT IS SATISFACTORILY ESTABLISHED THEN FIRST SUCH INVESTME NT SHOULD BE CONSIDERED AS UNDECLARED RECEIPT UNDER THAT PARTICU LAR HEAD. IT IS OBSERVED THAT THERE IS NO CONFLICT WITH THE DECISIO N OF HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHD. HAJI HASAN (S UPRA) WHERE INVESTMENT IN AN ASSET OR EXPENDITURE IS NOT IDENTI FIABLE AND NO NEXUS WAS ESTABLISHED THEN WITH ANY HEAD OF INCOME AND TH US WAS NOT AVAILABLE FOR SET OFF AGAINST ANY LOSS UNDER ANY OT HER HEAD. THEREFORE, THE HONBLE COORDINATE BENCH HELD THAT W HERE ASSET IN WHICH UNDECLARED INVESTMENT IS SOUGHT TO BE TAXED I S NOT CLEARLY IDENTIFIABLE OR DOES NOT HAVE INDEPENDENT IDENTITY BUT IS INTEGRAL AND INSEPARABLE (MIXED) PART OF DECLARED ASSET, FALLING UNDER A PARTICULAR HEAD, THEN THE DIFFERENCE SHOULD BE TREATED AS UNDE CLARED BUSINESS INCOME EXPLAINING THE INVESTMENT. IN THE PRESENT CA SE THE EXCESS STOCK WAS PART OF THE STOCK. THE REVENUE HAS NOT PO INTED OUT THAT THE EXCESS STOCK HAS ANY NEXUS WITH ANY OTHER RECEIPTS. THEREFORE, WE DO NOT FIND ANY FAULT WITH THE DECISION OF THE LD. CIT (A) DIRECTING THE AO TO TREAT THE SURRENDERED AMOUNT AS EXCESS STOCK QUA THE EXCESS STOCK FOUND. 4.3 THE AO RELIED UPON THE DECISION OF HONBLE PUNJ AB AND HARYANA HIGH COURT IN CASE OF KIM PHARMA (P.) LIMITED VS. CIT 25 8 CTR 454. IN THIS CASE THE AMOUNT SURRENDERED IN COURSE OF SURVEY WAS NOT REFLECTED IN BOOKS OF ACCOUNTS AND NO SOURCE FROM WHERE IT WAS DERIVED WA S DECLARED BY THE ASSESSEE AND THEREFORE IT WAS HELD THAT THE SAME CA NT BE ASSESSED AS BUSINESS INCOME. IN THIS CASE THE DECISION OF HONB LE KARNATAKA HIGH COURT IN CASE OF CIT VS. S.K. SRIGIRI AND BROS 298 ITR 13 RE LIED BY THE ASSESSEE WAS DISTINGUISHED BY HOLDING THAT IN THIS CASE ASSESSEE RECEIVED ADDITIONAL INCOME FROM BUSINESS ONLY. IN THE PRESENT CASE ALSO THE EXCESS STOCK OFFERED I N SURVEY IS PART OF THE BUSINESS INCOME. THE EXCESS STOCK IS DETERMINED BY VALUING THE BUSINESS STOCK AT CURRENT PRICE INSTEAD OF THE PURCHASE PRIC E. NOTHING WAS BROUGHT TO 14 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. SUGGEST THAT THIS WAS NOT A REGULAR ITEM OF THE STO CK DEALT BY THE ASSESSEE. HENCE THE CASE LAWS RELIED BY THE AO IS NOT APPLICA BLE. 4.4 THE AO FURTHER REFERRED TO THE PROVISIONS OF SE CTION 115BBE AND HELD THAT NO DEDUCTION OR SET OFF OF BUSINESS LOSS WILL BE ALLOWABLE. THE PROVISIONS OF SECTION 115BBE READS AS UNDER:- (1) WHERE THE TOTAL INCOME OF AN ASSESSEE INCLUDES ANY INCOME REFERRED TO IN SECTION 68, SECTION 69, SECTION 69A, SECTION 69B , SECTION 69C OR SECTION 69D, THE INCOME-TAX PAYABLE SHALL BE THE AGGREGATE OF (A) THE AMOUNT OF INCOME-TAX CALCULATED ON INCOME R EFERRED TO IN SECTION 68, SECTION 69, SECTION 69A, SECTION 69B, SECTION 6 9C OR SECTION 69D, AT THE RATE OF THIRTY PER CENT; AND (B) THE AMOUNT OF INCOME-TAX WITH WHICH THE ASSESSE E WOULD HAVE BEEN CHARGEABLE HAD HIS TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME REFERRED TO IN CLAUSE (A). (2) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE SHALL BE ALLOWED TO TH E ASSESSEE UNDER ANY PROVISION OF THIS ACT IN COMPUTING HIS INCOME REFER RED TO IN CLAUSE (A) OF SUB- SECTION (1). FROM THE ABOVE PROVISIONS, IT CAN BE NOTED THAT NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE SHALL BE ALLOWED. IT N OWHERE SAYS THAT SET OFF OF THE LOSS WITH ANY OTHER INCOME WILL NOT BE ALLOWED. 5.5 IT MAY BE NOTED THAT SUB-SECTION 2 TO SECTION 1 15BBE IS AMENDED W.E.F. 01.04.2017 TO INCLUDE THEREIN THE WORDS SET OFF OF LOSS . THE AMENDED SUB-SECTION 2 W.E.F AY 2017-18 IS AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE OR SET OFF OF ANY LOSS SHALL BE ALLOWED TO THE ASSESSEE UNDER ANY PROVISION OF THIS ACT IN COMPUTI NG HIS INCOME REFERRED TO IN CLAUSE (A) OF SUB-SECTION (1). IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF AMEN DMENT, THE AMENDMENT TO SECTION 115BBE IS EXPLAINED AND HAS BE EN STATED THAT THIS 15 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2017 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2017-18 AND SUBSEQU ENT YEARS. FROM THE ABOVE IT CAN BE NOTED THAT THIS AMENDMENT IS MADE APPLICABLE FOR AY 2017-18 AND SUBSEQUENT YEARS. IT IS A SETTLED PR OPOSITION OF LAW THAT ANY AMENDMENT WHICH INCREASES THE TAX BURDEN OF THE ASS ESSEE HAS TO BE CONSIDERED PROSPECTIVE AND NOT RETROSPECTIVE. IN TH E CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD. 367 ITR 466/ 109 DTR 33, THE SUP REME COURT AT PARA 32 & 33 HELD THAT LEGISLATIONS WHICH MODIFY ACCRUED RI GHTS OR WHICH IMPOSE OBLIGATIONS OR IMPOSE NEW DUTIES OR ATTACH A NEW DI SABILITY HAVE TO BE TREATED AS PROSPECTIVE UNLESS THE LEGISLATIVE INTENT IS CLE ARLY TO GIVE THE ENACTMENT A RETROSPECTIVE EFFECT. IT FURTHER HELD IN PARA 39(C) THAT IF THE CONCERNED PROVISION OF THE TAXING STATUTE IS AMBIGUOUS AND VA GUE AND IS SUSCEPTIBLE TO TWO INTERPRETATIONS, THE INTERPRETATION WHICH FAVOU RS THE SUBJECTS, AS AGAINST THERE THE REVENUE, HAS TO BE PREFERRED. THEREFORE , THE AMENDMENT TO SECTION 115BBE W.E.F. 01.04.2017 IS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION AND THUS, THE LD. CIT(A) CORRECTLY DI RECTED THE AO TO ALLOW THE SET OFF OF THE BUSINESS LOSS FOR THE YEAR AGAINST T HE INCOME OFFERED ON ACCOUNT OF EXCESS BUSINESS STOCK FOUND IN SEARCH. 4.6 THE ABOVE ISSUE IS ALSO CONSIDERED BY THE HONB LE ITAT VISHAKAPATNAM BENCH IN CASE OF PILLALALA RAMAKRISHN A RAO & ANR. VS. ACIT& ANR. 2016 ITL 4940 WHERE AT PARA 11 OF ITS ORDER, IT HELD AS UNDER: 11. THE CIT, ASSUMED JURISDICTION TO REVISE THE AS SESSMENT ORDER ON THE GROUND THAT THERE IS A LACK OF ENQUIRY ON THE PART OF THE A.O., IN EXAMINING THE ISSUE OF CASH FOUND DURING THE COURSE OF SEARCH AT THE TIME OF COMPLETION OF ASSESSMENT U/S 143(3) OF THE ACT. THE CIT WAS OF THE OPINION THAT THE A.O. HAS APPLIED INCORRECT PROVISIONS OF THE ACT, TO DEA L WITH CASH FOUND DURING THE COURSE OF SEARCH, AS AGAINST SEPARATE PROVISIONS PR OVIDED BY WAY OF SECTION 115BBE OF THE ACT. THE CIT FURTHER, OBSERVED THAT A S PER THE PROVISIONS OF SECTION 115BBE OF THE ACT, WHERE THE TOTAL INCOME O F AN ASSESSEE INCLUDES ANY INCOME REFERRED TO IN SECTION 68 TO 69D OF THE ACT, THEN NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION IN RES PECT OF ANY EXPENDITURE OR ALLOWANCE (OR SET OFF OF ANY LOSS) SHALL BE ALLOWED TO THE ASSESSEE UNDER ANY PROVISION OF THIS ACT, IN COMPUTING HIS INCOME REFE RRED TO IN CLAUSE (A) OF SUB 16 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. SECTION (1) OF SECTION 115 BBE OF THE ACT. THE CIT WAS OF THE OPINION THAT THE A.O. IGNORING THE PROVISIONS OF SECTION 115BBE OF T HE ACT, ACCEPTED INCOME DECLARED BY THE ASSESSEE UNDER THE NORMAL PROVISION S OF INCOME FROM PROFESSION AND FURTHER ALLOWED SET OFF OF BROUGHT F ORWARD LOSS FROM EARLIER YEARS, WHICH RENDER THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE DO N OT SEE ANY MERITS IN THE FINDINGS OF THE CIT FOR THE REASON THAT THE ASSESSE E RIGHT FROM THE BEGINNING CLAIMS THAT CASH FOUND DURING THE COURSE OF SEARCH REPRESENTS HIS PROFESSIONAL INCOME EARNED IN THE INDIVIDUAL CAPACITY FOR THE FI NANCIAL YEAR 2012-13, ACCORDINGLY INCLUDED CASH FOUND DURING COURSE OF SE ARCH AS HIS PROFESSIONAL INCOME FOR THE ASSESSMENT YEAR 2013-14 AND FILED RE TURNS OF INCOME. WE FURTHER NOTICED THAT THE ASSESSEE HAS ADMITTED ENTI RE CASH SEIZED DURING THE COURSE OF SEARCH AS HIS PROFESSIONAL INCOME WITHOUT THERE BEING ANY DEDUCTIONS TOWARDS EXPENDITURE, BUT, CLAIMED SET OF F OF BROUGHT FORWARD BUSINESS LOSS OF EARLIER YEARS AGAINST SUCH ADDITIO NAL INCOME. THE ALLEGATION OF THE CIT IS THAT WHEN ANY INCOME IS ADMITTED CONS EQUENT TO SEARCH PROCEEDINGS, NO DEDUCTIONS TOWARDS ANY EXPENDITURE OR ALLOWANCES OR SET OFF OF LOSS SHALL BE ALLOWED AGAINST SUCH INCOME. BUT, THE FACT IS THAT AS PER THE PROVISIONS OF SUB SECTION (2) OF SECTION 115BBE OF THE ACT, WHICH WAS AMENDED BY THE FINANCE ACT, 2016 W.E.F. 1.4.2017 WH ICH IS APPLICABLE FROM THE ASSESSMENT YEAR 2017-18 AND SUBSEQUENT YEARS, T HERE IS A BAR ON SET OFF OF LOSS FROM A.Y. 2017-18, HOWEVER, THERE IS NO BAR TO CLAIM SET OFF OF LOSS UP TO A.Y. 2016-17. THEREFORE, EVEN ASSUMING FOR A MOM ENT THAT THE A.O. HAS APPLIED INCORRECT PROVISIONS OF THE ACT, TO TAX CAS H FOUND DURING THE COURSE OF SEARCH, THE ASSESSEE CAN ALWAYS CLAIM SET OFF OF BR OUGHT FORWARD LOSS FROM EARLIER YEARS UP TO THE ASSESSMENT YEAR 2016-17, EV EN IF THE SAME HAS BEEN ADDED UNDER THE PROVISIONS OF SEC. 68 TO 69D OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE A. O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS THERE IS NO PREJUDICE IS CAUSED TO THE REVENUE. 5. THE LD. DR IS HEARD WHO HAS RELIED UPON THE ORD ER OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE AO HAS RIGHTLY INVOKED THE P ROVISIONS OF SECTION 69B OF THE ACT. FURTHER, HE SUBMITTED THAT THE PROVISI ONS OF SECTION 115BBE FORMS PART OF AND COMES UNDER CHAPTER-XII PROVIDING FOR D ETERMINATION OF RATE OF 17 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. TAX IN CERTAIN SPECIAL CASES AND ACCORDINGLY, QUANT IFICATION OF THE AMOUNT OF TAX. THE PROVISION OF SECTION 115BBE DOES NOT RELAT E TO THE COMPUTATION OF TOTAL INCOME. IT WAS SUBMITTED THAT FOR QUANTIFICAT ION OF TAX, IN RESPECT OF INCOME REFERRED IN THE SAID PROVISIONS, THE AMENDME NT BY THE FINANCE ACT 2016 WOULD NOT AFFECT THE COMPUTATION OF TOTAL INCO ME. HENCE, THE BUSINESS LOSSES IN THE INSTANT CASE CANNOT BE ALLOWED SET OF F AGAINST THE AMOUNT BROUGHT TO TAX UNDER SECTION 69B IN TERMS OF INVEST MENT IN UNDISCLOSED STOCK OF STONES AND JEWELLERY. 5.1 FURTHER, IN SUPPORT OF HIS CONTENTIONS, HE RELI ED UPON THE FOLLOWING DECISIONS: DHANUSH GENERAL STORES VS CIT (2012) 20 TAXMAN.COM 853 (CHHATTISGARH) RAZAKBHAI R. ARABIANI VS ITO (2013) 40 TAXMAN.COM 2 45 (GUJARAT) VIPUL KUMAR KIRITLAL SHAH VS ITO (2013) 33 TAXMAN.C OM 370 (GUJARAT) KRISHNAMEGH YARN INDUSTRIES VS ACIT (2016) 68 TAXMA N.COM 103 (GUJARAT) CIT VS KUWER FIBERS (P) LTD (2017) 33 TAXMAN.COM 34 5 (DEL) 6. PER CONTRA, THE LD AR DRAWN OUR REFERENCE TO TH E DECISION OF THE COORDINATE BENCH IN CASE OF SATISH KUMAR GOYAL VS J CIT (2016) 70 TAXMANN.COM 382 (AGRA) WHEREIN IT WAS HELD THAT BUS INESS LOSSES OF THE ASSESSEE COULD BE SET OFF UNDER SECTION 71 AGAINST THE INCOME ASSESSABLE UNDER SECTION 68 UNDER THE HEAD INCOME FROM OTHER SOURCES TAKING INTO CONSIDERATION THE CONFLICTING DECISIONS OF VARIOUS HIGH COURTS ON THE SUBJECT AND ALSO THE AMENDMENT MADE BY THE FINANCE ACT 2012 TO SECTION 115BBE IS PROSPECTIVE IN NATURE. HE ALSO DRAWN OUR REFERENCE TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS SHILPA DYEING & PRINTING MILLS (P) LTD (2013) 219 TAXMANN 279 (GUJARAT) FOR THE PROPOSITIO N THAT SECTION 71 PERMITS ASSESSEE TO SET OFF LOSS OTHER THAN OF CAPI TAL GAINS AGAINST INCOME FROM OTHER HEAD. IT WAS FURTHER SUBMITTED THAT IN THE SAID DECISION, THE GUJARAT HIGH COURT HAS TAKEN INTO CONSIDERATION ITS EARLIER DECISIONS RENDERED IN CASE OF FAKIR MOHMED HAJIHASAN VS CIT (247 ITR 290), THE DECISION OF DCIT VS RADHE DEVELOPERS INDIA LTD (329 ITR 1) AND DECISION OF MADRAS HIGH COURT IN CASE OF CIT VS CHENSING VENTURES (291 ITR 258). IT WAS FURTHER SUBMITTED THAT THE HONBLE PUNJAB & HARYANA HIGH CO URT IN CASE OF KIM PHARMA (P) LTD (258 CTR 454) HAS IN FACT RELIED ON THE DECISION OF GUJARAT 18 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. HIGH COURT IN CASE OF FAKIR MOHMED HAJIHASAN (SUPRA ) WHICH HAS SUBSEQUENTLY BEEN EXPLAINED IN SUBSEQUENT DECISION OF RADHE DEVELOPERS INDIA LTD (SUPRA). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, THE FACTUAL MATRIX AND VARIOUS DECISIONS RE LIED UPON BY BOTH THE PARTIES. THE ASSESSING OFFICER HAS BROUGHT TO TAX, UNDISCLOSED INVESTMENT IN EXCESS STOCK OF STONES, GOLD & JEWELLERY FOUND AND SURRENDERED DURING THE COURSE OF SEARCH PROCEEDINGS WHICH HAS NOT BEEN REC ORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, UNDER THE PROVISIONS OF S ECTION 69B READ WITH SECTION 115BBE OF THE ACT. FURTHER, THE ASSESSING OFFICER HAS NOT ALLOWED THE SET OFF OF BUSINESS LOSS OF RS 86,96,733 AGAINST TH E SAID INCOME OF RS 2,31,41,217 WHICH HAS BEEN BROUGHT TO TAX UNDER SEC TION 69B READ WITH SECTION 115BBE OF THE ACT. THE ASSESSING OFFICER HA S HOWEVER ALLOWED THE CARRY FORWARD OF SAID BUSINESS LOSS TO BE SET OFF I N THE SUBSEQUENT ASSESSMENT YEARS. THE FACT THAT THE BUSINESS LOSS HAS BEEN INCURRED DURING THE YEAR IS THUS NOT IN DISPUTE. THE LIMITED DISPU TE RELATES TO SET OFF OF SAID BUSINESS LOSS AGAINST THE INCOME WHICH HAS BEEN BRO UGHT TO TAX UNDER SECTION 69B READ WITH SECTION 115BBE OF THE ACT. 8. FIRSTLY, REGARDING THE CONTENTION OF THE LD CIT DR THAT THE PROVISIONS OF SECTION 115BBE COMES UNDER CHAPTER-XII PROVIDING FO R DETERMINATION OF RATE OF TAX IN CERTAIN SPECIAL CASES AND ACCORDINGLY, IT RELATES TO QUANTIFICATION OF THE AMOUNT OF TAX AND NOT TO THE COMPUTATION OF TOT AL INCOME AND THEREFORE, THE AMENDMENT BROUGHT IN BY THE FINANCE ACT 2016 WO ULD NOT AFFECT THE COMPUTATION OF TOTAL INCOME. IT WAS ACCORDINGLY CON TENDED THAT THE BUSINESS LOSSES IN THE INSTANT CASE CANNOT THEREFORE BE ALLO WED SET OFF AGAINST THE AMOUNT BROUGHT TO TAX UNDER SECTION 69B IN TERMS OF UNDISCLOSED INVESTMENT IN STOCK OF STONES, GOLD AND JEWELLERY. 9. IT IS NOTED THAT BY THE FINANCE ACT, 2016, AN AM ENDMENT HAS BEEN BROUGHT-IN IN SECTION 115BBE(2) WHEREIN IT HAS BEEN PROVIDED THAT NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO SET OFF OF ANY LOSS SHALL BE ALLOWED TO THE ASSESSEE UNDER ANY PROVISION OF THIS ACT IN COMPUTING HIS INCOME AS REFERRED TO CLAUSE (A) OF SUBSECTION (1) OF THE ACT. IF WE WERE TO ACCEPT THE CONTENTIONS OF THE LD CIT(DR), THE QUEST ION THAT ARISES IS WOULD THAT INTERPRETATION RENDER SUB-SECTION (2) OTIOSE AND WHAT WAS THE NECESSITY 19 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. FOR BRINGING IN THE SUBJECT AMENDMENT. THE INTENT OF THE LEGISLATURE HAS BEEN PROVIDED IN THE MEMORANDUM EXPLAINING THE SAID AMENDMENT WHICH READS AS UNDER: CURRENTLY, THERE IS UNCERTAINTY ON THE ISSUE OF SE T-OFF OF LOSSES AGAINST INCOME REFERRED IN SECTION 115BBE OF THE ACT. THE M ATTER HAS BEEN CARRIED TO JUDICIAL FORUMS AND COURTS IN SOME CASES HAS TAKEN A VIEW THAT LOSSES SHALL NOT BE ALLOWED TO BE SET-OFF AGAINST INCOME REFERRE D TO IN SECTION 115BBE. HOWEVER, THE CURRENT LANGUAGE OF SECTION 115BBE OF THE ACT DOES NOT CONVEY THE DESIRED INTENTION AND AS A RESULT THE MATTER IS LITIGATED. IN ORDER TO AVOID UNNECESSARY LITIGATION, IT IS PROPOSED TO AMEND THE PROVISIONS OF THE SUB- SECTION (2) OF SECTION 115BBE TO EXPRESSLY PROVIDE THAT NO SET OFF OF ANY LOSS SHALL BE ALLOWABLE IN RESPECT OF INCOME UNDER THE S ECTIONS 68 OR SECTION 69 OR SECTION 69A OR SECTION 69B OR SECTION 69C OR SECTIO N 69D. 10. IN LIGHT OF ABOVE, GIVEN THE FACT THAT THE AO H AS INVOKED THE PROVISIONS OF SECTION 11BBE IN THE INSTANT CASE, THE PROVISIONS O F SUB-SECTION (2) TO SECTION 11BBE ARE EQUALLY APPLICABLE. THE AMENDMENT BROUGH T IN BY THE FINANCE ACT, 2016 WHEREBY SET OFF OF LOSSES AGAINST INCOME REFERRED TO IN SECTION 69B HAS BEEN DENIED IS STATED CLEARLY TO BE EFFECTIVE F ROM 1 APRIL 2017 AND WILL ACCORDINGLY, APPLY TO ASSESSMENT YEAR 2017-18 ONWAR DS. ACCORDINGLY, FOR THE YEAR UNDER CONSIDERATION, THERE IS NO RESTRICTION T O SET OFF OF BUSINESS LOSSES AGAINST INCOME BROUGHT TO TAX UNDER SECTION 69B OF THE ACT. 11. FURTHER, THE MATTER COULD BE LOOKED AT FROM ANO THER PERSPECTIVE. THE PROVISIONS RELATING TO SET OFF OF LOSSES ARE CONTAI NED IN CHAPTER-VI RELATING TO AGGREGATION OF INCOME AND SET OFF OF LOSSES. WHENE VER LEGISLATURE DESIRES TO RESTRICT SET-OFF OF LOSS OR ALLOWANCE OF LOSS, IN A PARTICULAR MANNER, USUALLY, THE PROVISIONS ARE MADE IN CHAPTER-VI SUCH AS NON-ALLOW ANCE OF BUSINESS LOSS AGAINST SALARY INCOME AS PROVIDED IN SECTION 71(2A) , AND TREATMENT OF SHORT- TERM OR LONG-TERM CAPITAL LOSSES. THERE IS NO SPEC IFIC PROVISION WHICH RESTRICT SET OFF OF BUSINESS LOSSES AGAINST INCOME BROUGHT T O TAX UNDER SECTION 69B. INTERESTINGLY, BOTH SECTION 69B AND SECTION 71 FALL S UNDER THE SAME CHAPTER VI. IN THE ABSENCE OF ANY PROVISIONS IN SECTION 71 FALLING UNDER CHAPTER-VI 20 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. WHICH RESTRICT SUCH SET OFF, IN THE INSTANT CASE, S ET OFF OF BUSINESS LOSSES AGAINST INCOME BROUGHT TO TAX UNDER SECTION 69B CAN NOT BE DENIED. 12. NOW, WE REFER TO VARIOUS JUDICIAL PRONOUNCEMENT S QUOTED BY BOTH THE PARTIES. WE FIND THAT THE DECISION OF HONBLE GUJAR AT HIGH IN CASE OF FAKIR MOHMED HAJIHASAN (SUPRA) AND SUBSEQUENT DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF CHENSING VENTURES (SUPRA) ARE TWO EARLIEST DECISIONS ON THE SUBJECT WHERE THE HONBLE COURTS HAVE TAKEN A D IVERGENT VIEW IN THE MATTER. AS PER THE DECISION OF HONBLE GUJARAT HIG H COURT, THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT WOULD BE CONSIDER ED AS TOTAL INCOME OF THE PREVIOUS YEAR WITHOUT ALLOWING SET-OFF OF BUSIN ESS LOSS. AS PER MADRAS HIGH COURTS DECISION, THE ADDITION WOULD BE SET-OF F AGAINST THE BUSINESS LOSS AND THE BALANCE ADDITION, IF ANY, WOULD FORM PART O F THE TOTAL INCOME AND ATTRACT TAX. 13. IT IS NOTICED THAT THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS SHILPA DYEING & PRINTING MILLS (P) LTD (SUPRA) HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE WHERE THE SAID DIVERGEN T VIEW HAS BEEN RECONCILED. IN THAT DECISION, THE HONBLE HIGH COU RT HAS CONSIDERED ITS EARLIER DECISION RENDERED IN CASE OF FAKIR MOHMED HAJIHASAN (SUPRA) AS EXPLAINED IN ANOTHER DECISION IN CASE OF RADHE DEVELOPERS INDIA LTD (SUPRA) AND ALSO THE DECISION OF MADRAS HIGH COURT IN CASE OF CHENSING V ENTURES (SUPRA). IT WOULD THEREFORE TO RELEVANT TO REFER TO THE FACTS AND THE LEGAL PROPOSITION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT DECISION IN CASE OF SHILPA DYEING & PRINTING MILLS (P) LTD. FACTS OF THE CASE BRIEF FACTS ARE THAT, THE RESPONDENT-ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DYING AND PRINTING. DURING THE COURSE O F SCRUTINY FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER NOTI CED THAT IN A SURVEY ACTION CONDUCTED AT THE BUSINESS PREMISES OF THE AS SESSEE, IT HAD DECLARED A SUM OF RS. 100.98 LACS (ROUNDED OFF) ON ACCOUNT OF EXCESS STOCK. IN THE RETURN, THE ASSESSEE HAD SUGGESTED CURRENT YEAR'S L OSS AGAINST SUCH INCOME. ASSESSING OFFICER HOLDING A BELIEF THAT INCOME FROM UNLISTED SOURCE WOULD NOT FALL UNDER ANY OF THE HEADS OF THE INCOME, THE SAME HAS TO BE TAXED SEPARATELY, THE CURRENT LOSSES CANNOT BE SET OFF AG AINST SUCH INCOME. FINDINGS AND LEGAL PROPOSITION 21 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. 8. WE, HOWEVER, FIND THAT SECTION 71 OF THE ACT PERMI TS AN ASSESSEE TO SET OFF LOSS OTHER THAN THAT OF CAPITAL GAINS AGAINST I NCOME FROM OTHER HEAD. THIS VERY ISSUE CAME-UP FOR CONSIDERATION BEFORE THE MAD RAS HIGH COURT IN CASE OF CHENSING VENTURES (SUPRA). THE DIVISION BENCH OF TH E COURT CONSIDERED THE ISSUE IN FOLLOWING MANNER: '6. HEARD COUNSEL. THE ASSESSING OFFICER HAS NOT GI VEN ANY REASON WHATSOEVER TO DENY THE SET OFF OF THE BUSINESS LOSS AGAINST THE INCOME DECLARED UNDER THE HEAD & 'OTHER SOURCES'. SECTION 71 DEALS WITH SET OFF OF LOSS AGAINST INCOME UNDER ANY OTHER HEAD. AFTER SET TING OFF LOSSES AGAINST 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 A GAINST INCOME OF THE SAME YEAR UNDER ANY OTHER HEAD, EXCEPT FOR LOSSES WHICH ARISE UNDER THE HEAD 'CAPITAL GAINS'. THE INCOME TAX IS ONLY ONE TAX AND LEVIED ON THE SUM TOTAL OF THE INCOME CLASSIFIED AND CHARGEABLE UNDER THE VARI OUS HEADS. SECTION 14 HAS CLASSIFIED THE DIFFERENT HEADS OF INCOME AND INCOME UNDER EACH HEAD IS SEPARATELY COMPUTED. INCOME WHICH IS COMPUTED IN AC CORDANCE WITH LAW IS ONE INCOME AND IT IS NOT A COLLECTION OF DISTINCT T AX LEVIED SEPARATELY ON EACH HEAD OF INCOME AND IT IS NOT AN AGGREGATE OF VARIOU S TAXES COMPUTED WITH REFERENCE TO EACH OF THE DIFFERENT SOURCES SEPARATE LY. THERE IS ONLY ONE ASSESSMENT AND THE SAME IS MADE AFTER THE TOTAL INC OME HAS BEEN ASCERTAINED. THE ASSESSEE IS SUBJECT TO INCOME-TAX ON HIS TOTAL INCOME THOUGH HIS INCOME UNDER EACH HEAD MAY BE WELL BELOW THE TAXABLE LIMIT. HENCE THE LOSS SUSTAINED IN ANY YEAR UNDER ANY HEAD S OF INCOME WILL HAVE TO BE SET OFF AGAINST INCOME UNDER ANY OTHER HEAD. IN THIS CASE, THE ASSESSING OFFICER MADE ADDITION OF RS.28,50,000/- AS UNDISCLO SED INCOME UNDER SECTION 69 OF THE ACT. ONCE THE LOSS IS DETERMINED, THE SAM E SHOULD BE SET OFF AGAINST THE INCOME DETERMINED UNDER ANY OTHER HEAD OF INCOM E. IN THE ASSESSMENT, NO REASONS WERE GIVEN BY THE ASSESSING OFFICER TO D ENY THE BENEFIT OF SECTION 71 OF THE ACT. THE BENEFIT PROVIDED UNDER SECTION 7 1 OF THE ACT CANNOT BE DENIED AND THE LEARNED STANDING COUNSEL APPEARING F OR THE REVENUE IS ALSO UNABLE TO EXPLAIN OR GIVE REASONS WHY THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF SECTION 71 OF THE ACT. THE REASONS GIVEN BY THE TRIBUNAL ARE BASED ON VALID MATERIALS AND EVIDENCE AND THE SAME IS IN ACCORDANCE WITH THE 22 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. PROVISIONS OF SECTION 71OF THE ACT. WE FIND NO ERRO R OR LEGAL INFIRMITY IN THE IMPUGNED ORDER.' 9. WE MAY FURTHER NOTICE THAT THE DECISION IN CASE OF FAKIR MOHMED HAJI HASAN (SUPRA) CAME-UP FOR CONSIDERATION IN CASE OF RADHE DEVELOPERS INCIA LTD. (SUPRA),IT WAS OBSERVED AS UNDER: 'THE DECISIONS OF THIS COURT IN THE CASE OF FAKIR M OHMED HAJI HASAN (SUPRA) AND KRISHNA TEXTILES (SUPRA) ARE NEITHER RELEVANT N OR GERMANE TO THE ISSUE CONSIDERING THE FACT THAT IN NONE OF THE DECISIONS THE LEGISLATIVE SCHEME EMANATING FROM CONJOINT READING OF PROVISIONS OF SE CTIONS 14 & 56 OF THE ACT HAVE BEEN CONSIDERED. THE APEX COURT IN THE CASE OF D.P. SANDU BROS.CHEMBUR P. LTD.,(SUPRA) HAS DEALT WITH THIS VE RY ISSUE WHILE DECIDING THE TREATMENT TO BE GIVEN TO A TRANSACTION OF SURRENDER OF TENANCY RIGHT. THE EARLIER DECISIONS OF THE APEX COURT COMMENCING FROM CASE OF UNITED COMMERCIAL BANK LTD. V. CIT [1957] 32 ITR 688 (SC) HAVE BEEN CONSIDERED BY THE APEX COURT AND, HENCE, IT IS NOT NECESSARY T O REPEAT THE SAME. SUFFICE IT TO STATE THAT THE ACT DOES NOT ENVISAGE TAXING A NY INCOME UNDER ANY HEAD NOT SPECIFIED IN SECTION 14 OF THE ACT. IN THE CIRC UMSTANCES, THERE IS NO QUESTION OF TRYING TO READ ANY CONFLICT IN THE TWO JUDGMENTS OF THIS COURT AS SUBMITTED BY THE LEARNED COUNSEL FOR THE REVENUE.' 10. IN OUR OPINION, THE STATUTORY PROVISIONS CONTAINED IN SECTION 71 WAS APPLICABLE IN THE PRESENT CASE. BY APPLYING THE DEC ISION IN CASE OF FAKIR MOHMED HAJI HASAN (SUPRA) AS EXPLAINED IN CASE OF R ADHE DEVELOPERS INCIA LTD. (SUPRA), THE SAME CANNOT BE DECLINED. IN THE R ESULT, NO QUESTION OF LAW ARISES. TAX APPEAL IS, THEREFORE, DISMISSED. 14. IT IS ALSO NOTED THAT IN LATEST DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF KRISHNAMEGH YARN INDUSTRIES (SUPRA) WHICH HAS BEEN BROUGHT TO OUR ATTENTION BY THE LD CIT DR TO SUPPOR T HIS CONTENTIONS REGARDING APPLICABILITY OF SECTION 69B, THE EARLIER DECISION IN CASE OF SHILPA DYEING AND PRINTING MILLS HAS BEEN FOLLOWED FOR SET TING OFF OF LOSSES UNDER SECTION 71 AGAINST SUCH INCOME. THE RELEVANT FINDI NGS OF HONBLE HIGH COURT ARE AS UNDER: 23 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. 8. WE HAVE LEARNED ADVOCATES FOR THE RESPECTIVE PARTIE S. PERUSED THE ORDERS OF THE CIT (APPEALS) AS WELL AS THE ITAT. IT IS AN UNDISPUTED FACT THAT DURING SCRUTINY, THE ASSESSEE HIMSELF HAS DISCLOSED THE FACT THAT IN HIS BOOKS OF ACCOUNT, HE HAD SHOWN LESS STO CK TO THE TUNE OF RS.10,06,987/-. IT IS ALSO AN ADMITTED FACT THAT WH EN THE PHYSICAL STOCK WAS EXAMINED BY THE AUTHORITY, THE VALUE OF T HE SAID STOCK WAS RS. 13,33,485/-, HOWEVER, AS PER THE BOOKS OF ACCOU NT, THE VALUE OF STOCK WAS TO THE TUNE OF RS.3,26,498/- I.E. AMOUNT TO THE TUNE OF RS.10,06,987/- WAS NOT RECORDED IN THE BOOKS OF ACC OUNT. HOWEVER, IT IS ADMITTED BY THE ASSESSEE HIMSELF THAT HE HAS NOT COMPLETELY DISCLOSED THE STOCK IN THE BOOKS OF ACCOUNT. NOW, C ONSIDERING THE PROVISO OF SECTION 69(B) OF THE ACT, WE ARE OF THE OPINION THAT THE ASSESSEE HAD NOT FULLY DISCLOSED THE STOCKS IN THE BOOKS OF ACCOUNT AND THEREFORE, THE ASSESSING OFFICER AS WELL AS THE CIT (APPEALS) HAVE RIGHTLY OBSERVED THAT THE CASE OF THE ASSESSEE WOUL D FALL UNDER THE PROVISO OF SECTION 69(B) OF THE ACT. WE ARE ALSO OF THE OPINION THAT THE SUBMISSIONS MAD E BY THE LEARNED ADVOCATE IS THAT THE CASE WOULD FALL UNDER THE PROV ISO OF SECTION 69(C) OF THE ACT DOES NOT APPLY TO THE FACTS OF THE PRESE NT CASE. IT IS NOT THE CASE OF THE REVENUE THAT THERE IS AN UNEXPLAINED EX PENDITURE, WHICH WOULD COVER UNDER THE PROVISO OF THIS ACT AND THERE FORE, THE ASSESSEE WOULD NOT BE ENTITLED FOR THE SET OFF UNDER THE PRO VISO OF SECTION 71 OF THE ACT. AS FAR AS APPLICABILITY OF THE CASE OF SHI LPA DYEING & PRINTING MILLS (P.) LTD. (SUPRA) IS CONCERNED, THE SAME WOUL D BE APPLICABLE SINCE THE COURT HAD HELD THAT THE AMOUNT OF EXCESS STOCK WOULD FALL UNDER THE DEFINITION OF INCOME AS PER SECTION 14 OF THE ACT AND THEREFORE, THE ASSESSEE WOULD BE ENTITLED FOR THE S ET OFF UNDER PROVISO OF SECTION 71 OF THE ACT. AS FAR AS THE CASE OF ATT AR SINGH GURMUKH SINGH (SUPRA) IS CONCERNED, THE SAME WOULD NOT BE A PPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE SINCE I T IS NOT THE CASE THAT THERE WAS UNEXPLAINED EXPENDITURE MADE BY THE ASSESSEE. 9. THEREFORE, WE ARE OF THE OPINION THAT THE CIT (APPE ALS) AS WELL AS THE ITAT HAVE COMMITTED ERROR IN REFUSING GIVING SE T OFF TO THE ASSESSEE UNDER SECTION 71 OF THE ACT AND ACCORDINGL Y, WE ALLOW THESE 24 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR. APPEALS BY SETTING ASIDE THE ORDER DATED 28.02.2005 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (THE ITAT) AND ORDER DATED 07.07.2014 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AHMEDABAD [THE CIT (APPEALS)]. 15. IN LIGHT OF ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE DESERVE TO SUCCEED IN THE SUBJECT APPEAL AND WILL BE ELIGIBLE FOR SET OFF BUSINESS LOSS OF RS 86,96,733 AGAINST THE INCOME OF RS 2,31,41,217 W HICH HAS BEEN BROUGHT TO TAX UNDER SECTION 69B READ WITH SECTION 115BBE O F THE ACT. IN THE RESULT, GROUNDS TAKEN BY REVENUE ARE DISMISSED. THUS IT IS CLEAR THAT IN THE SAID CASE ARISING FROM THE SAME SEARCH AND SEIZURE AS WELL AS SURVEY ACTION, THE TRIBUNAL HAS DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE. FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL, WE ALLOW THE CLAIM OF THE ASSESSEE AND SET ASIDE THE ORDERS OF THE AUTHOR ITIES BELOW QUA THIS ISSUE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 13/06/ 2019. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 13/06/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI SANJAY BAIRATHI, JAIPUR. 2. THE RESPONDENT THE ACIT, CENTRAL CIRCLE-2, JAI PUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1343/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 25 ITA N0. 1343/JP/2018 SHRI SANJAY BAIRATHI, JAIPUR.