The ACIT, Circle-4, Surat V. M/s. Shilpa Dyeing & Printing Mills Pvt.Ltd., Surat

ITA 1838/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63019 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Assessee Lawyers: R N VEPARI
• Keywords: Business income; Income from undisclosed sources

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.1838/AHD/2012 ( & ' & ' & ' & ' / / / / ASSESSMENT YEAR : 2008-09) ACIT CIRCLE-4 SURAT & & & & / VS. M/S.SHILPA DYEING & PRINTING MILLS PVT.LTD. 434, GIDC INDUSTRIAL ESTATE SACHIN SURAT ( '# ./)* ./ PAN/GIR NO. : AAECS 0859 E ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . ' / APPELLANT BY : SHRI Y.P.VERMA, SR.D.R. ,-(+ / . ' / RESPONDENT BY : SHRI R.N. VEPARI &0 / # / / / / DATE OF HEARING : 16/10/2012 12' / # / DATE OF PRONOUNCEMENT : 19.10.12 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF THE LD.CIT(A)-IV, SURAT DATED 31.05.2012 PASSED FOR A.Y . 2008-09 AND THE GROUNDS RAISED ARE AS UNDER:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE O N ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY PROC EEDINGS TO THE TUNE OF RS.1,00,98,672/-. ITA NO. 1838/AHD/2012 ACIT VS. M/S.SHILPA DYEING & PRINTING MILLS P.LTD. ASST.YEAR - 2008-09 - 2 - 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING SET OFF OF CURRENT YEAR BUSINESS LOSS ON THE UNDISCLOSED INCOME DECLARED DURING THE COURSE OF SURVEY. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE INCOME REPR ESENTING THE EXCESS STOCK OF RS.1,00,98,672/- DETECTED DURING TH E SURVEY U/S.133A OF THE ACT WAS TREATED AS INCOME FROM BUSI NESS OR INCOME FROM OTHER SOURCES AND THEREBY ALLOWING SET OFF OF BUSINESS LOSS. 2. AT THE OUTSET, IT IS WORTH TO MENTION THAT ALL THESE THREE GROUNDS OF THE REVENUE REVOLVE AROUND A SINGLE ISSUE OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY PROCEEDINGS. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE IT ACT DATED 29.11.2010 WE RE THAT THE ASSESSEE- COMPANY IS IN THE BUSINESS OF DYEING AND PRINTING O F CLOTH. CONSEQUENCE UPON, A SURVEY U/S.133A OF THE IT ACT, AN AMOUNT OF RS.1,00,98,672/- WAS DECLARED ON ACCOUNT OF EXCESS STOCK FOUND. THE AO HAS OBJECTED THE ADJUSTMENT OF THE INCOME/LOSS A S COMPUTED BY THE ASSESSEE. FACT OF THE CASE HAVE REVEALED THAT THE SAID DISCLOSURE WAS MADE UNDER THE HEAD MISCELLANEOUS INCOME, THEREFO RE THE AO HAS OPINED THAT THE SAME WAS TO BE SEPARATELY TAXED AS INCOME FROM UNDISCLOSED INCOME. SUCH AN INCOME SHOULD NOT BE AVAILABLE FOR INTRA- HEAD ADJUSTMENT OR INTER-HEAD ADJUSTMENT, AS PER AO . ACCORDING TO AO, THE ASSESSEE HAS WRONGLY CLAIMED THE LOSS AS BU SINESS LOSS BECAUSE THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE UN ACCOUNTED INCOME WAS EARNED OUT OF BUSINESS ACTIVITY. FOLLOWING FAKIR M UHD. HAJI HASAN VS. ITA NO. 1838/AHD/2012 ACIT VS. M/S.SHILPA DYEING & PRINTING MILLS P.LTD. ASST.YEAR - 2008-09 - 3 - CIT (2001) 247 ITR 290 (GUJ.), THE AO HAS HELD THA T THE ASSESSEE WAS UNABLE TO PROVE THAT THE SAID UNACCOUNTED INCOME WA S EARNED OUT OF BUSINESS INCOME. BY TREATING THE SAID AMOUNT AS IN COME FROM UNDISCLOSED SOURCES, THE TRADING LOSS WAS NOT ALLOW ED AS DEDUCTION FROM UNDISCLOSED INCOME. THE AO HAS FINALLY ASSESSED TH E INCOME IN THE FOLLOWING MANNER. :- INCOME AS PER COMPUTATION OF INCOME RS.15,40,400/ - A) INCOME FROM BUSINESS & PROFESSION LESS : INCOME DECLARED DURING THE COURSE OF SURVEY, CONSIDERED SEPARATELY. RS.1,00 ,98,672/- -------------------- RS.(-)85,58,272/- ========== B) INCOME FROM UNDISCLSOED SOURCES INCOME DISCLOSED DURING THE COURSE OF SURVEY U/S.69 OF THE ACT. RS.1,00,98,67 2/- TOTAL INCOME RS.1,00,98,672/- ========== THUS THE LOSS OF RS.85,58,272/- IS NOT ALLOWED TO B E SET-OFF AND IS CARRIED FORWARD. 4. BEFORE LD.CIT(A), THE EXPLANATION OF THE ASSESSE E WAS THAT THE INCOME DISCLOSED AT THE TIME OF SURVEY WAS IN RESPE CT OF EXCESS STOCK FOUND WHICH WAS IN THE NATURE OF BUSINESS ACTIVITY, THEREFORE PART OF THE BUSINESS INCOME. IT HAS ALSO BEEN PLEADED THAT E VEN IF THE SAID AMOUNT ITA NO. 1838/AHD/2012 ACIT VS. M/S.SHILPA DYEING & PRINTING MILLS P.LTD. ASST.YEAR - 2008-09 - 4 - WAS TO BE TAXED, THEN THE SAME SHOULD BE UNDER THE HEAD INCOME FROM OTHER SOURCES AND, THEREFORE, THE CURRENT YEAR LOS S OUGHT TO HAVE BEEN SET-OFF AGAINST THE INCOME IN TERMS OF THE PROVISIO NS OF SECTION 71 OF IT ACT. RELIANCE WAS PLACED ON CHENSING VENTURES 291 ITR 258 (MAD.). AFTER CONSIDERING THE ARGUMENTS, LD.CIT(A HAS DECID ED THE ISSUE IN ASSESSEES FAVOUR AS UNDER:- 2.3. I HAVE GONE THROUGH THE FACTS OF THE CASE. THE A.O. HAS ACCEPTED THE CURRENT YEAR BUSINESS LOSS. HE HAS NO T ALLOWED SET OFF OF THIS LOSS AGAINST INCOME DISCLOSED DURING SURVEY AS, RELYING UPON THE DECISION IN FAKIR MOHMED HAJI HASSAN, HE H ELD THAT INCOME DISCLOSED IN SURVEY DID NOT FALL UNDER ANY H EAD OF INCOME AD THEREFORE WAS NOT ELIGIBLE FOR SET OFF WITH CURR ENT YEAR BUSINESS LOSS. THE DECISION IN THE CASE OF FAKIR MOHMED HA JI HASSAN HAS BEEN OVERTURNED BY THE HONBLE GUJARAT HIGH COURT I TSELF IN THEIR DECISION IN RADHEY DEVELOPERS PVT.LTD. WHICH HELD T HAT INCOME THAT DOES NOT FALL WITHIN THE PRESCRIBED HEADS OF I NCOME COULD NOT BE TAXED. THEREFORE, FOR THE INCOME DECLARED IN SU RVEY TO BE TAXED, IT HAS TO FALL UNDER ONE OF THE HEADS OF INCOME. O NCE A HEAD OF INCOME IS ASSIGNED TO THE ADDITIONAL INCOME DISCLOS ED, WHETHER BUSINESS OR OTHER SOURCE, IT BECOMES AVAILABLE FOR SET OFF AGAINST CURRENT YEAR BUSINESS LOSS AS CURRENT YEAR BUSINESS LOSS IS ALLOWED TO BE SET OFF AGAINST CURRENT YEAR INCOME UNDER ANY OTHER HEAD (SECTION-71). THE ASSESSEE WAS THEREFORE ELIGIBLE TO SET OFF CURRENT YEAR BUSINESS LOSS WITH INCOME DECLARED DURING SURV EY. THE A.O. IS DIRECTED TO SET OFF CURRENT YEAR BUSINESS LOSS A GAINST ADDITIONAL INCOME DECLARED DURING SURVEY. 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND ON CAREFUL EXAMINATION OF THE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS INCORRECTLY APPRECIATED THE FACTS AS ALSO THE LAW I NVOLVED IN THIS CASE. WE HAVE NOTED THAT THE IMPUGNED AMOUNT WAS DISCLOSE D UNDER THE HEAD ITA NO. 1838/AHD/2012 ACIT VS. M/S.SHILPA DYEING & PRINTING MILLS P.LTD. ASST.YEAR - 2008-09 - 5 - OTHER INCOME AS MISCELLANEOUS INCOME. THE SCHED ULE-12 OF THE BALANCE-SHEET CONTAINED SALES ALONG WITH OTHER INCO ME AND THE TOTAL OF THIS SCHEDULE WAS AT RS.11,30,85,527/-. AS PER T HE PROFIT & LOSS ACCOUNT, IT WAS CARRIED OVER AS INCOME OF SALE OF PRODUCTS AND OTHER INCOME. AGAINST THE SAID TOTAL INCOME, AN EXPENDI TURE OF RS.11,03,85,047/- WAS CLAIMED. A RESULTANT PROFIT OF RS.29,16,195/- WAS COMPUTED. THIS WAS THE PROFIT WHICH WAS COMPUTED BY THE AO AND MADE PART OF THE TOTAL INCOME COMPUTED WHICH WAS DI SCLOSED; AFTER CLAIMING DEDUCTION; AT RS.15,40,400/-. THIS COMPUT ATION THUS MADE IT CLEAR THAT IN THE SAID PROFIT THERE WAS AN AMOUNT O F UNDISCLOSED INCOME WHICH WAS OFFERED AT THE TIME OF SURVEY. AS PER TH E STATEMENT MADE AT THE TIME OF SURVEY, THE ASSESSEE HAS STATED THAT TH ERE WAS ADDITIONAL CLOTH OF 10,18,340 METERS WHICH WAS VALUED AT RS.1,00,98, 672/- . THE AOS ONLY OBJECTION IS THAT THE SAID DISCLOSURE OUGHT NO T TO BE REDUCED FROM THE INCOME FROM THE BUSINESS BEING NOT PART OF THE BUSI NESS INCOME AND THE RESULTANT LOSS OUGHT NOT TO BE ADJUSTED AGAINST THE SAID UNDISCLOSED INCOME WHICH IS TO BE TAXED INDEPENDENTLY IN THE HA NDS OF THE ASSESSEE. IN OUR CONSIDERED OPINION, THE AO HAD GONE WRONG BY NOT CONSIDERING THE PROVISIONS OF SECTION 71 OF IT ACT. IN THIS R EGARD, THE LAW PRONOUNCED IN THE CASE OF CHENSING VENTURES (SUPRA ) IS TO BE FOLLOWED, WHEREIN IT WAS HELD THAT ONCE A LOSS IS DETERMINED, THE SAME SHOULD BE SET OFF AGAINST THE INCOME DETERMINED UNDER ANY OTHER H EAD OF INCOME AND THERE WAS NO REASON FOR DENIAL OF BENEFIT U/S.71 OF IT ACT BY THE REVENUE DEPARTMENT. IN THE RESULT, WE FIND NO FORCE IN T HIS GROUND OF THE REVENUE, HENCE DISMISSED. ITA NO. 1838/AHD/2012 ACIT VS. M/S.SHILPA DYEING & PRINTING MILLS P.LTD. ASST.YEAR - 2008-09 - 6 - 6. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 19/ 10 /2012 ..&, .&../ T.C. NAIR, SR. PS '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-IV, SURAT 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER.. 16.10.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.10.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S19.10.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 19.10.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER