Shri Ram Swaroop Singhal, Sriganganagar V. ACIT, Circle, Sriganganagar

ITA 145/JODH/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6236 (ITAT-JODHPUR)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 03-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA
• Keywords: Business income; Income from undisclosed sources; Document seized; Deemed to accrue or arise in india; Documents seized
• Section: 69C; 143(3); 133A; 14A; 80IB; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH (SMC), JODHPUR BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 143/JODH/2018 (ASSESSMENT YEAR-2014-15 SHRI LOVISH SINGHAL, 82-A, PURANI DHAN MANDI, SRIGANGANAGAR. VS INCOME TAX OFFICER, WARD-2, SRIGANGANAGAR. (APPELLANT) (RESPONDENT) PAN: ALJPL 6904 C ITA NO. 142/JODH/2018 (ASSESSMENT YEAR-2014-15 SHRI VASU SINGHAL, 82-A, PURANI DHAN MANDI, SRIGANGANAGAR. VS INCOME TAX OFFICER, WARD-2, SRIGANGANAGAR. (APPELLANT) (RESPONDENT) PAN: CPGPS 4743 M ITA NO. 144/JODH/2018 (ASSESSMENT YEAR-2014-15 SHRI PRAMOD KUMAR SINGHAL, 82-A, PURANI DHAN MANDI, SRIGANGANAGAR. VS A.C.I.T., CIRCLE- SRIGANGANAGAR. (APPELLANT) (RESPONDENT) PAN: ABWPS 6202 K 2 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES ITA NO. 146/JODH/2018 (ASSESSMENT YEAR-2014-15 SHRI VINOD KUMAR SINGHAL, 82-A, PURANI DHAN MANDI, SRIGANGANAGAR. VS A.C.I.T., CIRCLE- SRIGANGANAGAR. (APPELLANT) (RESPONDENT) PAN: ABWPS 6201 L ITA NO. 145/JODH/2018 (ASSESSMENT YEAR-2014-15 SHRI RAM SWAROOP SINGHAL, 103, NAYI DHAN MANDI, SRIGANGANAGAR. VS A.C.I.T., CIRCLE- SRIGANGANAGAR. (APPELLANT) (RESPONDENT) PAN: AHNPS 5694 L ASSESSEE BY SHRI RAJENDRA JAIN (ADV) REVENUE BY SH. ASHOK KHANNA JCIT DR DATE OF HEARING 23/05/2018 DATE OF PRONOUNCEMENT 25/05/2018 O R D E R PER: R.C. SHARMA, AM THESE ARE THE APPEALS FILED BY THE DIFFERENT ASSESS EES AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A), BIKA NER DATED 14/11/2017 AND 15/11/2017 RESPECTIVELY FOR THE A.Y. 2014-15 IN 3 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES THE MATTER OF ORDER U/S 143(3) OF THE INCOME-TAX AC T, 1961 [HEREINAFTER REFERRED TO AS THE ACT, FOR SHORT]. 2. IN ALL THESE APPEALS, A COMMON ISSUE HAS BEEN TA KEN, THEREFORE, ALL THE APPEALS ARE BEING HEARD TOGETHER AND THE BENCH DECIDED TO DISPOSE OFF ALL THESE APPEALS BY A CONSO LIDATED ORDER. 3. THE ISSUE INVOLVED IN ALL THE APPEALS PERTAINS T O UPHOLDING THE PROVISIONS OF SECTION 69 OF THE ACT WHILE CALCU LATING THE TAX RATE AS PER PROVISIONS OF SECTION 115BBE OF THE ACT . 4. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS CON TENDED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE RAJ ASTHAN HIGH COURT. 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECOR D, I FOUND THAT A SURVEY U/S. 133A WAS CARRIED OUT AT ASSESSEES BUS INESS PREMISES ON 09- 01-2014. DURING THE COURSE OF SURVEY PROCEEDINGS, T HE ASSESSEE OFFERED AN AMOUNT OF RS. 10,90,000/- FOR TAXATION ON ACCOUNT O F DISCREPANCY IN STOCK, INCRIMINATING DOCUMENTS AND EXCESS CASH FOUND. SUBS EQUENTLY, THE ASSESSEE FILED HIS RETURN OF INCOME FOR AY 2014-15, DECLARIN G THE TOTAL INCOME AT RS. 10,15,000/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTED 4 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES THAT THOUGH THE ASSESSEE IN HIS RETURN FILED FOR AY 2014-15 INCLUDED THE SURRENDERED AMOUNT OF RS. 10,90,000/- AS INCOME FRO M BUSINESS, HOWEVER, WHILE CALCULATING THE TAX ON THIS INCOME, IT HAD CAL CULATED / PAID TAX AT NORMAL RATE INSTEAD OF 30% AS PER THE PROVISIONS OF SEC. 115BBE OF THE ACT. ACCORDINGLY, THE AO ISSUED A SHOW-CAUSE NOTICE ON 2 3-11-2016 REQUIRING THE ASSESSEE AS TO WHY TAX MAY NOT BE CALCULATED @30% AS PER PROVISIONS OF SEC. 115BBE OF THE ACT. THE ASSESSEE FILED HIS REPL Y DATED 29-11-2016, THE AO REPRODUCED THIS REPLY AT PAGE NO. 3 OF THE ASSES SMENT ORDER. THE ASSESSEES MAIN CONTENTION BEFORE THE AO WAS THAT SI NCE HE HAD DISCLOSED THE SURRENDERED INCOME IN ITS RETURN OF INCOME, IT WAS NOT COVERED BY ANY DEEMING PROVISIONS VIZ. 68, 69, 69A, 69B, 69C OR 69 D, THE PROVISIONS OF SEC. 115BBE COULD NOT BE APPLIED IN. RESPECT OF THIS SUR RENDERED INCOME. THE AO HOWEVER, DID NOT ACCEPT THIS REPLY OF THE ASSESSEE A ND LEVIED TAXES @ 30% IN RESPECT OF INCOME SO SURRENDERED. 6. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS CONFIR MED THE ACTION OF THE ASSESSING OFFICER FOR CHARGING TAX @ 30% IN RESPECT OF INCOME SO SURRENDERED, AGAINST WHICH THE ASSESSEE IS IN FURTHE R APPEAL BEFORE THE ITAT. 7. IT WAS ARGUED BY THE LD AR THAT THE ASSESSEE IS I NDIVIDUAL AND WAS EARNING INCOME OUT OF TRADING AS WELL AS INTEREST IN COME FROM M/S M.R. SEEDS PVT. LTD. THAT DURING THE YEAR UNDER CONSIDER ATION, A SURVEY WAS 5 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES CONDUCTED ON 09.01.2014 AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING SURVEY, THE ASSESSEE HAS OFFERED AN AMOUNT OF RS. 1 0,90,000/- FOR TAXATION ON ACCOUNT OF INCRIMINATING DOCUMENTS, EXCESS CASH FOUND AND STOCK DISCREPANCIES. DURING THE ASSESSMENT PROCEEDING THE ASSESSEE HAS EXPLAINED BEFORE THE LD AO THAT THE SURRENDER AMOUNT WAS IN RE LATION TO BUSINESS ACTIVITIES AND THERE ARE DIRECT NEXUS WITH BUSINESS AND ACCORDINGLY HE HAS TREATED SAME AS BUSINESS INCOME. THE LD AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE OR MATERIAL TO ESTABLISH THAT THE ASSESSEE WAS INVOLVED IN ANY OTHER ACTIVITIES AND AS SUCH THE INCOME DISCLOSED AS BUSI NESS INCOME BY THE ASSESSEE IS ACCORDANCE WITH LAW AND ALSO SUPPORTED FR OM JUDICIAL DECISIONS. 8. RELIANCE WAS PLACED ON THE DECISIONS OF HON'BLE R AJASTHAN HIGH COURT IN THE CASE OF CIT OF CIT V/S BAJARGAN TRADERS D.B. I.T. NO. 258/2017 DATED 12/09/2017 THE HON'BLE RAJASTHAN HIGH COURT HELD AS UNDER:- '2.10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF SURVEY, T HE ASSESSEE HAS SURRENDERED AN AMOUNT OF RS. 70,04,814/- TOWARDS INVESTMENT IN STOCK OF RICE WHICH HAD NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS. SUBSEQUENTL Y, IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAS INCORPORATED THIS TRANSACTION BY D EBITING THE PURCHASE ACCOUNT AND CREDITING THE INCOME FROM UNDISCLOSED SOURCES. IN THE ANNUAL ACCOUNTS, THE PURCHASES OF RS. 70,04,814/- WERE FINALLY REFLECTED AS PART OF TOTAL PURCHASES AMOUNTING TO RS. 33,47,19,658/- IN THE PROFIT AND L OSS ACCOUNT AND THE SAME ALSO FOUND INCLUDED AS PART OF THE CLOSING STOCK AM OUNT TO RS. 1,94,42,569/- IN THE PROFIT/ LOSS ACCOUNT SINCE THE SAID STOCK OF RI CE WAS NOT SOLD OUT. IN ADDITION 6 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES TO THE PURCHASE AND THE CLOSING STOCK, THE AMOUNT O F RS. 70,04,814/- ALSO FOUND CREDITED IN THE PROFIT AND LOSS ACCOUNT AS INCOME F ROM UNDISCLOSED SOURCES. THE NET EFFECT OF THIS DOUBLE ENTRY ACCOUNTING TREATMEN T IS THAT FIRSTLY THE UNRECORDED STOCK OF RICE HAS BEEN BROUGHT ON THE BO OKS AND NOW FORMS PART OF THE RECORDED STOCK WHICH CAN BE SUBSEQUENTLY SOLD O UT AND THE PROFIT/ LOSS THEREFROM WOULD BE SUBJECT TO TAX AS ANY OTHER NORM AL BUSINESS TRANSACTION. SECONDLY, THE UNRECORDED INVESTMENT WHICH HAS GONE IN PURCHASE OF SUCH UNRECORDED STOCK OF RICE HAS BEEN RECORDED IN THE B OOKS OF ACCOUNTS AND OFFERED TO TAX BY CREDITING THE SAID AMOUNT IN THE PROFIT A ND LOSS ACCOUNT. HAD THIS INVESTMENT BEEN MADE OUT OF KNOWN SOURCE, THERE WAS NO NECESSITY FOR ASSESSEE TO CREDIT THE PROFIT/ LOSS ACCOUNT AND OFFER THE SA ME TO TAX. ACCORDINGLY, WE DO NOT SEE ANY INFIRMITY IN ASSESSEE'S BRINGING SUCH T RANSACTION IN ITS BOOKS OF ACCOUNTS AND THE ACCOUNTING TREATMENT THEREOF SO AS TO REGULARISE ITS BOOKS OF ACCOUNTS. IN FACT, THE SAME PROVIDES A CREDIBLE BAS E FOR REVENUE TO BRING TO TAX SUBSEQUENT PROFIT/ LOSS ON SALE OF SUCH STOCK OF RI CE IN FUTURE. 2.11. HAVING SAID THAT, THE NEXT ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE AMOUNT SURRENDERED BY WAY OF INVESTMENT IN THE UNRECORDED STOCK OF RICE HAS TO BE BROUGHT TO TAX UNDER THE HEAD 'BU SINESS INCOME' OR 'INCOME FROM OTHER SOURCES'. IN THE PRESENT CASE, THE ASSES SEE IS DEALING IN SALE OF FOODGRAINS, RICE AND OIL SEEDS, AND THE EXCESS STOC K WHICH HAS BEEN FOUND DURING THE COURSE OF SURVEY IS STOCK OF RICE. THEREFORE, T HE INVESTMENT IN PROCUREMENT OF SUCH STOCK OF RICE IS CLEARLY IDENTIFIABLE AND RELA TED TO THE REGULAR BUSINESS STOCK OF THE ASSESSEE. THE DECISION OF THE CO-ORDINATE BE NCH IN CASE OF SHRI RAMNARAYAN BIRLA (SUPRA) SUPPORTS THE CASE OF THE A SSESSEE IN THIS REGARD. THEREFORE, THE INVESTMENT IN THE EXCESS STOCK HAS T O BE BROUGHT TO TAX UNDER THE HEAD 'BUSINESS INCOME' AND NOT UNDER THE HEAD I NCOME FROM OTHER SOURCES '. IN THE RESULT, GROUND NO. 1 OF THE ASSESSEE IS A LLOWED.' 7 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES 9. IT WAS FURTHER ARGUED THAT FROM THE ABOVE JURISD ICTIONAL HIGH COURT DECISIONS THE EXCESS STOCK AND INCRIMINATING DOCUME NTS AND CASH FOUND AS A RESULT OF SEARCH ARE RELATED TO BUSINESS ACTIVITIES AND AS SUCH SAME MAY KINDLY BE ACCEPTED AS BUSINESS INCOME. FURTHER IT I S RELEVANT TO MENTION HERE THAT THE LD CIT (A) HAS CATEGORICALLY RECORDED THE FINDING THAT 'EVEN WHEN SOURCE IS EXPLAINED AND SAME IS ACCRUED THROUGH BUS INESS UNDERTAKEN BY THE ASSESSEE, IT WILL BE TREATED AS INCOME U/S 68 TO 69C AND PROVISIONS OF SECTION 115BBE WILL APPLY ACCORDINGLY.' THE OBSERVATION MADE BY THE LD CIT (A) IS TOTALLY AND APPARENTLY CONTRARY TO THE PROVISIONS O F THE LAW AND ALSO AGAINST THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT R EFERRED ABOVE. 10. AS PER THE LD AR THE SURRENDER INCOME DISCLOSED BY THE ASSESSEE ARE PART OF THE BUSINESS ACTIVITIES AND NO OTHER ACTIVI TIES CARRIED OUT BY THE ASSESSEE AND ALSO NO MATERIAL OR EVIDENCE BROUGHT O N RECORD BY THE DEPARTMENT AND AS SUCH THE INCOME DECLARED IN THE N ATURE OF BUSINESS INCOME AND THE PROVISIONS OF SECTION 69 APPLIED BY THE LD AO AND CONFIRMED BY LD CIT (A) IS TOTALLY UNJUSTIFIABLE AND ALSO CON TRARY TO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT. 11. THE LD AR HAS FURTHER CONTENDED THAT THE HON'BL E ITAT, JODHPUR BENCH, JAIPUR BENCH AND HON'BLE ITAT, MUMBAI BENCH HAS ALLOWED THE APPEAL ON IDENTICAL FACTS: - 8 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES I. ACIT V/S SANJAY BAIRATHI GEMS LTD., ITAT JAIPUR BENC H. THE RELEVANT FINDING RECORDED BY THE HON'BLE ITAT AT PARA 4.1 TO PARA 4.3 PAGE 8 TO 11 OF THE ORDER READS AS UNDER: - '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 ASSESSE E SUCH EXCESS STOCK/INVESTMENT IS A BUSINESS STOCK/INVESTMENT WHI CH HAS ARISEN OUT OF THE UNRECORDED BUSINESS ACTIVITY OF THE ASSESSEE AND THEREFORE THE SAME NEEDS TO BE ASSESSED UNDER THE HEAD PROFIT & G AIN OF BUSINESS. FOR THIS PURPOSE 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 HEL D THAT EXCESS STOCK FOUND DURING THE SURVEY IS NOT SEPARATELY AND CLEARLY IDENTIFIABLE BUT IS PART OF MIXED LOTS OF STOCK FOU ND AT THE PREMISES WHICH INCLUDED DECLARED STOCK AS PER BOOKS AND ALSO T HE EXCESS STOCK AS COMPUTED BY THE SURVEY OFFICERS, THE PROVISIONS OF SECTION 69B CANNOT BE MADE APPLICABLE AS PRIMARY CONDITION FOR INVOKING THE PROVISIONS OF SECTION 69A, 69B IS THAT THE ASSET SH OULD BE SEPARATELY IDENTIFIABLE AND IT SHOULD HAVE INDEPENDENT PHYSICA L EXISTENCE OF ITS OWN. SINCE EXCESS STOCK IS A RESULT OF SUPPRESSION O F PROFIT FROM BUSINESS OVER THE YEARS AND HAS NOT BEEN KEPT IDENTI FIABLE SEPARATELY BUT IS THE PART OF OVERALL PHYSICAL STOCK FOUND, THE INVESTMENT IN THE EXCESS STOCK HAS TO BE TREATED AS BUSINESS INCOME AS PER DETAILED REASONS GIVEN IN THE CASE OF FASHION WORLD VS. ACIT ITA NO. 1634/AHD/2006 WHEREIN, THE TRIBUNAL HELD THAT, IF E XCESS STOCK FOUND DURING THE COURSE OF SURVEY OR SEARCH AND DOES NOT HAVE ANY INDEPENDENT IDENTITY AS AN ASSET BUT AS MIXED PART OF OVERALL STOCK FOUND IN THE SURVEY/SEARCH THEN SUCH EXCESS STOCK WO ULD 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 NORMAL STOCK AND TO BE TAXED UNDER THE HEAD INCOME FROM BUS INESS. THE RELEVANT 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 NO T DISPUTED THAT THE 9 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES ASSESSEE IS ENGAGED IN THE BUSINESS OF JEWELLERY. D URING THE COURSE OF SURVEY EXCESS STOCK VALUING RS. 77,66,887/- WAS FOUN D IN RESPECT OF GOLD AND SILVER JEWELLERY. THE COORDINATE BENCH IN THE CASE OF CHOKSHI HIRALAL MAGANLAL VS. DCIT, 131 TTJ (AHD.) 1 HAS HELD THAT IN A CASES WHERE SOURCE OF INVESTMENT/EXPENDITURE IS CLE ARLY IDENTIFIABLE AND ALLEGED UNDISCLOSED ASSET HAS NO INDEPENDENT EX ISTENCE OF ITS OWN OR THERE IS NO SEPARATE PHYSICAL IDENTITY OF SU CH INVESTMENT/EXPENDITURE THEN FIRST WHAT IS TO BE TAX ED IS THE UNDISCLOSED BUSINESS RECEIPT INVESTED IN UNIDENTIFI ABLE UNACCOUNTED ASSET AND ONLY ON FAILURE IT SHOULD BE CONSIDERED T O BE TAXED UNDER SECTION 69 ON THE PREMISES THAT SUCH EXCESS INVESTM ENT 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 I NCOME UNDER SECTION 69 WOULD NOT BE NECESSARY. THEREFORE, THE F IRST ATTEMPT OF THE ASSESSING AUTHORITY SHOULD BE TO FIND OUT LINK OF UN DECLARED INVESTMENT/EXPENDITURE WITH THE KNOWN HEAD, GIVE OPP ORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS AND IF IT IS SATISF ACTORILY ESTABLISHED THEN FIRST SUCH INVESTMENT SHOULD BE CONSIDERED AS UNDECLARED RECEIPT UNDER THAT PARTICULAR HEAD. IT IS OBSERVED THAT THERE IS NO CONFLICT WITH THE DECISION OF HONBLE GUJARAT HIGH C OURT IN THE CASE OF FAKIR MOHD. HAJI HASAN (SUPRA) WHERE INVESTMENT IN A N ASSET OR EXPENDITURE IS NOT IDENTIFIABLE AND NO NEXUS WAS ES TABLISHED THEN WITH ANY HEAD OF INCOME AND THUS WAS NOT AVAILABLE FOR SET OFF AGAINST ANY LOSS UNDER ANY OTHER HEAD. THEREFORE, T HE HONBLE COORDINATE BENCH HELD THAT WHERE ASSET IN WHICH UNDECLARED INVESTMENT IS SOUGHT TO BE TAXED IS NOT CLEARLY IDENTIFIABLE OR DOES NOT HAVE INDEPENDENT IDENTITY BUT IS INTEGR AL AND INSEPARABLE (MIXED) PART OF DECLARED ASSET, FALLING UNDER A PAR TICULAR HEAD, THEN THE DIFFERENCE SHOULD BE TREATED AS UNDECLARED BUSI NESS INCOME EXPLAINING THE INVESTMENT. IN THE PRESENT CASE THE EXCESS STOCK WAS PART OF THE STOCK. THE REVENUE HAS NOT POINTED OUT T HAT THE EXCESS STOCK HAS ANY NEXUS WITH ANY OTHER RECEIPTS. THEREFO RE, 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. C IT 258 CTR 454. IN THIS CASE THE AMOUNT SURRENDERED IN COURSE OF SURVE Y WAS NOT REFLECTED IN BOOKS OF ACCOUNTS AND NO SOURCE FROM WH ERE IT WAS 10 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES DERIVED WAS DECLARED BY THE ASSESSEE AND THEREFORE IT WAS HELD THAT THE SAME CANT BE ASSESSED AS BUSINESS INCOME. IN T HIS CASE THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF C IT VS. S.K. SRIGIRI AND BROS 298 ITR 13 RELIED BY THE ASSESSEE WAS DIST INGUISHED BY HOLDING THAT IN THIS CASE ASSESSEE RECEIVED ADDITIO NAL INCOME FROM BUSINESS ONLY.' II. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE ITAT, JODHPUR BENCH IN THE CASE OF ACIT, CENTRAL CIRCLE -1 V/S MIR AJ TRADECOM PVT. LTD., I.T.A. NO. 124/JODH/2017 DATED 03/07/2017 WHE REIN THE HON'BLE BENCH HELD AS UNDER: - '(V) IT WAS ALSO SETTLED POSITION OF LAW THAT INCOM E REFERRED IN SECTION 115BBE I.E. 68, 69 A/B/C ETC. DOES NOT STATE HEAD O F INCOME AND ASSESSING AUTHORITY HAS TO LOOK TO THE SURROUNDING CIRCUMSTANCES IN ORDER TO DETERMINE AS TO UNDER WHAT HEAD THE SAID I NCOME SHOULD BE ASSESSED. IN THIS REGARD, WE RELY ON THE DECISION O F MUMBAI BENCH OF ITAT IN THE CASE OF ITO V. DHARAMBIR HANSRAJ AGARWA L [23 ITD 589] OBSERVED THAT SECTION 68 DOES NOT EXPRESSLY STATE A S TO UNDER WHAT HEAD THE SAID INCOME SHOULD BE ASSESSED. SECTION 68 IS SILENT ABOUT THE HEAD UNDER WHICH THE SAID INCOME SHOULD BE ASSE SSED. THE ASSESSING OFFICER HAS TO LOOK TO THE SURROUNDING CIR CUMSTANCES IN ORDER TO DETERMINE THE HEAD OF INCOME UNDER WHICH T HE SAID INCOME SHOULD BE ASSESSED. RELEVANT PARA IS REPRODUCED AS UNDER: - '3. EVEN IF WE HOLD THAT THE EXPLANATION OF THE ASS ESSEE ABOUT THE NATURE AND SOURCE OF THOSE AMOUNTS WAS NOT SATISFAC TORY, AS HAS BEEN HELD BY THE INCOME TAX OFFICER, THE ONLY CONSE QUENCE THEREOF WOULD BE THAT SUMS CREDITED IN THE BOOKS OF THE ASSE SSEE WOULD BE LIABLE TO BE CHARGED TO INCOME-TAX, AS THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE BOOKS WERE MAINTAINED . SECTION 68 DOES NOT EXPRESSLY STATE AS TO UNDER WHAT HEAD THE SAID INCOME SHOULD BE ASSESSED. SECTION 68 IS SILENT ABOUT THE HEAD UNDER WHICH THE SAID INCOME SHOULD BE ASSESSED. CONSEQUENTLY, T HE ASSESSING AUTHORITY HAS TO LOOK TO THE SURROUNDING CIRCUMSTANC ES IN ORDER TO 11 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES DETERMINE AS TO UNDER WHAT HEAD THE SAID INCOME SHO ULD BE ASSESSED.' (VI) WE ALSO RELY ON THE FOLLOWING CITATION AS SUBM ITTED AND AS REFERRED IN CIT (A) ORDER PAGE 34 IN THIS REGARD: CIT VS. SHETH DEVELOPER (P) LTD IN APPEAL NO. 3724 OF 2010 DATED 27.07.2012: THE BOMBAY HIGH COURT HELD THAT IN CASE OF WHERE UNDISCLOSED INCOME FOUND IN FORM OF CASH WAS EXPLAI NED AS HAVING BEEN ACQUIRED WHILE CARRYING ON THE BUSINESS AS BUI LDER AND ON SUCH INCOME DEDUCTION U/S 80IB WAS CLAIMED BY HOLDING TH AT IN THE CASE BEFORE IT THE UNDISCLOSED INCOME WAS RECEIVED IN TH E COURSE OF CARRYING OUT THE BUSINESS ACTIVITY AS A BUILDER WHI CH IS ASSESSED AS INCOME FROM BUSINESS. (VII) WE FURTHER RELY ON FOLLOWING CITATIONS- A. LAKHMICHAND BAIJNATH V. CIT [1959] 35 ITR 416, THE SU PREME COURT HAS OBSERVED THAT WHEN AN AMOUNT IS CREDITED IN THE BUSINESS BOOKS, IT IS NOT AN UNREASONABLE INFERENCE TO DRAW THAT IT IS A RECEIPT FROM BUSINESS. IT WAS ALSO OBSERVED THAT AS THE CREDITS WERE FOUND IN THE BUSINESS ACCOUNTS OF THE ASSESSEE AND THE EXPLANATION AS TO HOW THE AMOUNTS CAME TO BE RE CEIVED WAS REJECTED BY THE INCOME-TAX AUTHORITIES, THE INC OME-TAX AUTHORITIES WERE ENTITLED TO TREAT THE CREDITS AS B USINESS RECEIPTS CHARGEABLE TO TAX. B. NALINIKANT AMBALAL MODY V S.A.L. NARAYAN ROW, CIT [1 966] 61 ITR 428, THE SUPREME COURT HAS HELD THAT WHETHER AN INCOME FALLS UNDER ONE HEAD OR ANOTHER HAS TO BE DECIDED A CCORDING TO THE COMMON NOTIONS OF PRACTICAL MAN BECAUSE THE ACT DOES NOT PROVIDE ANY GUIDANCE IN THE MATTER. C. DAULATRAM RAWATMULL V. CIT [1967] 64 ITR 593, IT HAS BEEN HELD BY THE CALCUTTA HIGH COURT THAT WHERE A CREDIT ENTR Y IS FOUND IN THE BUSINESS ACCOUNTS OF AN ASSESSEE AND THE EXPLAN ATION AS TO HOW THE AMOUNT CAME TO BE RECEIVED IS REJECTED BY T HE INCOME- TAX AUTHORITIES AND THE AMOUNT IS TAKEN TO BE INCOME FROM AN UNDISCLOSED SOURCE, SUCH INCOME CAN BE TREATED AS B USINESS 12 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES INCOME, IF THE ASSESSEE HAS NO OTHER SOURCE OF INCO ME. SAME VIEW HAS BEEN TAKEN BY CALCUTTA HIGH COURT IN CASE O F MANSFIELD AND SONS V. CIT [1963] 48 ITR 254. IN VIEW OF ABOVE, RECEIPTS IS FULLY EXPLAINED ON DA TE OF SEARCH AS PER STATEMENT RECORDED TOWARDS PREMIUM FROM DISTRIBUTER S/ STOCKIEST AND ALSO ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS/ ITR / AUDITED BALANCE SHEET OF THE RELEVANT ASSESSMENT YEAR, THER EFORE, IT WAS SUPPOSED TO BE ASSESESD AS INCOME FROM BUSINESS AS THE PART OF AMOUNT ASSESSED/ ACCEPTED DURING THE YEAR UNDER CON SIDERATION AS BUSINESS RECEIPTS IN ABSENCE OF ANY CONTRARY/ CORRO BORATIVE DOCUMENTS WITH THE DEPARTMENT. (VIII) CONSIDERING THE FACT THAT THE SUM OF RS. 6.5 0 CRORES WAS RECEIVED BY THE RESPONDENT COMPANY AS PREMIUM FROM DISTRIBUTERS/ STOCKIEST LOOKING TO GOODWILL AS MIRAJ I S AN ESTABLISHED BRAND NAME AND OUT OF TOTAL PREMIUM AMOUNT OFFERED TO TAX RS. 6.75 CRORES, A SUM OF RS. 25 LACS IS ACCEPTED AS BU SINESS RECEIPT BY LD ACIT, WE HEREBY REQUEST BEFORE YOUR HONOUR TO DI RECT THE DEPARTMENT TO CONSIDER THE ENTIRE RECEIPTS AS BUSIN ESS INCOME AS RESPONDENTS HAD NO SOURCE OF RECEIPTS OTHER THAN BU SINESS AS PE RFIRST ARGUMENT BEFORE LD CIT (A) AS NARRATED AT CI T (A) ORDER PAGE 41 PARA 7.1(II). (IX) SAME IS SQUARELY COVERED BY JUDGMENT DATED 23. 05.2017 IN APPEAL NO. ITA/338/JODH/2016 IN CASE OF ACIT V/S M/ S I VIEW MOTION P. LTD. IN VIEW OF ABOVE, IT IS REITERATED BEFORE YOUR KIND HONOUR THAT ADJUSTMENT/ SET OFF TOWARDS BROUGHT FORWARD BUSINES S LOSSES OF EARLIER YEARS TO THE EXTENT OF RS. 2,67,62,208/- IS PERMISSIBLE ONCE IT IS CONSIDERED AS FIRST ARGUMENT TO CONSIDER THE REC EIPTS OF RS. 6.50 CRORES AS BUSINESS RECEIPTS IN ABSENCE OF ANY OTHER CORROBORATIVE/ SEIZED DOCUMENTS BEFORE THE DEPARTMENT AS THE PROVI SIONS OF CLAUSE (I) OF SUB SECTION (1) OF SECTION 72 WHICH C LEARLY PROVIDE FOR 13 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES SET OFF BROUGHT FORWARD BUSINESS LOSSES IN THE SUBS EQUENT YEAR AGAINST THE PROFITS NAD GAINS OF BUSINESS OR PROFES SION. THEREFORE, WE HEREBY REQUEST TO DIRECT THE DEPARTMENT TO (I) C ONSIDER RECEIPTS AS BUSINESS RECEIPTS AS PART OF AMOUNT IS ALREADY A CCEPTED AS BUSINESS RECEIPTS DURING THE YEAR (II) THERE IS NO OTHER SOURCE TO GET SUCH RECEIPTS BY THE COMPANY AND (III) AS PER ABOVE JUDICIAL PRONOUNCEMENTS INSTEAD OF CONSIDERING IT AS 'INCOME FROM OTHER SOURCES' AND ALLOW THE SET OFF OF BROUGHT FORWARD B USINESS LOSSES IN ABSENCE OF ANY OTHER CORROBORATIVE DOCUMENTS BEFORE THE DEPARTMENT AND DISMISS THE DEPARTMENTAL APPEAL ON T HIS GROUND. THUS GROUND OF REVENUE IS DISMISSED. GROUND NO. 2 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) WAS RIGHT IN DIRECTING TO ALLOW ADJUSTMENT/ SET OFF TOWARDS BROUGHT FORWARD BUSINESS LOSES OF EARLIER YEAR TO T HE EXTENT OF RS. 2,67,62,208/- DESPITE HOLDING THAT SAID SUM ARE CHAR GEABLE TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND IN C ONTRAVENTION OF PROVISIONS OF CLAUSE (I) OF SUB-SECTION (1) OF SE CTION 72 PROVIDING FOR SET OFF BROUGHT FORWARD BUSINESS LOSSES IN THE SUBSEQUENT YEARS AGAINST THE PROFITS AND GAINS OF BUSINESS OR PROFES SION ONLY. AS SUBMITTED IN GROUND NO.1 PARA 5 HEREINABOVE AND I S SUBMITTED BEFORE AO/ CIT (A) ARE BEING REITERATED FOR THE ABO VE GROUND ALSO. SAME IS ALSO SQUARELY COVERED BY JUDGMENT DATED 23. 05.2017 IN APPEAL NO. ITA/338/JODH/2016 IN CASE OF ACIT V/S M/ S I VIEW MOTION P. LTD. IN VIEW OF ABOVE, IT WAS SUBMITTED BEFORE YOUR KIND HONOUR THAT ADJUSTMENT/ SETOFF TOWARDS BROUGHT FORWARD BUSINESS LOSSES OF EARLIER YEARS TO THE EXTENT OF RS. 2,67,62,208/- IS PERMISSIBLE ONCE IT IS CONSIDERED AS FIRST ARGUMENT TO CONSIDER THE REC EIPTS OF RS. 6.50 CRORES AS BUSINESS RECEIPTS AS REMAINING PREMIUM AM OUNT OF RS. 25 LACS CONSIDERED DURING THE YEAR UNDER CONSIDERATION OF THE RESPONDENT COMPANY IN ABSENCE OF ANY OTHER CORROBOR ATIVE/ SEIZED 14 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES DOCUMENTS BEFORE THE DEPARTMENT AS THE PROVISIONS O F CLAUSE (I) OF SUB SECTION (1) OF SECTION 72 WHICH CLEARLY PROVIDE FOR SET OFF BROUGHT FORWARD BUSINESS LOSSES IN THE SUBSEQUENT Y EAR AGAINST THE PROFITS AND GAINS OF BUSINESS OR PROFESSION. THEREF ORE, WE HEREBY REQUEST TO DIRECT THE DEPARTMENT TO (I) CONSIDER RE CEIPTS AS BUSINESS RECEIPTS AS PART OF AMOUNT IS ACCEPTED DURING THE Y EAR (II) THERE IS NO OTHER SOURCE TO GET SUCH RECEIPTS BY THE COMPANY (III) AS PER ABOVE JUDICIAL PRONOUNCEMENTS & AND ALLOW THE SET O FF OF BROUGHT FORWARD BUSINESS LOSSES AND DISMISS THE DEPARTMENTA L APPEAL. THUS APPEAL OF THE REVENUE IS DISMISSED. GROUND NO. 3 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) WAS RIGHT IN OBSERVING THAT THE AMENDMENT MADE BY FINANCE BILL 2016 TO THE PROVISIONS OF SECTION 115BBE OF TH E INCOME TAX ACT CLARIFYING THAT NO SET OFF OF ANY LOSS AGAINST THE DEEMED INCOME UNDER SECTION 68, 69, 69A TO 69D SHALL BE ALLOWABLE , IS NOT APPLICABLE TO THE ASSESSMENT YEARS 2014-15. 1. AS EARLIER EXPLAINED, AND DISCUSSED IN DETAIL THAT AMENDED PROVISIONS SHALL BE APPLICABLE FROM 1ST APRIL 2017, ACCORDINGLY APPLICABLE FROM ASSESSMENT YEAR 2017-18 ONWARDS. REL EVANT FINDING OF CIT (A) IN ORDER AT PAGE 40 PARA 6.5 AND PAGE 47 PARA 7.4.2. 'IN SUBMISSION REFERRED IN PARA 6.4 AND 6.5 THE APP ELLANT REFERRED THE AMENDMENT BY FINANCE BILL 2016 TO AMEND SECTION 155BBE OF THE INCOME TAX ACT TO CLARIFY THAT THE RESTRICTION IMPOSED BY THE AMENDMENT BY FINANCE BILL 2016 FOR ADJUSTMENT AGAIN ST DEEMED INCOME TAXED UNDER THE HEAD INCOME FROM OTHER SOURC E IS W.E.F. 01.04.2017 AND FOR THE AY 2015-16, THE SAME IS NOT A PPLICABLE.' 2. IT WAS ALSO SUBMITTED THAT EVEN THE DENIAL OF SUCH SET OFF BY SECTION 115BBE WAS BROUGHT ON THE STATUE BY FINANCE ACT, 20 16 W.E.F. 01.04.2017 I.E. FOR AND FROM THE A.Y. 2017-18. THERE FORE, WHEN THE SPECIFIC DENIAL OF THE SET OFF WAS BROUGHT PROSPECT IVELY BY THE 15 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES LEGISLATURE IN SECTION 115BBE, THE SET OFF OF LOSS UNDER THE HEAD 'BUSINESS' AGAINST THE 'INCOME FROM OTHER SOURCES' CANNOT BE DENIED TO THE ASSESSEE. 3. AMENDMENT TO THE EFFECT THAT THE SUB-SECTION (2) OF SECTION 115BBE SO AS TO PROVIDE THAT THE SET OFF OF ANY LOSS SHALL ALSO BE NOT ALLOWABLE IN RESPECT OF INCOME UNDER THE AFORESAID SECTIONS. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2017 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2017-2018 AND SUBSEQUENT YEARS. AFORESAID AMENDMENT CAN NOT B E APPLIED RETROSPECTIVE OTHERWISE THERE IS NO RATIONALE TO EF FECT AFORESAID AMENDMENT. IT IS ALSO SETTLED POSITION OF LAW THAT RESTRICTIVE AMENDMENTS ARE APPLICABLE PROSPECTIVELY.' III. THE HON'BLE ITAT, MUMBAI BENCH IN THE CASE OF ACIT V/S RAHIL AGENCIES IN I.T.A. NO. 4413/MUM/2014 DATED 23/11/20 16. THE HON'BLE BENCH HELD AS UNDER: - '19. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT BY APPLYING PROVISIONS OF SECTION 115BBE THE AO HAS DE CLINED SET OFF OF BUSINESS LOSS AGAINST INCOME DECLARED DURING THE CO URSE OF SURVEY/SEARCH. THE PROVISIONS OF SECTION 115BE ARE APPLICABLE ON THE INCOME TAXABLE UNDER SECTION 68, 69, 69A, 69B, 69C OR 69D OF THE ACT. THE INCOME DECLARED BY THE ASSESSEE IS UNRECOR DED STOCK OF DIAMOND FOUND DURING THE COURSE OF SEARCH. THE ASSE SSEE IS IN THE BUSINESS OF DIAMOND TRADE AND SUCH STOCK WAS PART OF THE BUSINESS AFFAIR OF THE COMPANY. THEREFORE SINCE INCOME DECLA RED IS IN THE NATURE OF BUSINESS INCOME, THE SAME IS NOT TAXABLE UNDER ANY OF THE SECTION REFERRED ABOVE AND ACCORDINGLY SECTION 115B BE HAS NO APPLICATION IN CASE. 20. FURTHERMORE, THE MEMORANDUM TO THE FINANCE BILL , 2012 READ ON SECTION 115BBE READS AS UNDER :- 'UNDER THE EXISTING PROVISIONS OF THE INCOME-TAX AC T, CERTAIN UNEXPLAINED AMOUNTS ARE DEEMED AS INCOME UNDER SECT ION 68, SECTION 69, SECTION 69A, SECTION 69B, SECTION 69C A ND SECTION 69D OF THE ACT AND ARE SUBJECT TO TAX AS PER THE TAX RATE APPLICABLE TO THE ASSESSEE. IN CASE OF INDIVIDUALS, HUF, ETC., NO TA X IS LEVIED UP TO THE 16 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES BASIC EXEMPTION LIMIT. THEREFORE, IN THESE CASES, N O TAX CAN BE LEVIED ON THESE DEEMED INCOME IF THE AMOUNT OF SUCH DEEMED INCOME IS LESS THAN THE AMOUNT OF BASIC EXEMPTION LIMIT AND E VEN IF IT IS HIGHER, IT IS LEVIED AT THE LOWER SLAB RATE. IN ORDER TO CU RB THE PRACTICE OF LAUNDERING OF UNACCOUNTED MONEY BY TAKING ADVANTAGE OF BASIC EXEMPTION LIMIT, IT IS PROPOSED TO TAX THE UNEXPLAI NED CREDITS, MONEY, INVESTMENT, EXPENDITURE, ETC., WHICH HAS BEEN DEEME D AS INCOME UNDER SECTION 68, SECTION 69, SECTION 69A, SECTION 69B, SECTION 69C OR SECTION 69D, AT THE RATE OF 30% (PLUS SURCHARGE AND CESS AS APPLICABLE). IT IS ALSO PROPOSED TO PROVIDE THAT NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE SHALL BE AL LOWED TO THE ASSESSEE UNDER ANY PROVISION OF THE ACT IN COMPUTIN G DEEMED INCOME UNDER THE SAID SECTIONS.THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2013 AND WILL, ACCORDINGLY, APPLY IN REL ATION TO THE ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT Y EARS. [CLAUSE 45). 21. THUS, IN THE ACT ITSELF IT IS CLEARLY MENTIONED THAT THIS SECTION IS APPLICABLE FROM 1ST DAY OF APRIL, 2013. WHEN THE LE GISLATURE ITSELF PROVIDED THAT THE PARTICULAR PROVISIONS ARE APPLICA BLE PROSPECTIVELY THEN SUBMISSION OF LD D.R. THAT THE SECTION IS APPL ICABLE RETROSPECTIVELY WITHOUT ANY BASIS IS NOT TENABLE. F URTHER, IT IS NOT A MATTER OF INSERTION OF EXPLANATION OR CLARIFICATION TO SOME EXISTING PROVISIONS OF LAW. IT IS A NEW SECTION INSERTED BAR RING CLAIM OF EXPENSES/ ALLOWANCE AGAINST PARTICULAR INCOME. THER EFORE ANY BAR OR RESTRICTIONS OF A CLAIM CANNOT BE APPLIED RETROSPEC TIVELY. IT IS WELLSETTLED RULE OF INTERPRETATION ALLOWED BY TIME AND SANCTIFIED BY JUDICIAL DECISIONS THAT RETROSPECTIVE OPERATION SHO ULD NOT BE GIVEN TOA STATUTE SO AS TO EFFECT, ALTER OR DESTROY AN EX ISTING RIGHT OR CREATE A NEW LIABILITY OR OBLIGATION. IF THE ENACTMENT IS EXPRESSED IN LANGUAGE WHICH IS FAIRLY CAPABLE OF EITHER INTERPRE TATION, IT OUGHT TO BE CONSTRUED AS PROSPECTIVE ONLY AS PER RATIO OF HO NBLE SUPREME COURT IN THE CASE OF GOVINDDAS VS. ITO, (1976) 103IT R 123 (SC). A STATUE WHICH DEALS WITH MATTER OF SUBSTANTIVE LAW A ND TAXATION IS MATTER OF SUBSTANTIVE LAW-WOULD NOT BE CONSTRUED TO HAVE RETROSPECTIVE OPERATION UNLESS SUCH A CONSTRUCTION APPEARS VERY CLEARLY IN THE TERMS OF THE ACT OR ARISES BY NECESS ARY IMPLICATION. 22. AS PER OUR CONSIDERED VIEW, SECTION 115BBE BAR FROM CLAIMING ANY EXPENSES OR ALLOWANCE FROM THE INCOME TAXABLE U NDER SECTION 17 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES 68, 69, 69A, 69B, 69C, OR 69D OF THE ACT. IN THE IN STANT CASE BEFORE US THE CLAIM WAS OF SET OFF OF BUSINESS LOSS AGAINST I NCOME DECLARED DURING SEARCH. THERE IS VITAL DIFFERENCE BETWEEN TH E LOSS AND EXPENSES/ ALLOWANCE. HON'B1E SUPREME COURT IN CASE OF CIT VS. WALLFORD SHARE & STOCK BROKERS PVT. LTD ( 326 ITR 1) WHILE DISCUSSING THE ISSUE THAT LOSSES INCURRED IN MUTUAL FUND FROM WHICH DIVIDEND RECEIVED, CANNOT BE CONSIDERED FOR THE PURPOSE OF S ECTION 14A OF THE ACT AND HELD THAT: 'WE MAY REITERATE THAT ONE MUST KEEP IN MIND THE CON CEPTUAL DIFFERENCE BETWEEN LOSS EXPENDITURE, COST OF ACQUIS ITION, ETC. WHILE INTERPRETING THE SCHEME OF THE ACT.' IN VIEW OF THE DECISION OF HONBLE SUPREME COURT, B USINESS LOSS CANNOT BE TREATED AT PAR WITH THE EXPENSES / ALLOWA NCES AND SUCH BUSINESS LOSS CAN BE SET OFF AGAINST ANY TYPE OF IN COME AS SECTION 71 DO NOT DEBAR FROM SETTING OFF SUCH LOSSES. CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE BEN CH IN THE ABOVE CITED CASE, WE ALSO HOLD THAT THE ORDER PASSED BY L D CIT(A) ON ALL THE ISSUES DOES NOT CALL FOR ANY INTERFERENCE.' 12. ON THE OTHER HAND, THE LD DEPARTMENTAL REPRESEN TATIVE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER CONT ENDED THAT THE ASSESSING OFFICER WAS PERFECTLY JUSTIFIED IN ADDING THE AMOUNT U/S 68/69 OF THE ACT. ACCORDINGLY, THE LEVY OF TAX U/S 115BBE OF THE ACT WAS @ 30% ON SUCH INCOME. 13. I HAVE HEARD THE RIVAL CONTENTIONS AND RECORD P ERUSED. I HAVE ALSO CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. I HAVE ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY THE L D AR DURING THE COURSE OF HEARING BEFORE THE ITAT IN THE CONTEXT OF FACTUAL M ATRIX OF THE CASE. FROM 18 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES THE RECORD, I FIND THAT DURING THE COURSE OF SURVEY , INCOME WAS SURRENDRED BY THE ASSESSEE ON ACCOUNT OF STOCK, EXCESS CASH FOUND OUT OF SALE OF STOCK AND ALSO IN RESPECT OF INCRIMINATING DOCUMENTS. AS PER JUDICIAL PRONOUNCEMENTS CITED BY THE LD. AR AND ALSO THE DECISION OF HONBL E RAJASTHAN HIGH COURT IN THE CASE OF BAJRANG TRADERS IN INCOME TAX APPEAL NO . 258/2017 DATED 12/09/2017 I OBSERVE THAT THE HON'BLE HIGH COURT IN RESPECT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AND SURRENDER MAD E THEREOF WAS FOUND TO BE TAXABLE UNDER THE HEAD BUSINESS AND PROFESSION . SIMILARLY IN RESPECT OF EXCESS CASH FOUND OUT OF SALE OF GOODS IN WHICH THE ASSESSEE WAS DEALING WAS ALSO FOUND TO BE TAXABLE AS BUSINESS INCOME. APP LYING THE PROPOSITION OF LAW LAID DOWN IN THE JUDICIAL PRONOUNCEMENTS AS DISCU SSED ABOVE, I HOLD THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN TAXING TH E SURRENDER MADE ON ACCOUNT OF EXCESS STOCK AND EXCESS CASH FOUND U/S 6 9 OF THE ACT. THUS, THERE IS NO JUSTIFICATION FOR TAXING SUCH INCOME U/S 115B BE OF THE ACT. 14. SO FAR AS THE SURRENDER OF INCOME IS ON ACCOUNT OF INCRIMINATING DOCUMENTS, IT IS NOT CLEAR AS TO WHETHER IT WAS OUT O F THE BUSINESS TRANSACTION, THE ASSESSEE WAS CARRYING ON IN THE REG ULAR COURSE OF BUSINESS. HOWEVER, AUTHORITIES HAD NOT GIVEN ANY FINDING ON TH E NATURE OF SUCH INCRIMINATING DOCUMENTS NOR WITH REGARD TO INCOME SU RRENDER WITH RESPECT TO THESE DOCUMENTS. THEREFORE, IN THE INTEREST OF JUST ICE, I RESTORE THE ISSUE 19 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES WITH REGARD TO SURRENDER OF INCOME ARISING OUT OF IN CRIMINATING DOCUMENTS TO THE FILE OF THE ASSESSING OFFICER TO FIND OUT THE N ATURE OF SUCH INCOME IF ARISING OUT OF THE BUSINESS TRANSACTION CARRIED ON BY THE ASSESSEE AND TO DECIDE THE ISSUE AFRESH AS PER LAW. NEEDLESS TO SAY THAT THE ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY BEFORE DECIDING THE ISSUE. 15. IN THE RESULT, ALL THE APPEALS ARE ALLOWED IN P ART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 25/05/2018. SD/- [R.C. SHARMA] ACCOUNTANT MEMBER DATED : 25/05/2018 *RANJAN COPY TO : 1. THE APPELLANT/S 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 6. GUARD FILE (ITA NO. 142 TO 146/JODH/2018) ASSISTANT REGISTRAR JODHPUR BENCH