The Income Tax Officer- II, Kapurthala V. Sh. Shashi Mohan, Kapurthala

ITA 144/ASR/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0501 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKER
• Assessee Lawyers: J S BHASIN
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 69

Judgement Text

ITA NO.144(ASR)/2016 ASSESSMENT YEAR: 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. (CAMP AT JALANDHAR) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.144(ASR)/2016 ASSESSMENT YEAR:2010-11 PAN: AMUPS3326F THE INCOME TAX OFFICER-II, VS. SH. SHASHI MOHAN PRO P. KAAPURTHALA. M/S. AGGARWAL RICE MILLS, VILL. FATTU DHINGRA, G.S. ROAD, DISTT. KAPURTHALA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. BHAWANI SHANKER, DR RESPONDENT BY: SH. J.S. BHASIN, ADV. DATE OF HEARING: 23/06/2016 DATE OF PRONOUNCEMENT: 15/07/2016 ORDER PER A.D. JAIN, JM; THIS IS THE REVENUES APPEAL FOR THE ASSESSMENT YE AR 2010-11, AGAINST THE ORDER, DATED 21.12.2015, PASSED BY THE LD. CIT(A)-2, JALANDHAR. THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE IN HOLDING THAT IT CAN BE INFERRED FOLLOWING THE DE CISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. KIM PHARMA PVT. LTD., VS. CIT, 298 CTR (P&H) 454 TH AT DISCREPANCY IN STOCK OF RS.40,10,000/- SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY SHOULD BE BROU GHT TO TAX UNDER HEAD BUSINESS INCOME AND IT CAN BE SET OF F AGAINST SURRENDER INCOME OF RS.40,10,000/-. 2. THAT THE LD. CIT(A) HAS MISINTERPRETED THE DECI SION OF THE PUNJAB & HARYANA HIGH COURT IN M/S. KIM PHARMA PVT. LTD., VS. CIT, 298 CTR (P&H) 454, WHEREIN IT HAS BEEN HEL D THAT INCOME ASSESSED UNDER DEEMING PROVISIONS OF SECTION 69, ITA NO.144(ASR)/2016 ASSESSMENT YEAR: 2010-11 2 69A, 69B ETC. COULD NOT BE SET OFF AGAINST BUSINESS LOSS U/S 70 & 71 OF THE INCOME TAX ACT. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN DELETING THE ADDITION OF RS.50,00,000/- MADE BY THE AO HOLDING THAT THE AO WAS NOT JUSTIFIED IN DENYING BE NEFIT OF SET CURRENT YEAR BUSINESS LOSS AGAINST SURRENDERED INCOME. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN DIRECTING TO ALLOW SET OFF OF INCOME OF RS.9,90, 000/- SURRENDERED BY THE ASSESSEE ON ACCOUNT OF DISCREPAN CY IN CASH WHICH HE HAS HIMSELF TREATED AS ASSESSABLE U/S 69A OF THE INCOME TAX ACT, 1961 IN PARA 6.4. OF HIS ORDER. 2. THE BRIEF FACTS OF THE CASES ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF RUNNING OF A RICE SHELLER UNDER THE NAM E AND STYLE OF HIS PROPRIETARY CONCERN, NAMELY, M/S. AGGARWAL RICE MIL LS AND FILED HIS RETURN OF INCOME AT RS.16,88,240/- FOR THE YEAR UND ER CONSIDERATION, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. DURING A SSESSMENT PROCEEDINGS, THE AO NOTICED THAT SURVEY OPERATION U /S 133A(1) OF THE ACT WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 18.02 .2010. THE SURVEY TEAM NOTICED CERTAIN DISCREPANCIES IN CASH AND STOC K, WHICH COULD NOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE. THE ASSES SEE SURRENDERED A SUM OF RS.50,00,000/- IN ADDITION TO ITS NORMAL INCOME, AS PER THE FOLLOWING DETAILS: SR. NO. PARTICULAR OF INCOME SURRENDERED AMOUNT SURRENDERED 1. ON ACCOUNT OF DISCREPANCY IN CASH RS.9,90,000/- 2. ON ACCOUNT OF DISCREPANCY IN STOCK RS40,10,000/- TOTAL RS.50,00,000/- ITA NO.144(ASR)/2016 ASSESSMENT YEAR: 2010-11 3 IT WAS FURTHER NOTICED BY THE AO THAT THE ASSESSEE HAD DECLARED TOTAL INCOME IN THE RETURN AT RS.16,88,240/- WHICH INCLUD ED SURRENDERED INCOME OF RS.50,00,000/- WHICH WAS DISCLOSED BY HI M DURING THE SURVEY. FURTHER, THE AO NOTICED THAT AS A RESULT O F SET OFF OF CURRENT YEARS BUSINESS LOSSES AGAINST SURRENDERED INCOME, THE NET TAXABLE INCOME HAD BEEN DECLARED AT RS.16,66,240/-. IN VIEW OF THE ABOVE, THE AO HELD THAT THE ASSESSEE CANNOT SET OF CURRENT YEA RS BUSINESS LOSSES AGAINST SURRENDERED INCOME OF RS.50,00,000, AS THE SAME CANNOT BE TREATED AS BUSINESS INCOME AND HAD TO BE ASSESSED UNDER DEEMING PROVISIONS OF SECTION 69 OF THE ACT. THE AO, THEREF ORE, DENIED THE SET OFF OF CURRENT YEARS BUSINESS LOSSES TO THE ASSESSEE AGAINST SURRENDERED INCOME IN VIEW OF THE DECISION OF HONBLE GUJARAT H IGH COURT, IN THE CASE OF M/S. FAKIR MOHAMED HAZI HASAN, 247 ITR 290 (G UJ.) AND DECISION OF ITAT, CHANDIGARH BENCH IN THE CASE OF LIBERTY PVT . LTD. VS. CIT, ( ITA NO.727/CHD/2012). THE AO ULTIMATELY COMPLETED THE A SSESSEE IN THIS CASE AT AN ASSESSED INCOME OF RS.66,88,240/- AND MADE AN ADDITION OF RS.50,00,000/- TO THE RETURNED INCOME OF THE ASSESS EE. 3. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE LD. CIT(A), WHO IN TURN ALLOWED THE APPEAL OF THE ASSESSEE. WHILE A LLOWING THE APPEAL OF THE ASSESSEE, THE LD. CIT(A) HAS GIVEN WELL REASONE D FINDINGS IN PARAS 6.4 TO 6.6. OF HIS ORDER AND THE SAME DO NOT REQUIRE ANY INTERFERENCE. 4. THE LD. COUNSEL FOR THE ASSESSEE PLACED STRONG R ELIANCE ON THE ORDER OF THE LD. CIT(A). ITA NO.144(ASR)/2016 ASSESSMENT YEAR: 2010-11 4 5. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ER OF THE ASSESSING OFFICER AND CONTENDED THAT THE LD. CIT(A) HAS ERRE D IN HOLDING THAT IT CAN BE INFERRED FOLLOWING THE DECISION OF HONBLE PUNJA B & HARYANA HIGH COURT IN THE CASE OF M/S. KIM PHARMA PVT. LTD. , VS. CIT (SUPRA) THAT DISCREPANCY IN STOCK OF RS.40,10,000/- SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY SHOULD BE BROUGHT TO T AX UNDER THE HEAD BUSINESS INCOME AND IT CAN BE SET OFF AGAINST SURRE NDERED INCOME OF RS.40,10,000/-. HE FURTHER SUBMITTED THAT THE LD. C IT(A) HAS MISINTERPRETED THE AFORESAID DECISION OF THE HONBL E PUNJAB & HARYANA HIGH COURT, IN THE CASE OF KIM PHARMA PVT. LTD. ( SUPRA), WHEREIN IT HAS BEEN HELD THAT INCOME ASSESSED UNDER DEEMING PROVIS IONS OF SECTION 69, 69A, 69B ETC., COULD NOT BE SET OFF AGAINST BUSINES S LOSS U/S 70 & 71 OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULL Y GONE THROUGH THE ORDER OF THE LD. CIT(A), DATED 21.12.2015 AND FIND THAT WHILE ALLOWING THE APPEAL OF THE ASSESSEE ON THE ISSUE IN DISPUTE, THE LD. CIT(A) HAS GIVEN WELL VERSED AND REASONED FINDINGS, WHICH DO NOT RE QUIRE ANY INTERFERENCE ON OUR PART. BESIDES, EXACTLY A SIMILAR ISSUE HAS R ECENTLY BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL, IN THE CASE OF M/S. J.B. RESROTS, FAZILKA VS. I.T.O. WARD III(4), ABOHAR, I N ITA NO. 488(ASR)/2015, FOR THE ASSESSMENT YEAR 2011-12, VIDE ORDER DATED 1 9.05.2016, IN FAVOUR OF THE ASSESSEE AND THE RELEVANT FINDINGS GIVEN TH EREIN ARE AS FOLLOWS: ITA NO.144(ASR)/2016 ASSESSMENT YEAR: 2010-11 5 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. APROPOS THE CONTENTION OF THE LD. DR THA T GAURISH STEELS P. LIMITED (SUPRA), IS PER INCURIAM KIM PHARMA P. LI MITED (SUPRA). THESE ARE ONE AT ONE WITH THE LD. DR. IN GAURISH STEELS P. L IMITED (SUPRA), THE TRIBUNAL HAS TAKEN NOTE OF THE FACT THAT IN KIM PHA RMA P. LIMITED (SUPRA), THE ONLY ISSUE WAS TAXABILITY OF THE CASH SURRENDE RED DURING THE COURSE OF SURVEY, WHICH WAS ALSO GIVEN IN GAURISH STEELS P. LIMITED (SUPRA). THE TRIBUNAL HELD THAT THE OTHER AMOUNT SURRENDERED, ON ACCOUNT OF DISCREPANCY IN THE COST OF CONSTRUCTION, DISCREPANC Y IN STOCK AND DISCREPANCY IN ADVANCES AND RECEIVABLE, HAS TO BE C ONSIDERED AS BUSINESS INCOME, WHEREAS THE CASH SURRENDERED WAS NOT TO BE SO CONSIDERED. IT HAS NOT BEEN SHOWN AS TO HOW THIS ACTION OF THE TRIBUNA L IN GAURISH STEELS P. LIMITED (SUPRA), IS AT VARIANCE WITH KIM PHARMA P . LTD. (SUPRA). ACCORDINGLY, THIS ARGUMENT OF THE LD. DR IS REJECTE D. 9. NOW COMING TO THE FACTS OF THE PRESENT CASE, IN THE SURVEY CONDUCTED, THE ASSESSEE OFFERED RS.10 LAKHS AS ADDI TIONAL INCOME. THE QUESTION AS TO WHETHER THIS CASH IS RELATABLE TO TH E BUSINESS OF THE ASSESSEE, IN ACCORDANCE WITH KIM PHARMA P. LIMITED (SUPRA) AND IF SO, WHETHER IT IS NOT A BUSINESS INCOME. THE SURVEY IN THIS CASE WAS CONDUCTED ON 24.01.2011. THE ASSESSEE MAINTAINS THA T ITS MARRIAGE PALACE WAS STARTED BEING LET OUT FROM 10.10.2010. A COPY OF THE LEDGER ACCOUNT CONTAINING THE BUILDING ACCOUNT HAS BEEN PL ACED ON RECORD IN THE ASSESSMENT PROCEEDINGS. THE SAME HAS BEEN FIELD BEF ORE US ALSO. THIS IS ALSO FOR THE PERIOD FROM 01.04.2010 TO 31.03.2011. THE OPENING BALANCE THEREOF STANDS AT RS.34,03,578/-. AS ON 24.01.2011, THE AMOUNT DEBITED ON ACCOUNT OF BUILDING IS RS.10,00,000/- AS PER LED GER ACCOUNT, THE PALACE INCOME FOR THE PERIOD 01.04.2010 TO 31.03.2011 HAS BEEN SHOWN AT RS.4,65,000/- NOW, THE AO ASSESSED THE AMOUNT OF RS .4,65,000/- AS BUSINESS INCOME. THIS INCLUDED THE RECEIPTS AMOUNTI NG TO RS.3,44,000/- FOR THE PERIOD 10.10.2010 TO 16.01.2011. THIS INCOME HA S BEEN SHOWN ON ACCOUNT OF LETTING OUT OF THE MARRIAGE PALACE FOR T HE PERIOD 10.10.2010 TO 16.01.2011. AS SUCH, AS RIGHTLY CONTENDED, THE AO H AS ACCEPTED THIS INCOME OF THE ASSESSEE AS BUSINESS INCOME. THE PROF IT & LOSS ACCOUNT OF THE ASSESSEE FOR THE PERIOD FROM 04.02.2011 TO 31.0 3.2011 SHOWN AS PALACE INCOME BY RS.4,65,000/-, THE DETAILS OF WHIC H ARE, AS ABOVE. THEREFORE, THE GRIEVANCE OF THE ASSESSEE IN THIS RE GARD IS CORRECT AND THE SAME IS ACCEPTED. 10. IN KEEPING WITH KIM PHARMA P. LIMITED (SUPRA), AS RELIED ON IN GAURISH STEELS P. LIMITED (SUPRA, THIS INCOME HAS BEEN CONSIDERED AS THE ASSESSEES BUSINESS INCOME AND NO T AS DEEMED INCOME U/S 69A OF THE ACT. AS SUCH, THE BUSINESS LO SSES INCURRED BY THE ASSESSEE DURING THE YEAR CAN BE SET OFF AGAI NST THE INCOME SURRENDERED. AS PER THE REQUIREMENT OF SECTION 71 O F THE ACT, THE AO IS DIRECTED TO ACT ACCORDINGLY. THUS, GROUND NOS . 1 TO 3 ARE ACCEPTED. 11. GROUND NO. 4 IS CONSEQUENTIAL. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO.144(ASR)/2016 ASSESSMENT YEAR: 2010-11 6 7. FOR THE ABOVE DISCUSSION, RESPECTFULLY FOLLOWING OUR OWN ORDER IN THE CASE OF M/S. J.B. RESORTS, FAZILKA VS. I.T.O. WARD III( 4), ABOHAR, PASSED IN ITA NO. 488(ASR)/2015, FOR THE ASSESSMENT YEAR 2011-12, VI DE ORDER DATED 19.05.2016, WE DISMISS GROUND NOS. 1, 2 & 3 OF THE APPEAL OF TH E REVENUE. 8. SO FAR AS REGARDS GROUND NO.4 IS CONCERNED, THE REVENUE HAS CONTENDED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE AO TO ALLOW SET OFF INCOME OF RS.9,90,000/- SURRENDERED BY THE ASSESSEE ON ACCOUN T OF DISCREPANCY IN CASH WHICH HE HAS HIMSELF TREATED AS ASSESSABLE U/S 69A OF THE ACT. 9. WE FIND THAT THE LD. CIT(A) HAS WRONGLY ALLOWED THE SET OFF OF THE CASH SURRENDERED BY THE ASSESSEE, AS THE CASH SURRENDERE D DURING SURVEY HAS TO BE TAXED UNDER THE HEAD DEEMED INCOME UNDER SECTION 69A OF THE ACT. THIS ISSUE IS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF TH E REVENUE BY THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. KIM PHARMA (P) LTD. (SUPRA). ACCORDINGLY, THIS GROUND OF THE REVENUE IS ACCEPTED. 9. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/ 07/ 2016. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15/07/2016. /SKR/ COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE:SH. SHASHI MOHAN PROP. M/S. AG GARWAL RICE MILLS (2) THE ITO II, KAPURTHALA. (3) THE CIT(A), JLR (4) THE CIT, JLR. (5) THE SR DR, I.T.A.T. TRUE COPY BY ORDER