Bhima Jewellers, Sulthan Bathery, Wayanad V. The Pr CIT, Kozhikkode, Kozhikkode

ITA 208/COCH/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4207 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 07-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DHANARAJ A
• Assessee Lawyers: R KRISHNAN
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Business income; Depreciation; Salary income; Deemed to accrue or arise in india; Wrong claim; Unabsorbed depreciation
• Section: 69C; 143(3); 68; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM I .T.A. NO. 208 /COCH/ 2 01 8 ASSESSMENT YEAR : 20 13 - 14 M/S. BHIMA JEWELLERS, 6/785 AI, MYSORE ROAD, CHUNGUM JUNCTION, SULTHAN BATHERY, WAYANAD-673 592. [PAN: AAKFB 9817C] VS. THE PR. COMMISSIONER OF INCOME - TAX, KOZHIKODE. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) REVENUE BY SHRI DHANARAJ A. SR. DR ASSESSEE BY SHRI R. KRISHNAN, CA D ATE OF HEARING 05 / 0 7 /2018 DATE OF PRONOUNCEMENT 20 / 0 8 /2018 O R D E R PER CHANDRA POOJARI: AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED U/S. 263 OF THE ACT BY THE PR. CIT, KOZHIKODE DATED 30/03/2014 AND PERTAINS TO THE ASSESSMENT YEAR 2013-14. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 18/03/2016 ON A TOTAL INCOME OF RS.17,12,120/- BY MAKING LUMP SUM ADDITION OF RS.3,00,000/- TO THE INCOME RETURNED BY TAKING THE VOLUME OF BUSINESS AND DISCREPANCIES IN THE STATEMENT OF ACCOUNTS. ON PERUSAL OF RECORDS, IT WAS NOTICED ITA NO. 208/COCH/2018 2 THAT THE ASSESSMENT U/S. 143(3) OF THE ACT PASSED BY THE ASSESSING OFFICER IS PRIMA FACIE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE FOLLOWING REASONS: I) IT IS SEEN FORM THE RECORDS THAT THE ASSESSEE HAD UNEXPLAINED CREDITS TO THE TUNE OF RS.1,86,00,000/- IN CAPITAL ACCOUNT AND NET LOSS OF RS.1,76,24,221/- WAS SET OFF AGAINST THIS CASH CREDIT. II) AS PER SECTION 115BBE, 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 REFERRED TO IN SECTION 68, AT THE RATE OF 30% AND B) THE AMOUNT OF INCOME TAX WITH WHICH THE ASSESSEE WOULD HAVE BEEN CHARGEABLE HAD HIS TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME REFERRED TO IN CLAUSE (A). AS SUCH, THE ABOVE UNEXPLAINED CREDIT U/S. 68 SHOULD BE TAXED AT 30%. III) THE HONBLE HIGH COURT OF KERALA IN THE CASE OF M/S. KERALA SPONGE IRON LTD. HELD THAT UNEXPLAINED CASH CREDIT CANNOT BE TREATED AS BUSINESS INCOME BECAUSE IT IS NOT AN INCOME CLASSIFIABLE UNDER ANY HEAD OF INCOME AS PER SECTION 14 AND SUCH INCOMES ARE NOT ELIGIBLE FOR SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION. ON THE BASIS OF THIS JUDGMENT UNEXPLAINED CASH CREDIT OF RS.186,00,000/- IS NOT ELIGIBLE FOR SET OFF OF BUSINESS LOSS OF RS.1,76,24,221/-. 3. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE ISSUE, VERIFIED THE FACTS AND THEREFORE, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, THE CIT SET ASIDE THE ASSESSMENT FOR CONSIDERATION FRESH BY THE ASSESSING OFFICER AFTER GOING THROUGH THE RELEVANT CIRCULARS AND CASE LAWS, AND SUCH VERIFICATION AS MAY BE NECESSARY WITH SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. ITA NO. 208/COCH/2018 3 4. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT THE CIT HAS SET ASIDE THE ASSESSMENT WITHOUT CONSIDERING THE OBJECTIONS RAISED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE CIT HAS NOT GIVEN A CATEGORICAL FINDING IN THE ORDER U/S. 263 THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD OFFERED THE ADDITIONAL INCOME OF RS.1.86 CRORES UNDER THE HEAD BUSINESS IN THE RETURN OF INCOME. IT WAS SUBMITTED THAT ACCOUNTING REQUIRES THAT THE CAPITAL ACCOUNT SHOULD BE CREDITED, WHERE THE INCOME IS DIRECTLY TAKEN INTO CAPITAL AND NOT THE REVENUE ACCOUNT. ACCORDING TO THE LD. AR THE ADDITIONAL OFFER WAS TO COVER THE NEGATIVE RESULT IN THE BUSINESS AND THE CREDIT IN CAPITAL ACCOUNT WAS TO GIVE EFFECT TO THE OFFER IN THE FORM OF JOURNAL ENTRY. THE LD. AR SUBMITTED THAT THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF KERALA SPONGE IRON LTD. (379 ITR 330) IS TOTALLY ON A DIFFERENT CONTEXT. IN THE CASE OF KERALA SPONGE IRON LTD. (SUPRA), THE ASSESSEE CLAIMED CERTAIN AMOUNTS AS HAVING RECEIVED AS COMMODITY TRADING PROFIT BUT IN THE PRESENT CASE, THE ASSESSEE IS INVOLVED ONLY IN BUSINESS OF TRADING IN GOLD AND THEREFORE, THE INCOME CAN BE OFFERED ONLY UNDER BUSINESS. ACCORDING TO THE LD. AR SECTION 115BBE WAS AMENDED BY FINANCE ACT, 2016 TO EXPLICITLY STATE THAT THE INCOME ASSESSED UNDER SECTION 68 TO 69D WILL BE SUBJECTED TO TAX AT FLAT RATE OF 30% AND NOT SET OFF OF LOSS WOULD BE ALLOWED AGAINST SUCH INCOME. IT WAS SUBMITTED THAT THE MEMORANDUM EXPLAINING THE AMENDMENTS CLEARLY STATES THAT THE AMENDMENT WOULD TAKE PLACE PROSPECTIVELY FORM AY 2017-18 ONWARDS. ITA NO. 208/COCH/2018 4 THEREFORE, PRIOR TO THE AMENDMENT IN SECTION 115BBE, THERE IS NO PROHIBITION THAT THE UNEXPLAINED CREDITS SHOULD BE TAXED AT FLAT RATE AND THE SAME CANNOT BE SET OFF AGAINST BUSINESS LOSS. THUS, IT WAS SUBMITTED THAT THE SOURCE OF INCOME IS FROM BUSINESS AND THEREFORE THE PROVISIONS OF SECTION 115BBE IS NOT APPLICABLE. 4.1 THE LD. AR RELIED ON THE JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF CHENSING VENTURES (291 ITR 258) WHEREIN IT WAS HELD THAT THE ASSESSING OFFICER HAS NOT GIVEN 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 LOSS AGAINST INCOME UNDER ANY OTHER HEAD. AFTER SETTING OFF LOSSES AGAINST THE INCOME UNDER THE SAME HEAD, IF THE NET RESULT IS STILL A LOSS, THE ASSESSEE CAN SET OFF THE SAID LOSS UNDER SECTION 71 OF THE ACT AGAINST INCOME OF THE SAME YEAR UNDER ANY OTHER HEAD, EXCEPT FOR LOSSES WHICH ARISE UNDER THE HEAD CAPITAL GAINS. THE LD. AR ALSO RELIED ON THE FOLLOWING JUDGMENTS: I) CIT VS. WALFORT SHARE & STOCK BROKERS IN CIVIL APPEAL NO. 4927 OF 2010 DATED 06/07/2010 (SC). II) ACIT VS. M/S. SANJAY BAIRATHI GEMS LTD. IN ITA NO. 157/JP/2017 DATED 08/08/2017 (ITAT, JAIPUR BENCHES) III) NEO SPORTS BROADCAST PVT. LTD. VS. CIT(TDS) IN ITA NOS. 4010&4011/MUM/2014 DATED 19/02/2016 (ITAT, MUMBAI BENCHES) IV) LAKSHYA SETH VS. ITO IN ITA NO. 218/DEL/2015 DATED 07/10/2015 (ITAT, DELHI BENCHES) ITA NO. 208/COCH/2018 5 V) AKR POLY INDUSTRIES VS. DEPARTMENT OF INCOME TAX IN ITA NO.1042/MDS/2012 DATED 29/01/2013 (ITAT, CHENNAI BENCHES) 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE JUDGMENT ON THE KERALA HIGH COURT IN THE CASE OF CIT VS. KERALA SPONGE IRON LTD. (379 ITR 330) WHEREIN IT WAS HELD THAT WHEN INCOME COULD NOT BE CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME U/S. 14 OF THE ACT, IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCTION UNDER THE PROVISIONS WHICH CORRESPOND TO SUCH HEADS OF INCOME WILL NOT ARISE. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMOVE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFFICER TAKES A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS, WHERE SUCH INQUIRY WAS PRIMA FACIE WARRANTED. THE COMMISSIONER IS WELL WITHIN HIS POWERS TO TREAT AN ORDER AS ERRONEOUS ON THE GROUND THAT THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING THE WRONG CLAIMS MADE BY THE ASSESSEE. THE ASSESSING OFFICER CANNOT REMAIN PASSIVE IN THE FACE OF A CLAIM, WHICH CALLS FOR FURTHER ENQUIRY TO KNOW THE GENUINENESS OF IT. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOUSLY ON THE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCED BY THE ASSESSEE BEFORE HIM. THE ASSESSING OFFICER WAS ITA NO. 208/COCH/2018 6 STATUTORILY REQUIRED TO MAKE THE ASSESSMENT U/S. 143(3) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) OF SECTION 143(3). THE AO IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. THE ASSESSING OFFICER SHOULD PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THAT NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE TAX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS ON HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS OF THE CLAIMS MADE IN THE RETURN. THE ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS WHEN AN ENQUIRY HAS NOT BEEN MADE BEFORE ACCEPTING THE CLAIM MADE BY THE ASSESSEE. 6.1 IN THE PRESENT CASE , THE ASSESSEE HAS TREATED THE UNEXPLAINED CREDIT TO THE TUNE OF RS.1.86 CRORES WHICH WAS CREDITED TO THE CAPITAL ACCOUNT AS UNEXPLAINED INCOME U/S. 68 OF THE ACT AND THEREAFTER, SET OFF THE NET BUSINESS LOSS OF RS.1,76,24,221/- AGAINST THAT UNEXPLAINED INCOME. THE AO ALLOWED THE SET OFF OF BUSINESS LOSS OUT OF UNEXPLAINED INCOME AND COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT. THE AO DISCUSSED THIS ISSUE IN PARA 4 OF HIS ORDER. IT APPEARS THAT THE ASSESSING OFFICER HAS NOT ENQUIRED INTO AND NO PROPER EFFORTS WERE MADE TO FIND OUT WHETHER THE UNEXPLAINED INCOME U/S. 68 OF THE ACT COULD BE SET OFF AGAINST BUSINESS LOSS. WITHOUT MAKING ANY ENQUIRY AT ALL TO ASCERTAIN WHETHER THE INCOME OF THE ASSESSEE WAS ASSESSED UNDER THE PROPER HEAD OR NOT, THE AO ITA NO. 208/COCH/2018 7 ACCEPTED THE ASSESSEES CLAIM. AS SUCH, THE AO ALLOWED EXCESS RELIEF TO THE ASSESSEE WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN OTHER WORDS, THE FAILURE ON THE PART OF THE AO TO MAKE NECESSARY ENQUIRY RENDERED THE ASSESSMENT ORDER ERRONEOUS WHICH ALSO RESULTED IN ALLOWING EXCESS RELIEF WHICH RENDERED THE ASSESSMENT ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE. AS SUCH, THE CIT REMITTED THE ISSUE BACK TO THE FILE OF THE AO TO EXAMINE THE ISSUE AFRESH. 6.2 BEFORE US, THE LD. AR SUBMITTED THAT THERE ARE VARIOUS JUDGMENTS ON SIMILAR ISSUE AND WHICH WERE DECIDED IN FAVOUR OF THE ASSESSEE. BEING SO, THE ASSESSMENT ORDER CANNOT BE CONSIDERED AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE ARE NOT IN AGREEMENT WITH THE LD. AR ON THIS ISSUE. THIS IS SO BECAUSE THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KERALA SPONGE IRON LTD. (379 ITR 330) CONSIDERED A SIMILAR ISSUE. IN THAT CASE THE TRIBUNAL HELD AS UNDER: THE TRIBUNAL, FOR THE ASSESSMENT YEAR 2010-11, HELD THAT THE CLAIM OF RECEIPT OF PROFIT FROM COMMODITY TRADING WAS A SHAM OR BOGUS ONE AND THE ASSESSING OFFICER RIGHTLY ASSESSED THE SUM AS CREDIT UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961. THEREAFTER, THE TRIBUNAL EXAMINED THE ILLEGALITY OF THE REJECTION OF THE CLAIM OF THE ASSESSEE TO SET OFF OF BUSINESS LOSS AND CARRY FORWARD BUSINESS LOSS AND DEPRECIATION HOLDING THAT THE ASSESSEE WAS ENTITLED TO CLAIM SET OFF OF THE CURRENT YEARS LOSS AND ALSO BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION AGAINST THE UNEXPLAINED INCOME IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF THE ACT. ON APPEAL: HELD, ALLOWING THE APPEAL, THAT THE INCOME HAD BEEN TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68. ONCE IT WAS SO DONE FOR THE PURPOSE OF SET OFF OR ANY OTHER PURPOSE, THE UNEXPLAINED INCOME COULD NOT ITA NO. 208/COCH/2018 8 BE TREATED AS BUSINESS INCOME UNDER ANY ONE OF THE HEADS PROVIDED UNDER SECTION 14 IN WHICH CASE THE QUESTION OF SET OFF DID NOT ARISE. THEREFORE, THE ORDER OF THE TRIBUNAL TO THE EXTENT IT HAD SET ASIDE THE ORDER OF THE COMMISSIONER (APPEALS) DIRECTING THE ASSESSING OFFICER TO ALLOW THE SET OFF OF THE CURRENT YEARS BUSINESS LOSS AS WELL AS BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AGAINST INCOME ASSESSED UNDER SECTION 68 WAS TO BE SET ASIDE. 6.3 FURTHER, IT EMERGES THAT IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS ACCEPTED THE INCOME RETURNED WHEREIN THE ASSESSEE HAS SET OFF BUSINESS LOSS WITH UNEXPLAINED CREDIT WHICH WAS TREATED AS ITS INCOME. SINCE THE ASSESSEE HAD TO PROVE THE IDENTITY, CAPACITY AND CREDITWORTHINESS OF THE CREDITORS IN QUESTION, WHICH LED TO THE TREATMENT OF THE ASSESSEES INCOME U/S. 68 OF THE ACT. NOW, THE ONLY ISSUE BETWEEN THE PARTIES IS THAT AS PER REVENUE, SINCE THE ADDITION IN QUESTION UNDER SECTION 68 OF THE ACT IS NOT INCOME FROM THE ASSESSEE'S BUSINESS, IT HAS BEEN WRONGLY ORDERED TO BE TREATED AS ASSESSEE'S BUSINESS INCOME. WE NOTICE THAT THE CASE LAW OF CIT VS. ABDUL RAHMAN INDUSTRIES (2007) 293 ITR 475(MAD.) AND CHENSING VENTURES (SUPRA) HAS BEEN RELIED UPON BY THE ASSESSEE WHICH IS SOUGHT TO BE DISTINGUISHED BY THE REVENUE. WE NOTICE THE FACTS OF THE SAID CASE ARE ENTIRELY DIFFERENT. IN THE SAID CASE, UNCLAIMED BALANCE IN QUESTION EMANATED FROM TRADING TRANSACTIONS AND FINDINGS HAD ALSO BEEN RECORDED THAT THE TRANSACTIONS WERE VERY MUCH CONNECTED OR CLOSELY LINKED WITH THE ASSESSEE'S BUSINESS ACTIVITIES AND THE RECEIPT HAD ARISEN ONLY OF ASSESSEE'S TRADING TRANSACTIONS, WHICH WERE HELD TO BE RIGHTLY ASSESSED UNDER THE HEAD 'BUSINESS'. WHEN WE APPLY THE SAID CASE LAW IN THE FACTS OF THE INSTANT CASE, WE FIND THE FACTUAL POSITION IS ENTIRELY DIFFERENT AS THE ASSESSEE HAS ITA NO. 208/COCH/2018 9 NOT PROVED THE SOURCE OF UNEXPLAINED CREDIT, THE IDENTITY, CAPACITY, GENUINENESS AND CREDIT WORTHINESS OF THE TRANSACTIONS IN QUESTION AND FURTHER, IT HAS ALSO NOT SHOWN THE AMOUNT IN ITS DULY AUDITED ACCOUNTS AS ITS BUSINESS INCOME. THIS LEADS TO THE INFERENCE THAT ONCE THE ASSESSEE HAS NOT SHOWN THE RECEIPT AS ITS BUSINESS INCOME, THERE IS NO REASON AS TO HOW THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE CAN BE OVERRULED BY THE AUTHORITIES. THEREFORE, IN OUR OPINION, THE AFORESAID CASE LAW IS NOT APPLICABLE IN THE ASSESSEE'S CASE. 6.4 NOW, WE COME TO THE CASE LAW OF CIT VS. MARGARET'S HOPE TEA CO. LTD.([1993] 201 ITR 747(CAL.). IN THE SAID CASE, THE FACTS BEFORE THE HON'BLE CALCUTTA HIGH COURT WERE CLEARLY DIFFERENT AS THE CASH CREDIT IN QUESTION HAD APPEARED IN THE ASSESSEE'S BOOKS OF ACCOUNTS. THEREFORE, HON'BLE HIGH COURT HAD RIGHTLY HELD THAT THE CASH CREDITS WERE RESULT OF ASSESSEE'S MAIN BUSINESS ACTIVITY. AFTER PERUSING THE SAID CASE LAW, WE NOTICE THAT THEREIN THE CONCERNED ASSESSEE HAD DULY FILED CONFIRMATIONS FROM THE CREDITORS IN QUESTION. IT WAS IN THE SAID CIRCUMSTANCES THAT THE HON'BLE CALCUTTA HIGH COURT HAD RIGHTLY UPHELD THE CLAIM OF ASSESSEE. AGAIN WE REITERATE THAT THE FACTS OF THE INSTANT CASE AS CITED ABOVE ARE DIFFERENT FROM THOSE INVOLVED IN THE ABOVE SAID CASE. THEREFORE, BOTH THE ABOVE JUDGMENTS DO NOT HELP THE ASSESSEE'S CASE. 6.5 IN THE CASE LAW OF FAKIR MOHMED HAJI HASAN VS. CIT ( [2001] 247 ITR 290 (GUJ.) WHEREIN THE ADDITION WAS UNDER THE CHAPTER VI OF THE ACT (UNDER SECTION ITA NO. 208/COCH/2018 10 69A). THE SCHEME OF THE ACT MAKES IT CLEAR THAT SECTIONS 68, 69, 69A TO 69D DEAL WITH CASH CREDITS, UNEXPLAINED INVESTMENTS, UNEXPLAINED MONEY, AMOUNT OF INVESTMENTS NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNT, UNEXPLAINED EXPENDITURE AND AMOUNT BORROWED OR REPAID AT HUNDI. A PERUSAL OF THE ABOVE PROVISIONS MAKE IT CLEAR THAT SAME LANGUAGE, ALTHOUGH IN DIFFERENT SPHERES OF ADDITIONS, HAS BEEN USED BY THE LEGISLATURE. IN THIS BACKDROP, WE PROCEED TO DEAL WITH THE CASE LAW OF HON'BLE GUJARAT HIGH COURT (SUPRA) REGARDING ADDITION HAD BEEN MADE UNDER SECTION 69A HELD THAT THE DEEMED INCOME U/S. 69A OF THE ACT DOES NOT FALL UNDER THE HEAD OF INCOME 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS WELL AS ANY OTHER HEAD. THE RELEVANT PORTION OF THE AFORESAID JUDGMENT IS REPRODUCED AS UNDER: - '6, UNDER SECTION 4 OF THE ACT, INCOME-TAX IS TO BE CHARGED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON. AS PROVIDED BY SECTION 5 OF THE ACT, TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WOULD, INTER ALIA, INCLUDE ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH IS RECEIVED OR IS DEEMED TO BE RECEIVED BY SUCH PERSON, SUBJECT TO THE PROVISIONS OF THE ACT. IT WILL BE SEEN FROM SECTION 69A THAT WHERE THE BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE IS NOT RECORDED IN THE BOOKS OF ACCOUNT AND THERE IS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF ITS ACQUISITION, OR THE EXPLANATION IS NOT SATISFACTORY, THE VALUE THEREOF MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR IN WHICH THE ASSESSEE IS FOUND TO BE THE OWNER OF SUCH BULLION, ETC. 6.1 THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C OF THE ACT WOULD SHOW THAT IN CASES WHERE THE NATURE AND SOURCE OF INVESTMENTS MADE BY THE ASSESSEE OR THE NATURE AND SOURCE OF ACQUISITION OF MONEY, BULLION ETC., OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT EXPLAINED AT ALL, OR NOT SATISFACTORILY EXPLAINED, THEN THE VALUE OF SUCH INVESTMENTS AND MONEY, OR VALUE OF ARTICLES NOT RECORDED IN THE BOOKS OF ACCOUNT OR THE UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF ITA NO. 208/COCH/2018 11 SUCH ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOUT SUCH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD STAND DISCLOSED AND WILL, THEREFORE, BE KNOWN AND THE INCOME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCOME FOR ASSESSMENT AS PER THE PROVISIONS OF THE ACT. HOWEVER, WHEN THESE PROVISIONS APPLY BECAUSE NO SOURCE IS DISCLOSED AT ALL ON THE BASIS OF WHICH THE INCOME CAN BE CLASSIFIED UNDER ONE OF THE HEADS OF INCOME UNDER SECTION 14 OF THE ACT, IT WOULD NOT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDER ANY OF THESE HEADS INCLUDING 'INCOME FROM OTHER SOURCES' WHICH HAVE TO BE SOURCES KNOWN OR EXPLAINED. WHEN THE INCOME CANNOT BE SO CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME UNDER SECTION 14, IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCTIONS UNDER THE PROVISIONS WHICH CORRESPOND TO SUCH HEADS OF INCOME WILL NOT ARISE. IF IT IS POSSIBLE LO PEG THE INCOME UNDER ANY ONE OF THOSE HEADS BY VIRTUE OF A SATISFACTORY EXPLANATION BEING GIVEN, THEN THESE PROVISIONS OF SECTIONS 69, 69A, 69B AND 69C WILL NOT APPLY, IN WHICH EVENT THE PROVISIONS REGARDING DEDUCTIONS, ETC. APPLICABLE TO THE RELEVANT HEAD OF INCOME UNDER WHICH SUCH INCOME FALLS WILL AUTOMATICALLY BE ATTRACTED. 6.2. THE OPENING WORDS OF SECTION 14 'SAVE AS OTHERWISE PROVIDED BY THIS ACT' CLEARLY LEAVE SCOPE FOR 'DEEMED INCOME 1 OF THE NATURE COVERED UNDER THE SCHEME OF SECTIONS 69, 69A AND 69C BEING TREATED SEPARATELY, BECAUSE SUCH DEEMED INCOME IS NOT INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, OR CAPITAL GAINS, NOR IS IT INCOME FROM 'OTHER SOURCES' BECAUSE THE PROVISIONS OF SECTIONS 69, 69A, 69B AND 69C TREAT UNEXPLAINED INVESTMENTS, UNEXPLAINED MONEY, BULLION, ETC., AND UNEXPLAINED EXPENDITURE AS DEEMED INCOME WHERE THE NATURE AND SOURCE OF INVESTMENT, ACQUISITION OR EXPENDITURE, AS THE CASE MAY BE, HAVE NOT BEEN EXPLAINED OR SATISFACTORILY EXPLAINED. THEREFORE, IN THESE CASES, THE SOURCE NOT BEING KNOWN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THEREFORE, THE CORRESPONDING DEDUCTIONS, WHICH ARE APPLICABLE TO THE INCOMES UNDER ANY OF THESE VARIOUS HEADS, WILL NOT BE ATTRACTED IN CASE OF DEEMED INCOMES WHICH ARE COVERED UNDER THE PROVISIONS OF SECTIONS 69, 69A, 69B & 69C IN VIEW OF THE SCHEME OF THOSE PROVISIONS. 7. IT IS THEREFORE, CLEAR THAT, WHEN THE INVESTMENT IN OR ACQUISITION OF GOLD, WHICH WAS RECOVERED FROM THE ASSESSEE WAS NOT RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH INVESTMENT OR ACQUISITION AND THE VALUE OF SUCH GOLD WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, NOR THE NATURE AND SOURCE OF ITS ACQUISITION EXPLAINED, THERE COULD ARISE NO QUESTION OF TREATING THE VALUE OF SUCH GOLD, WHICH WAS DEEMED TO BE THE INCOME OF THE ASSESSEE, AS A DEDUCTIBLE TRADING LOSS ON ITS CONFISCATION, BECAUSE SUCH DEEMED INCOME DID NOT FALL UNDER THE HEAD OF INCOME 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. ITA NO. 208/COCH/2018 12 8. IN OUR OPINION, THEREFORE, THE TRIBUNAL WAS PERFECTLY RIGHT IN HOLDING THAT THE VALUE OF THE GOLD WAS LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AS THE SOURCE OF INVESTMENT IN THE GOLD OR OF ITS ACQUISITION WAS NOT EXPLAINED AND THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM THAT THE VALUE OF THE GOLD WOULD BE ALLOWED AS A DEDUCTION FROM HIS INCOME.' SIMILARLY IN THE CASE LAW OF ITO VS DULARI DIGITAL PHOTO SERVICES (P) LTD. ( [2012] 24 TAXMAN.COM.31(CHD) ), THE QUESTION BEFORE THE CO-ORDINATE BENCH WAS WHETHER UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT CAN BE CONSIDERED FOR SET-OFF AGAINST LOSSES UNDER VARIOUS HEADS OF INCOME. AFTER EXAMINING THE RELEVANT PROVISIONS IN DETAIL, CO-ORDINATE BENCH HAS HELD THAT SINCE THE SETTING OFF OF BUSINESS LOSSES CAN ONLY BE AGAINST THE INCOME UNDER ONE OF THE HEADS IN THE 'ACT' AND NOT THE INCOME WHICH DOES NOT COME UNDER THE FIVE DIFFERENT HEADS. TO MAKE IT CLEAR, IT HAS BEEN HELD THAT SINCE SEC. 68 ADDITION IS NOT AN INCOME UNDER ANY HEADS OF INCOME AND A BUSINESS LOSS CANNOT BE SET OFF AGAINST THE SAID ADDITION. THE RELEVANT OBSERVATIONS READ AS FOLLOWS: '10. WE SHALL NOW DEAL WITH THE ISSUE AS TO WHETHER UNEXPLAINED CASH CREDITS, WHICH ARE DEEMED TO BE THE INCOME OF THE ASSESSEE UNDER SECTION 68, CAN BE CONSIDERED FOR SET-OFF AGAINST LOSSES UNDER HEADS OF INCOME AS ENUMERATED IN SECTION!4. THE ANSWER TO THE AFORESAID QUESTION LIES IN THE FACT AS TO WHETHER UNEXPLAINED CASH CREDITS TAXED UNDER SECTION 68 ARE ASSESSABLE UNDER A KNOWN SOURCE OR HEAD OF INCOME AS ENUMERATED UNDER SECTION 14. IF THEY ARE SO ASSESSABLE UNDER A HEAD OF INCOME SPECIFIED IN SECTION 14, THEY WOULD THEN AND THEN ONLY NEED TO BE SET OFF AGAINST THE LOSS FROM OTHER HEADS OF INCOME IN TERMS OF SECTION 71. CHAPTER IV OF THE INCOME TAX ACT DEALS WITH 'COMPUTATION OF TOTAL INCOME' UNDER VARIOUS HEADS OF INCOME. SECTION 14, WHICH ENUMERATES HEAD OF INCOME, FALLS UNDER CHAPTER IV AND READS AS UNDER: HEADS OF INCOME. 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 :-- ASALARIES, B -[OMITTED BY THE FINANCE ACT 1989] C-INCOME FROM HOUSE PROPERTY. ITA NO. 208/COCH/2018 13 DPROFITS AND GAINS OF BUSINESS OR PROFESSION. E,CAPITAL GAINS. FINCOME FROM OTHER SOURCES . 11. SOME OF THE SALIENT FEATURES OF SECTION 14 INSOFAR AS THEY HAVE MATERIAL BEARING ON THE ISSUE UNDER APPEAL ARE AS UNDER:- (I) SECTION 14 MERELY CLASSIFIES THE INCOME UNDER VARIOUS HEADS OF INCOME FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOME UNDER THEM. SECTION 14 DOES NOT DEAL WITH AGGREGATION OF INCOME; IT MERELY DEALS WITH CLASSIFICATION OF INCOME UNDER VARIOUS HEADS OF INCOME. 'COMPUTATION OF TOTAL INCOME UNDER VARIOUS HEADS OF INCOME' UNDER CHAPTER IV IS ALTOGETHER DIFFERENT FROM 'AGGREGATION OF INCOME' UNDER CHAPTER VI OF THE INCOME-TAX ACT. THEY DO NOT MEAN ONE AND THE SAME THING. THEY ARE FUNDAMENTALLY DIFFERENT FROM EACH OTHER. (II) SECTION 14 IS NOT A CHARGING SECTION; IT MERELY CLASSIFIES INCOME UNDER VARIOUS HEADS OF INCOME. IT IS THE TOTAL INCOME OF THE PREVIOUS YEAR AND NOT THE HEAD OF INCOME WHICH IS CHARGEABLE TO INCOME-TAX UNDER SECTION 4, OPENING WORDS OF SECTION 14 ARE '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 HEADS OF INCOME SPECIFIED THEREIN. THUS, SECTION 14 IS SUBJECT TO THE OTHER PROVISIONS OF THE I.T. ACT. TAXABILITY OF INCOME UNDER THE SPECIFIC PROVISIONS OF THE I.T. ACT OUTSIDE CHAPTER IV IS NOT AFFECTED BY HEADS OF INCOME AS CLASSIFIED IN SECTION 14. AS A COROLLARY, IT FOLLOWS THAT INCOME LIABLE TO BE TAXED UNDER THE SPECIFIC PROVISIONS OF THE I.T. ACT OUTSIDE CHAPTER IV CAN BE TAXED WITHOUT BRINGING THE SAME UNDER A HEAD OF INCOME AS SPECIFIED UNDER SECTION 14/CHAPTER IV. AT THIS STAGE IT MAY BE RELEVANT TO CONSIDER CHAPTER VI IN GENERAL AND THE PROVISIO NS OF SEC.68 IN PARTICULAR, THEY READ AS UNDER;- CHAPTER VI AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSS CASH CREDITS: ITA NO. 208/COCH/2018 14 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 13. SOME OF THE SALIENT FEATURES OF CHAPTER VI AND SECTION 68 IN SO FAR AS THEY HAVE MATERIAL BEARING ON THE ISSUE UNDER APPEAL ARE AS UNDER: (I) ANY SUM, WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE IN TERM OF SECTIONS 68,69,69A. 69B AND 69C, FALLS WITHIN THE 'SCOPE OF TOTAL INCOME' AS DEFINED IN SECTION 2(45)/5 AND IS THEREFORE CHARGEABLE TO TAX UNDER SECTION 4. IN TERMS OF CHAPTER VI IT IS AGGREGATED WITH THE INCOME COMPUTED UNDER CHAPTER IV. AGGREGATION OF INCOME UNDER CHAPTER VI IS NOT THE SAME THING AS COMPUTATION OF INCOME UNDER VARIOUS HEADS OF INCOME IN TERMS OF CHAPTER VI OF THE IT ACT. (II) COMPUTATION OF INCOME UNDER EACH HEAD OF INCOME IN TERMS OF CHAPTER IV REQUIRES DETERMINATION OF EXCESS OF GROSS RECEIPTS OVER EXPENSES LEGALLY PERMISSIBLE IN THAT BEHALF UNDER THE RELEVANT HEAD OF INCOME. AGGREGATION OF INCOME UNDER CHAPTER VI DOES NOT PROVIDE FOR ANY DEDUCTION TOWARDS ANY EXPENDITURE. IT BRINGS THE ENTIRE SUM TO THE CHARGE OF INCOME-TAX AND THUS THERE IS NO ELEMENT OF 'COMPUTATION' OF INCOME UNDER CHAPTER VI AS IN THE CASE OF INCOME FALLING UNDER SPECIFIC HEADS IN TERMS OF CHAPTER IV. IT COULD BE FOR THIS REASON THAT THE SUMS TAXED UNDER CHAPTER VI HAVE BEEN KEPT OUTSIDE THE COMPUTATIONAL PROVISIONS OF CHAPTER IV. (III) AMOUNTS ARE TAXED UNDER THE PROVISIONS OF CHAPTER VI FOR THE REASON THAT THEIR NATURE AND SOURCES ARE NOT KNOWN. ONCE THEIR NATURE AND SOURCE ARE KNOWN, THEY HAVE TO BE PEGGED TO THAT SOURCE/HEAD OF INCOME AND TAXED UNDER THE RESPECTIVE HEADS OF INCOME AS ENUMERATED IN CHAPTER IV AND NOT UNDER THE PROVISIONS OF CHAPTER VI. CONVERSELY, IF THE NATURE AND SOURCE OF SUCH AMOUNTS ARE NOT KNOWN, THEY HAVE TO BE TAXED UNDER THE SPECIFIC PROVISIONS OF CHAPTER VI. IT THEREFORE NECESSARILY FOLLOWS THAT WHAT IS TAXED UNDER THE SPECIFIC PROVISIONS OF CHAPTER VI CANNOT BE PEGGED TO ANY OF THE SOURCES/HEADS OF INCOME AS SPECIFIED IN CHAPTER IV. ITA NO. 208/COCH/2018 15 14. THE AFORESAID VIEW IS SUPPORTED BY THE SCHEME OF TAXATION UNDER THE INCOME TAX ACT. SECTION 2(45) DEFINES 'TOTAL INCOME' AS 'THE TOTAL INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN THIS ACT'. IT IS RELEVANT TO NOTE THAT THE PRINCIPAL CHARGING SECTION 4 MAKES THE 'TOTAL INCOME REFERRED TO IN THE PRINCIPAL CHARGING SECTION. SECTION 14 CLASSIFIES THE HEADS OF INCOME WHILE SECTIONS 15 TO 59 PROVIDE FOR ITS QUANTIFICATION. CHAPTER VI OF THE INCOME TAX ACT PROVIDES FOR AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSS. THUS CHAPTER VI IS IN TWO PARTS; FIRST PART DEALS WITH AGGREGATION OF INCOME WHILE THE SECOND PART DEALS WITH SET OFF OR CARRY FORWARD OF LOSSES. CHAPTER HAS BEEN PLACED AFTER CHAPTER IV AND V, IT COMES INTO PLAY ONLY AFTER THE COMPUTATION OF TOTAL INCOME UNDER THE VARIOUS HEADS OF INCOME IN TERMS OF IN TERMS OF CHAPTER IV HAS BEEN DONE. INCOME FALLING UNDER CHAPTER VI IS TAXED BY AGGREGATING THE SAME WITH THE INCOME QUANTIFIED IN TERMS OF CHAPTER IV. CHAPTER VI IS NOT SUBSERVIENT TO CHAPTER IV. BESIDES, SECTION 14 ALLOWS THE TAXABILITY OF INCOME UNDER SPECIFIC PROVISIONS OF THE I.T. ACT OUTSIDE CHAPTER IV. FOR THE REASONS AFORESTATED, THE INCOME ASSESSABLE UNDER SECTION 68 CANNOT BE ASSESSED AS INCOME FROM OTHER SOURCES UNDER SECTION 56. 15. THUS WHAT IS TAXED UNDER CHAPTER IV IS INCOME FROM A KNOWN SOURCE INCLUDING INCOME FROM OTHER SOURCES. A SOURCE OF INCOME MEANS A SPECIFIC SOURCE FROM WHICH A PARTICULAR INCOME SPRINGS OR ARISES. ONCE A SOURCE GIVING RISE TO A PARTICULAR INCOME IS IDENTIFIED, IT HAS THEN TO BE PLACED UNDER A PARTICULAR HEAD OF INCOME AS SPECIFIED IN SECTION 14. THUS INCOME CAN BE TAXED UNDER A SPECIFIC HEAD OF INCOME AS ENUMERATED IN SECTION 14 ONLY WHEN IF IS POSSIBLE TO PEG THE SAME TO A KNOW SOURCE/HEAD OF INCOME. IF THE NATURE AND SOURCE OF A PARTICULAR RECEIPT IS NOT KNOWN, IT CANNOT THEN BE PEGGED TO A KNOWN SOURCE/HEAD OF INCOME. CHAPTER IV CONTEMPLATES COMPUTATION OF INCOME ARISING FROM KNOWN SOURCES/HEADS OF INCOME WHEREAS CHAPTER VI, ON THE OTHER HAND, CONTEMPLATES AGGREGATION OF THE ENTIRE SUM THE NATURE AND SOURCES OF WHICH ARE NOT KNOWN. THE AFORESAID TWO CHAPTERS ARE COMPLETELY DIFFERENT IN THEIR NATURE, SCOPE AND EFFECT. THOUGH THE INCOME ASSESSABLE UNDER THEM ARE PART OF TOTAL INCOME AS DEFINED IN SECTIONS 2(45)/4/5 OF THE L.T. ACT YET THAT DOES NOT MEAN THAT INCOME ASSESSABLE UNDER SECTION 68 HAS TO BE ASSESSED UNDER SECTION 56. IN THE CASE BEFORE US, SOURCE OF UNEXPLAINED CASH CREDITS IS NOT KNOWN AND HENCE THEY CANNOT BE LINKED TO ANY KNOWN SOURCE/HEAD OF INCOME INCLUDING INCOME FROM OTHER SOURCES. IN ORDER TO CONSTITUTE 'INCOME FROM 'OTHER SOURCES', THE SOURCE, NAMELY, THE 'OTHER SOURCES', HAS TO BE IDENTIFIED. INCOME FROM UNEXPLAINED OR UNKNOWN SOURCES CANNOT THEREFORE BE CONSIDERED OR TAXED AS INCOME FROM OTHER SOURCES. ITA NO. 208/COCH/2018 16 THE AFORESAID VIEW IS FORTIFIED BY THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT IN FAKIR MOHMED HAJI HASAN V. CIT [2001] 247 ITR 290/[2002] 120 TAXMAN 11 IN WHICH THE HON'BLE HIGH COURT HAS HELD AS UNDER:- 'THE SCHEME OF SECTIONS 69,69A, 69B AND 69C OF THE INCOME-TAX ACT 1961, WOULD SHOW THAT IN CASES WHERE THE NATURE AND SOURCE OF INVESTMENTS MADE BY THE ASSESSEE OR THE NATURE AND SOURCE OF ACQUISITION OF MONEY, BULLION ETC. OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY THE ASSESSEE ARE NOT EXPLAINED AT ALL, OR NOT SATISFACTORILY EXPLAINED, THEN, THE VALUE OF SUCH INVESTMENTS AND MONEY OR THE VALUE OF ARTICLES NOT RECORDED IN THE BOOKS OF ACCOUNT OR THE UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOUT SUCH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD STAND DISCLOSED AND WILL, THEREFORE, BE KNOWN AND THE INCOME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCOME FOR ASSESSMENT AS PER THE PROVISIONS OF THE ACT. HOWEVER, WHEN THESE PROVISIONS APPLY BECAUSE NO SOURCE IS DISCLOSED AT ALL ON THE BASIS OF WHICH THE INCOME CAN BE CLASSIFIED UNDER ONE OF THE HEADS OF INCOME UNDER SECTION 14 OF THE ACT, IT WOULD NOT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDER ANY OF THESE HEADS INCLUDING INCOME FROM 'OTHER SOURCES' WHICH HAVE TO BE SOURCES KNOWN OR EXPLAINED. WHEN THE INCOME CANNOT BE SO CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME UNDER SECTION 14, IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCTIONS UNDER THE PROVISIONS WHICH CORRESPOND TO SUCH HEADS OF INCOME WILL NOT ARISE. IF IT IS POSSIBLE TO PEG THE INCOME UNDER ANY OF THOSE HEADS BY VIRTUE OF A SATISFACTORY EXPLANATION BEING GIVEN, THEN THESE PROVISIONS OF SECTIONS 69, 69A, 69B AND 69C WILL NOT APPLY, IN WHICH EVENT, THE PROVISIONS REGARDING DEDUCTIONS, ETC., APPLICABLE TO THE RELEVANT HEAD OF INCOME UNDER WHICH SUCH INCOME FALLS WILL AUTOMATICALLY BE ATTRACTED. THE OPENING WORDS OF SECTION 14 ARE 'SAVE AS OTHERWISE PROVIDED BY THIS ACT' CLEARLY LEAVE SCOPE FOR 'DEEMED INCOME' OF THE NATURE COVERED UNDER THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C BEING TREATED SEPARATELY, BECAUSE SUCH DEEMED INCOME IS NOT INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, OR CAPITAL GAINS, NOR IS IT INCOME FROM 'OTHER SOURCES' BECAUSE THE PROVISIONS OF SECTIONS 69,69A, 69B AND 69C TREAT UNEXPLAINED INVESTMENT, UNEXPLAINED MONEY, BULLION, ETC., AND UNEXPLAINED EXPENDITURE AS DEEMED INCOME WHERE THE NATURE AND SOURCE OF INVESTMENT, ACQUISITION OR EXPENDITURE, AS THE CASE MAY BE, HAVE NOT ITA NO. 208/COCH/2018 17 BEEN EXPLAINED OR SATISFACTORILY EXPLAINED, THEREFORE, IN THESE CASES, THE SOURCE NOT BEING KNOWN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THEREFORE, THE CORRESPONDING DEDUCTIONS WHICH ARE APPLICABLE TO THE INCOMES UNDER ANY OF THESE VARIOUS HEADS, WILL NOT BE ATTRACTED IN THE CASE OF DEEMED INCOMES WHICH ARE COVERED UNDER THE PROVISIONS OF SECTIONS 69,69A,69A AND 69C OF THE ACT IN VIEW OF THE SCHEME OF THOSE PROVISIONS.' 6.6 IN VIEW OF THE FOREGOING, WE ARE UNABLE TO HOLD THAT UNEXPLAINED CASH CREDITS ASSESSED UNDER SECTION 68 ARE TO BE ASSESSED AS INCOME FROM OTHER SOURCES UNDER SECTION 56. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH AUGUST, 2018. SD/- SD/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: DATED: 20 TH AUGUST, 2018 GJ COPY TO: 1. M/S. BHIMA JEWELLERS, 6/785 AI, MYSORE ROAD, CHUNGUM JUNCTION, SULTHAN BATHERY,WAYANAD-673 592. 2. THE INCOME-TAX OFFICER, WARD-2, KALPETTA. 3. THE PR. COMMISSIONER OF INCOME-TAX, KOZHIKODE. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN ITA NO. 208/COCH/2018 18