The ACIT, Circle-3, Surat V. M/s. Balaji Corporation, Surat

ITA 2094/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2067 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 18-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S DHAUDHARY
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Income from undisclosed sources; Loose papers; Opportunity of being heard; Deemed to accrue or arise in india; Additional evidence; Assessment record
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING : 4-2-11. DRAFTED ON: 4-2- 11. ITA NO. 2094 /AHD/ 2010 ASSESSMENT YEAR :2007-08 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, 2 ND FLOOR,ROOM NO.213 AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS. M/S. BALAJI CORPORATION, F.P.111,T.P.31, ADAJAN, SURAT. PAN/GIR NO. : AAHFB 9650J (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI D .S.DHAUDHARY, SR.D.R. RESPONDENT BY: SHRI M. K. PATEL. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, SU RAT DATED 30-3-2010. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE IS T HAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING THE ADDITION OF `.19,43,997/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED AS SESSING OFFICER OBSERVED THAT THE ASSESSEE HAS ADMITTED UNACCOUNTED INCOME OF `.1.15 CRORES DURING THE COURSE OF SURVEY UNDER SECTION 13 3A OF THE ACT ON 1-3- 2007. THE ASSESSEE FILED RETURN OF INCOME SHOWING I NCOME OF `.95,56,003/- AFTER SET OFF OF LOSS OF `.19,43,997/-. THE LEARNED ASSESSING OFFICER RELYING ON THE DECISION OF FAKIR MOHMED HAJI HASAN VS. COMM ISSIONER OF INCOME TAX (2001) 247 ITR 290 (GUJ.) AND ALSO OBSERVING TH AT THERE WAS NO PROVISION FOR ALLOWING EXPENSES, DEDUCTION, LOSS OF PARTICULAR HEAD OF INCOME PAGE 2 OF 11 CANNOT BE UTILIZE INCOME FALLING AGAINST SECTION 68 TO 69D DISALLOWED THE LOSS OF `.19,43,997/- CLAIMED BY THE ASSESSEE AND A SSESSED THE INCOME AT `.1.15 LACS WHICH WAS NOT UNDISCLOSED INCOME OF THE ASSESSEE. 4. ON APPEAL BEFORE THE CIT(A), THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE FURNISHED WRITTEN SUBMISSION DURING THE APPELLATE PROCEEDINGS, WHERE IT WAS CONTENDED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT THE DECLARATION OF `.1.15 CRORES MADE IN COURSE OF THE SURVEY WAS ON THE BASIS OF THE LOOSE PAPERS THAT WERE FOUND AND IMPOUNDED. THE ASSESSEE WAS UNDER MENTAL PRESSU RE AND WAS NOT IN A POSITION TO CORRECTLY ASCERTAIN HIS PROFIT OR INCOM E FOR THE YEAR. HOWEVER, THE ASSESSEE HAD STILL CREDITED THE SUM OF `.1.15 C RORES TO THE PROFIT AND LOSS ACCOUNT AND HAD CLAIMED LEGITIMATE EXPENSES WHICH T HE ASSESSING OFFICER DISALLOWED WITHOUT EXAMINING THE SAME. THE ASSESSEE S BOOKS WERE DULY AUDITED AND THE AUDITORS HAVE NOT POINTED OUT ANY D EFECT IN THEM, NOR WERE THE ASSESSING OFFICER ABLE TO DO SO. THE EXPENSES W HICH WERE CLAIMED WERE IN CONNECTION WITH THE CONSTRUCTION BUSINESS OF THE ASSESSEE, AND ALL SUCH EXPENSES WOULD HAVE GONE TOWARDS CREATING THE CLOSI NG STOCK. THE ASSESSING OFFICER FAILED TO EXAMINE THE BREAK-UP OF THE CLOSING STOCK OR EVEN THE VALUATION, WITHOUT WHICH HE COULD NOT TAKE THE VIEW THAT IT WAS NOT PROPERLY VALUED. IT WAS THUS REQUESTED THAT THE ADD ITION OF `.19,43,997 BE DELETED. 5. VIDE LETTER DATED 26-3-2009, THE CIT-I, SURAT REQUE STED THAT BEFORE DECIDING THE APPEAL, AN OPPORTUNITY OF BEING HEARD MAY BE GIVEN TO THE LEARNED ASSESSING OFFICER. THE CASE WAS THEREFORE, DISCUSSED ON 29-3-2010 WITH THE LEARNED ASSESSING OFFICER WHEN SHRI U.B. M ISHRA THE ADDL. CIT RANGE-3, AND SHRI P. JAGASHETH C.A. AND LEARNED AUT HORISED REPRESENTATIVE OF THE ASSESSEE OF THE ASSESSEE, WERE PRESENT. THE ASSESSMENT RECORDS WERE EXAMINED. THE LEARNED ASSESSING OFFICER FILED A DETAILED WRITTEN SUBMISSION ALONG WITH CITATION OF SEVERAL CASE-LAWS . THE APPEAL WAS THEREFORE DECIDED TAKING INTO CONSIDERATION THE ASS ESSMENT ORDER, THE WRITTEN SUBMISSION OF THE LEARNED AUTHORISED REPRES ENTATIVE OF THE PAGE 3 OF 11 ASSESSEE AND FINALLY, THE WRITTEN SUBMISSION OF THE LEARNED ASSESSING OFFICER DATED 29-3-2010. 6. THE CIT (A) OBSERVED THAT THE BASIC CONTENTION OF T HE LEARNED ASSESSING OFFICER IS THAT, THE SUBMISSIONS THAT HAV E BEEN MADE IN APPELLATE PROCEEDINGS, WERE NOT MADE DURING THE ASSESSMENT PR OCEEDINGS. NO EXPLANATION WAS FURNISHED AS TO WHY THERE WAS THE D IFFERENCE BETWEEN THE UNDISCLOSED INCOME DECLARED DURING THE SURVEY AND T HE TOTAL INCOME SHOWN IN THE RETURN OF INCOME. IT WAS ALLEGED BY THE LEAR NED ASSESSING OFFICER THAT THE ASSESSEE HAD DELIBERATELY BY PASSED THE VERY FI RST STAGE OF ADJUDICATION AND HAS NOW PLACED ARGUMENTS DIRECTLY BEFORE THE AP PELLATE AUTHORITY WITHOUT BRINGING THEM TO THE NOTICE OF THE LEARNED ASSESSING OFFICER. HE HAS THEREFORE REQUESTED THAT EITHER THE ARGUMENTS AS CO NTAINED IN HIS WRITTEN SUBMISSION BE ADMITTED AND CONSIDERED OR THE MATTER MAY BE REMANDED BACK TO HIM. 7. THE CIT (A) DID NOT AGREE WITH THE CONTENTION OF T HE LEARNED ASSESSING OFFICER. HE OBSERVED THAT AN EXAMINATION OF THE ASSESSMENT RECORDS SHOWS THAT THE ASSESSEE HAD FURNISHED VOLUM INOUS DETAILS. THE ASSESSEE AND HIS REPRESENTATIVE HAD APPEARED ON 13- 7-2009, 29-7-2009, 3- 8-2009, 17-8-2009 AND 14-12-2009. WRITTEN SUBMISSIO NS, EVEN THOUGH IN PART, WERE SUBMITTED ON EACH DAY OF APPEARANCE BY T HE ASSESSEE AND HIS LEARNED AUTHORISED REPRESENTATIVE. THEREFORE, IT CA NNOT BE SAID THAT THE ASSESSEE DID NOT FURNISH EITHER ANY EXPLANATION OR ANY DETAIL IN COURSE OF THE ASSESSMENT PROCEEDINGS. PERHAPS, THE ONLY FAILU RE ON THE PART OF THE ASSESSEE WAS TO EXPLAIN THE DIFFERENCE BETWEEN THE DISCLOSED UNACCOUNTED INCOME OF `.1.15 CRORES AND THE RETURNED INCOME OF `.95,56,003/-. THIS DID NOT REQUIRE ANY SPECIFIC EXPLANATION SINCE, THE PRO FIT AND LOSS ACCOUNT (REPRODUCED IN THE ASSESSMENT ORDER) CLEARLY SHOWED HOW THE PROFIT OF `.95,56,003/- WAS ARRIVED AT. EVEN OTHERWISE, THE A SSESSEE WAS FULLY ENTITLED AND WELL WITHIN HIS RIGHT TO RAISE A GROUND OR PLAC E AN ARGUMENT IN APPELLATE PROCEEDINGS EVEN THOUGH HE MAY NOT HAVE DONE SO BEF ORE THE LEARNED ASSESSING OFFICER. IN ANY CASE, THE LEARNED ASSESSI NG OFFICER HAS BEEN GIVEN AN OPPORTUNITY IN COURSE OF THE APPELLATE PROCEEDIN GS TO COUNTER THE PAGE 4 OF 11 SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE WHICH HE HAS DONE AND WHICH IS NOW THE SUBJECT MATT ER OF THE DISCUSSION. 8. HE THEN OBSERVED THAT IT HAS BEEN ARGUED BY THE LEARNED ASSESSING OFFICER THAT THERE WAS SUFFICIENT GROUND FOR REJECT ING THE BOOK RESULTS SINCE, A PLAIN READING OF THE PROFIT AND LOSS ACCOUNT REVE ALED THAT THE CLOSING STOCK HAD BEEN UNDERVALUED. THE EXPENSES CLAIMED AND DEBI TED TOTALED `.1,58,12,306/- WHEREAS THE CORRESPONDING SALES AND CLOSING STOCK TOTALED ONLY `.1,39,15,330/-. THE SIMPLE CONCLUSION WHICH C OULD BE DRAWN WAS THAT, EITHER THERE WAS UNDERVALUATION OF CLOSING STOCK OR THE SALES HAD NOT BEEN REFLECTED TRULY, CORRECTLY AND COMPLETELY AND THAT, THE ASSESSEE HAD WILLFULLY OMITTED TO EXPLAIN WHY SALES WERE MADE AT A LOSS. T HE LEARNED ASSESSING OFFICER HAS VEHEMENTLY CONTESTED THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT HE WAS NOT ABLE TO POINT OUT ANY DEFECT IN THE BOOKS. ACCORDING TO THE LEARNED ASSESSING OF FICER, THE TOTAL EXPENSES ATTRIBUTABLE TO THE CLOSING STOCK HAD NOT BEEN DEBI TED TO THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD OF VALUATION OF CLOSING STOC K AND THEREFORE, THERE WAS EVERY REASON FOR HIM TO CONCLUDE THAT THE BOOK RESULTS WERE NOT RELIABLE WHICH LEAD TO THE REJECTION OF THE SAME UNDER SECTI ON 145(3) OF THE I.T. ACT. 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THEREAFTER HELD AS UNDER:- 7.1. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE LEARNED ASSESSING OFFICER. FIRSTLY, HE FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE SURVEY WAS CONDUCTED ON 1-3-2007 WHEN THE BOOKS OF THE ASSESSEE WERE YET TO BE CLOSED. THE DISCLOSURE WAS MADE FOR THE CURRENT YEAR. IT CANNOT CONCLUSIVELY BE ARGUED THER EFORE, THAT THE ASSESSEE WOULD NOT HAVE SHOWN THE RECEIPT OF `.1,15 ,00,000/- IF THE SURVEY HAD NOT BEEN CARRIED OUT OR THAT THE ASSESSE E WOULD HAVE FILED A LOSS RETURN. ANY CONTENTION OR ARGUMENT SUGGESTIN G SUCH A HAPPENSTANCE IS AT BEST PRESUMPTUOUS. THE ASSESSEE STILL HAD THE OPPORTUNITY TO CLOSE ITS BOOKS AND IT CORRECTLY CRE DITED THE DISCLOSED SUM TO THE PROFIT AND LOSS ACCOUNT. THE LEARNED ASS ESSING OFFICERS OBSERVATION THAT AN ARITHMETICAL CALCULATION WOULD LEAD TO THE INEVITABLE CONCLUSION THAT THE CLOSING STOCK OR THE SALES HAD NOT BEEN FULLY DISCLOSED OR VALUED, WHICH WAS MADE WITHOUT B RINGING ON RECORD ANY DETAILS, NOW APPEARS TO BE BASED ON HIS FINDING THAT THE EXPENSES DEBITED WERE MORE THAN THE SALES AND THE CLOSING ST OCK. HE HOWEVER, HAS CONVENIENTLY LEFT OUT THE DISCLOSED INCOME OF ` .1,15,00,000/- WHICH WAS A PART OF THE CURRENT YEARS INCOME. UNLE SS AND UNTIL THE PAGE 5 OF 11 DISCLOSURE RELATES TO AN EARLIER YEAR FOR WHICH THE BOOKS HAVE ALREADY BEEN CLOSED AND AUDITED, A VIEW CANNOT BE TAKEN THA T THERE WAS CONCLUSIVE CONCEALMENT OF INCOME WHICH COULD NOT BE TAKEN INTO CONSIDERATION AS A PART OF THE RECEIPT OR INCOME FO R THE CURRENT YEAR. THE ACTION OF THE LEARNED ASSESSING OFFICER IN IGNO RING SUCH CREDIT LED TO HIS DISTORTED CALCULATION WHICH SHOWED THE EXPEN SES BEING IN EXCESS OF THE CREDITS. IN ANY CASE, UNTIL AND UNLES S THE LEARNED ASSESSING OFFICER WAS ABLE TO SHOW THAT THE EXPENSE S WERE EITHER BOGUS OR EXCESSIVE, NO ADVERSE VIEW COULD BE TAKEN. INTERESTINGLY, HE WAS NOT IN A POSITION TO DISPUTE THE SALES FIGURE O R THE CLOSING STOCK FIGURE SINCE, HE HAD NO MATERIAL OR EVIDENCE AT HIS DISPOSAL TO DO SO. AS A RESULT, HIS THAT THE SALES AND THE CLOSING STO CK HAD NOT BEEN TRULY, CORRECTLY AND COMPLETELY DISCLOSED WAS AT B EST A PRESUMPTION OR AN ASSUMPTION. 7.2. IN SUCH A SCENARIO, HE WAS ALSO NOT IN A POSITION T O TAKE THE VIEW THAT THE EXPENSES CLAIMED DID NOT GO TOWARDS CONSTI TUTING THE CLOSING STOCK. HE HAS OBSERVED IN HIS WRITTEN SUBMISSION DA TED 29-3-2010 THAT THE TOTAL EXPENSES ATTRIBUTABLE TO THE CLOSING STOC K HAD NOT BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE H EAD OF VALUATION OF CLOSING STOCK, WHICH MEANT THAT THE BOOK RESULTS WE RE NOT TRUE AND CORRECT. SUCH AN OBSERVATION OR FINDING IS NOT BASE D ON FACTS, ESPECIALLY WHEN HE MADE NO EFFORT TO EXAMINE THE EX PENSES OR EVEN VALUATION OF THE CLOSING STOCK, DETAILS OF WHICH HA D ALL BEEN FURNISHED IN COURSE OF THE ASSESSMENT PROCEEDINGS AS IS EVIDE NCED BY THE VOLUMINOUS ASSESSMENT RECORD WHICH WERE EXAMINED IN HIS PRESENCE AS ALSO THE ADDL. C.I.T. RANGE-3 AND THE LEARNED AU THORISED REPRESENTATIVE OF THE ASSESSEE. 8. IT HAS BEEN STATED BY THE LEARNED ASSESSING OFFI CER IN HIS WRITTEN SUBMISSION THAT THE WORKING PARTNER OF THE ASSESSEE WAS REQUESTED TO ESTABLISH THE SOURCE OF INCOME DISCLOS ED DURING THE SURVEY, WHICH HE FAILED TO DO. HE HAD THUS FAILED T O BRING ON RECORD THE CORRECT FACTUAL POSITION, AND HAD AUDACIOUSLY D ECLINED TO STATE ANYTHING REGARDING THE DIFFERENCE BETWEEN THE DISCL OSED AND THE RETURNED INCOME. IT HAS BEEN FURTHER ARGUED BY THE LEARNED ASSESSING OFFICER THAT SINCE THE DISCLOSURE DURING THE SURVEY WAS MADE ON THE BASIS OF THE LOOSE PAPERS THAT WERE FOUND AND IMPOU NDED, THERE WAS NO REASON WHY THE PARTNER OF THE ASSESSEE FIRM WHO HAD MADE THE DISCLOSURE, WOULD HAVE BEEN UNDER TREMENDOUS MENTAL AND PSYCHOLOGICAL PRESSURE AS CLAIMED BY THE LEARNED AU THORISED REPRESENTATIVE OF THE ASSESSEE. FURTHER SINCE THE A SSESSEE HAD NOT CHALLENGED THE DISCLOSURE, THEN WHY SHOULD SUCH A C LAIM BE MADE? 8.1. I FIND THAT THE LEARNED ASSESSING OFFICER HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THAT WHAT WAS IMPOUNDED WERE CERTAIN DIARIES AND SOME LOOSE PAPERS WHICH HAD NUMEROUS ENTRIES. N EITHER THE SURVEY PARTY, NOR THE PARTNER OF THE ASSESSEE FIRM WAS PRESENT DURING THE SURVEY, WAS IN A POSITION TO WORK OUT THE EXTEN T OF CONCEALMENT OF INCOME. IN SUCH A SITUATION, ANY PERSON WHO IS BEIN G SURVEYED WOULD PAGE 6 OF 11 HAVE BEEN UNDER TREMENDOUS MENTAL AND PSYCHOLOGICAL PRESSURE TO WORK OUT THE CORRECT CONCEALED INCOME UNDER PRESSUR E FROM THE SURVEY PARTY. IT WOULD NOT BE OUT OF PLACE TO MENTI ON THAT, EVEN THE SURVEY PARTY IS ALSO UNDER MENTAL AND PSYCHOLOGICAL PRESSURE TO OBTAIN MAXIMUM DISCLOSURE, AS A MEASURE OF THEIR SU CCESS. THE DIARIES AND LOOSE PAPERS INCLUDED SEVERAL ENTRIES W HICH REPRESENTED NOT ONLY ON-MONEY RECEIPTS BUT ALSO EXPENSES INCURR ED. THE LOOSE PAPERS INCLUDED SEVERAL PURCHASE BILLS. I HAVE EXAM INED ALL SUCH IMPOUNDED MATERIALS. IT WOULD HAVE BEEN SIMPLY IMPO SSIBLE TO DRAW THE PROFIT AND LOSS ACCOUNT AT THE SURVEY SPOT. THE REFORE, THE FACTUM OF THE PARTNER BEING UNDER MENTAL PRESSURE TO MAKE A DISCLOSURE CANNOT BE DENIED. THIS IS IMPORTANT IN VIEW OF THE FACT THAT WHILE FINALLY DRAWING THE PROFIT AND LOSS ACCOUNT, THE AS SESSEE FIRM ALSO CLAIMED SEVERAL EXPENSES WHICH HAVE NOT BEEN DISPUT ED OR CHALLENGED BY THE LEARNED ASSESSING OFFICER, EVEN T HOUGH IT WAS THE PROFIT AND LOSS ACCOUNT WHICH LED TO REJECT THE BOO K RESULTS AND TO MAKE THE ADDITION OF THE DIFFERENCE BETWEEN THE DEC LARED INCOME OF `.1,15,00,000/- AND THE RETURNED INCOME OF `.95,56, 003/-. 8.2. THE IMPORTANT THING TO CONSIDER IS THAT, THE S URVEY REPORT WHICH IS ALSO ON RECORD DOES NOT CONTAIN ADVERSE REMARK R EGARDING THE BOOKS OF ACCOUNT OR THE BOOKS RESULTS WHICH MEANS T HAT THE BOOKS WERE DULY MAINTAINED AND SO WERE THE SUPPORTING DOC UMENTS. THE BOOKS WERE DULY AUDITED AFTER THE ACCOUNTS WERE CLO SED SUBSEQUENTLY. IF THAT BE THE CASE, THEN THE LEARNED ASSESSING OFF ICER WAS SIMPLY NOT JUSTIFIED IN REJECTING THE BOOK RESULTS MERELY ON T HE PRESUMPTION THAT THE SALES OR THE CLOSING STOCK WERE NOT PROPERLY, T RULY OR FULLY DISCLOSED, WITHOUT EVEN BOTHERING TO EXAMINE OR VER IFY EITHER THE EXPENSES OR THE SALES OR THE VALUATION OF THE CLOSI NG STOCK, DETAILS OF WHICH ARE AVAILABLE ON RECORDS. 9. EVEN THOUGH THE LEARNED ASSESSING OFFICER HAS VE HEMENTLY ARGUED AGAINST THE ADMISSION OF ANY ADDITIONAL GROU ND IN APPEAL YET, THE CASE-LAWS THAT HAVE BEEN RELIED UPON BY HIM PER TAIN TO THE ADMISSION OF ADDITIONAL EVIDENCE. THE LEARNED ASSES SING OFFICER IS PERHAPS AWARE OF THE FACT THAT NO ADDITIONAL EVIDEN CE HAS BEEN SOUGHT TO BE FILED IN COURSE OF THE APPELLATE PROCE EDINGS. THERE IS NO ADDITIONAL GROUND TAKEN. THE PROFIT AND LOSS ACCOUN T OF THE ASSESSEE REPRODUCED BY THE LEARNED ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER (PARA 5.1 PAGE-3) IS SELF EXPLANAT ORY. THE ASSESSEE HAS ONLY DISPUTED THE CONCLUSION DRAWN BY THE LEARN ED ASSESSING OFFICER ON THE BASIS OF THE PROFIT AND LOSS ACCOUNT . THATS ALL. AND HAS CONTENDED THAT THE BOOKS OF ACCOUNT WERE REJECTED O NLY ON THE BASIS OF PRESUMPTION AND ASSUMPTIONS. 10. COMING BACK TO THE ASSESSMENT ORDER, IT IS SEEN THAT THE LEARNED ASSESSING OFFICER MADE A MENTION OF SOME AR ITHMETICAL CALCULATION WHICH, ACCORDING TO HIM, SHOWED THAT EI THER THE SALES HAD BEEN SUPPRESSED OR THE CLOSING STOCK HAD NOT BEEN V ALUED PROPERLY. HOWEVER, HE FAILED TO PROVIDE SUCH CALCULATION, AND HENCE, THE BASIS PAGE 7 OF 11 OF TAKING THE VIEW THAT EITHER THE SALES HAD BEEN S UPPRESSED OR THE CLOSING STOCK HAD NOT BEEN VALUED PROPERLY WHICH WA S THUS NOT JUSTIFIED. IT IS EVIDENT THAT THE LEARNED ASSESSING OFFICER WAS NOT REALLY CLEAR ABOUT WHETHER THE SALES HAD BEEN SUPPRESSED O R WHETHER THE CLOSING STOCK WAS UNDERVALUED. THE OBSERVATION THER EFORE, WAS PRESUMPTUOUS. THERE WAS ALSO NO BASIS FOR HIM TO OB SERVE THAT THE WAGES OF `.41,50,000/- HAD NOT BEEN ADDED TO THE OP ENING STOCK AND PURCHASES TO ARRIVE AT THE CLOSING STOCK AFTER EFFE CTING THE SALES (PARA- 5.3). THE PROFIT AND LOSS ACCOUNT REPRODUCED BY THE LEARNED ASSESSING OFFICER IN PARA 5.1 OF THE ASSESSMENT ORDER, CLEARL Y SHOWS THAT A SUM OF `.44,50,000/- HAD BEEN DEBITED UNDER THE HEAD OF SALARY AND WAGES THE BREAK-UP OF WHICH HOWEVER THE LEARNED AS SESSING OFFICER FAILED TO BRING ON RECORD. THERE WAS THUS ABSOLUTEL Y NO BASIS FOR THE LEARNED ASSESSING OFFICER TO TAKE THE VIEW THAT THE BOOKS OF THE ACCOUNT OF THE ASSESSEE WERE NOT RELIABLE. 11. INTERESTINGLY, AFTER REJECTING THE BOOKS RESULT S UNDER SECTION 145(3) OF THE ACT, THE LEARNED ASSESSING OFFICER ON LY ADDED THE SUM OF `.19,43,997/- WHICH WAS THE DIFFERENCE BETWEEN T HE UNDISCLOSED INCOME OF `.1.15 CRORES, AND THE RETURNED INCOME OF `.95,56,003/-. AS ALREADY OBSERVED, THE LEARNED ASSESSING OFFICER REJ ECTED THE BOOK RESULTS SINCE, ACCORDING TO HIM, THE SALES AND CLOS ING STOCK WERE NOT FULLY AND TRULY DISCLOSED AND VALUED. IF THAT BE SO , THEN THE LEARNED ASSESSING OFFICER OUGHT TO HAVE ESTIMATED THE ASSES SEES INCOME BY SHOWING THE EXTENT TO WHICH THE SALES WERE UNDERSTA TED OR THE CLOSING STOCK UNDERVALUED. THE FACT THAT HE ADDED ONLY THE SUM OF `.19,43,997/- CLEARLY EXPOSES HIS INTENTION BEHIND THE ACTION OF REJECTING THE BOOK RESULTS, WHICH WAS TO ENSURE THA T THE ENTIRE DISCLOSED SUM OF `.1.15 CRORES WAS BROUGHT TO TAX. THIS ESTABLISHES IN HINDSIGHT, THE FACT THAT THERE WAS ABSOLUTELY NO BA SIS FOR THE LEARNED ASSESSING OFFICER TO REJECT THE BOOK RESULTS. 12. SINCE, THERE WAS NO GROUND WHATSOEVER TO REJECT THE BOOKS OF ACCOUNT, THE LEARNED ASSESSING OFFICER LAUNCHED INT O A DISCUSSION AS TO HOW THE PROVISIONS OF SECTION14 ALLOWS FOR ASSES SMENT OF DEEMED INCOME UNDER SECTION. 68 TO 69D OF THE I.T. ACT, AG AINST WHICH NO DEDUCTION CAN BE ALLOWED OF ANY EXPENDITURE. HE HAS PLACED RELIANCE ON THE DECISION OF THE GUJARAT HIGH COURT IN THE CA SE OF FAKIR MOHMED HAJI HASAN VS.CIT (2001) 247ITR 290. ONCE AGAIN, IT IS QUITE EVIDENCE THAT THE LENGTHY DISCUSSION ON THIS SUBJECT WAS UTT ERLY IRRELEVANT, SINCE THERE WAS NO DEEMED INCOME EITHER OFFERED BY THE ASSESSEE OR ADDED BY THE LEARNED ASSESSING OFFICER UNDER THE PR OVISIONS OF SECTION 68 TO 69D OF THE I.T. ACT. 13. AS ALREADY OBSERVED EARLIER, THE LEARNED ASSESS ING OFFICER IN HIS WRITTEN SUBMISSION FILED IN COURSE OF THE APPELLATE PROCEEDINGS, HAS REQUESTED THAT HIS ARGUMENTS AS CONTAINED THEREIN, BE CONSIDERED OR THE MATTER MAY BE REMANDED TO HIM FOR FURTHER INVES TIGATION. AS MAY BE SEEN FROM THE DETAILED DISCUSSION THROUGHOUT THI S ORDER ALL HIS OBJECTIONS AND CONTENTIONS AND ARGUMENTS HAVE BEEN TAKEN INTO PAGE 8 OF 11 CONSIDERATION, WHICH MEANS THAT THERE REMAINS NO RE ASON TO REMAND THE CASE. THE ADDL.CIT RANGE-3 HAS GIVEN HIS VIEW T HAT THERE IS NO REQUIREMENT TO REMAND THE MATTER TO THE LEARNED ASS ESSING OFFICER. MOST IMPORTANTLY, THE LEARNED ASSESSING OFFICER CAN NOT BE GIVEN A SECOND INNINGS, ESPECIALLY WHEN ALL THE REQUISITE D ETAILS AND EXPLANATIONS HAD BEEN DULY FURNISHED BEFORE HIM, EV EN THOUGH HE HOLDS THE VIEW THAT NOTHING WAS FURNISHED. 14. GIVEN SUCH FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES BOOK RESULTS UNDER SECTION 145(3) OF THE I.T. ACT. CONSEQUENTLY, THE ADDITION OF THE SUM OF `.19,43,99 7/- WILL STAND DELETED. 10. THE COUNSEL FOR THE RESPONDENT ASSESSEE FILED A N ADJOURNMENT APPLICATION WHICH WAS REJECTED BY THE BENCH AS IT W AS OF THE VIEW THAT THE ISSUE CAN BE DECIDED WITHOUT THE ASSISTANCE OF THE ASSESSEE AND THEREFORE, PROCEEDED TO DECIDE THE SAME ON THE BASIS OF THE MA TERIAL AVAILABLE ON RECORD AND THE ARGUMENT OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED ASSESSING OFFICER. 12. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESEN TATIVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT A SURVEY WAS CONDUCTED AT TH E BUSINESS PREMISES OF THE ASSESSEE ON 01-03-2007 WHEREIN THE ASSESSEE ADM ITTED UNACCOUNTED INCOME OF `.1.15 CRORES. THE ASSESSEE FILED RETURN OF INCOME SHOWING INCOME OF `.95,56,003/- AFTER SET OFF OF LOSS OF `. 19,43,997/-. THE LEARNED ASSESSING OFFICER RELYING ON THE DECISION OF FAKIR MOHMED HAJI HASAN VS. COMMISSIONER OF INCOME TAX (2001) 247 ITR 290 (GUJ. ) AND ALSO OBSERVING THAT THERE WAS NO PROVISION FOR ALLOWING EXPENSES, DEDUCTION, AND LOSS OF PARTICULAR HEAD OF INCOME AGAINST AGAINST INCOME UN DER SECTION 68 TO 69D DISALLOWED THE LOSS OF `.19,43,997/- CLAIMED BY THE ASSESSEE AND ASSESSED THE INCOME AT `.1.15 LACS WHICH WAS DISCLOSED AT TH E TIME OF THE SURVEY BY THE ASSESSEE. IN APPEAL FILED BY THE ASSESSEE THE C IT (A) DELETED THE DISALLOWANCE BY OBSERVING AS FOLLOWS:- PAGE 9 OF 11 10. COMING BACK TO THE ASSESSMENT ORDER, IT IS SEEN THAT THE LEARNED ASSESSING OFFICER MADE A MENTION OF SOME AR ITHMETICAL CALCULATION WHICH, ACCORDING TO HIM, SHOWED THAT EI THER THE SALES HAD BEEN SUPPRESSED OR THE CLOSING STOCK HAD NOT BEEN V ALUED PROPERLY. HOWEVER, HE FAILED TO PROVIDE SUCH CALCULATION, AND HENCE, THE BASIS OF TAKING THE VIEW THAT EITHER THE SALES HAD BEEN S UPPRESSED OR THE CLOSING STOCK HAD NOT BEEN VALUED PROPERLY WHICH WA S THUS NOT JUSTIFIED. IT IS EVIDENT THAT THE LEARNED ASSESSING OFFICER WAS NOT REALLY CLEAR ABOUT WHETHER THE SALES HAD BEEN SUPPRESSED O R WHETHER THE CLOSING STOCK WAS UNDERVALUED. THE OBSERVATION THER EFORE, WAS PRESUMPTUOUS. THERE WAS ALSO NO BASIS FOR HIM TO OB SERVE THAT THE WAGES OF `.41,50,000/- HAD NOT BEEN ADDED TO THE OP ENING STOCK AND PURCHASES TO ARRIVE AT THE CLOSING STOCK AFTER EFFE CTING THE SALES (PARA- 5.3). THE PROFIT AND LOSS ACCOUNT REPRODUCED BY THE LEARNED ASSESSING OFFICER IN PARA 5.1 OF THE ASSESSMENT ORDER, CLEARL Y SHOWS THAT A SUM OF `.44,50,000/- HAD BEEN DEBITED UNDER THE HEAD OF SALARY AND WAGES THE BREAK-UP OF WHICH HOWEVER THE LEARNED AS SESSING OFFICER FAILED TO BRING ON RECORD. THERE WAS THUS ABSOLUTEL Y NO BASIS FOR THE LEARNED ASSESSING OFFICER TO TAKE THE VIEW THAT THE BOOKS OF THE ACCOUNT OF THE ASSESSEE WERE NOT RELIABLE. 11. INTERESTINGLY, AFTER REJECTING THE BOOKS RESULT S UNDER SECTION 145(3) OF THE ACT, THE LEARNED ASSESSING OFFICER ON LY ADDED THE SUM OF `.19,43,997/- WHICH WAS THE DIFFERENCE BETWEEN T HE UNDISCLOSED INCOME OF `.1.15 CRORES, AND THE RETURNED INCOME OF `.95,56,003/-. AS ALREADY OBSERVED, THE LEARNED ASSESSING OFFICER REJ ECTED THE BOOK RESULTS SINCE, ACCORDING TO HIM, THE SALES AND CLOS ING STOCK WERE NOT FULLY AND TRULY DISCLOSED AND VALUED. IF THAT BE SO , THEN THE LEARNED ASSESSING OFFICER OUGHT TO HAVE ESTIMATED THE ASSES SEES INCOME BY SHOWING THE EXTENT TO WHICH THE SALES WERE UNDERSTA TED OR THE CLOSING STOCK UNDERVALUED. THE FACT THAT HE ADDED ONLY THE SUM OF `.19,43,997/- CLEARLY EXPOSES HIS INTENTION BEHIND THE ACTION OF REJECTING THE BOOK RESULTS, WHICH WAS TO ENSURE THA T THE ENTIRE DISCLOSED SUM OF `.1.15 CRORES WAS BROUGHT TO TAX. THIS ESTABLISHES IN HINDSIGHT, THE FACT THAT THERE WAS ABSOLUTELY NO BA SIS FOR THE LEARNED ASSESSING OFFICER TO REJECT THE BOOK RESULTS. 12. SINCE, THERE WAS NO GROUND WHATSOEVER TO REJECT THE BOOKS OF ACCOUNT, THE LEARNED ASSESSING OFFICER LAUNCHED INT O A DISCUSSION AS TO HOW THE PROVISIONS OF SECTION14 ALLOWS FOR ASSES SMENT OF DEEMED INCOME UNDER SECTION. 68 TO 69D OF THE I.T. ACT, AG AINST WHICH NO DEDUCTION CAN BE ALLOWED OF ANY EXPENDITURE. HE HAS PLACED RELIANCE ON THE DECISION OF THE GUJARAT HIGH COURT IN THE CA SE OF FAKIR MOHMED HAJI HASAN VS.CIT (2001) 247 ITR 290. ONCE AGAIN, I T IS QUITE EVIDENCE THAT THE LENGTHY DISCUSSION ON THIS SUBJECT WAS UTT ERLY IRRELEVANT, SINCE THERE WAS NO DEEMED INCOME EITHER OFFERED BY THE ASSESSEE OR ADDED BY THE LEARNED ASSESSING OFFICER UNDER THE PR OVISIONS OF SECTION 68 TO 69D OF THE I.T. ACT. PAGE 10 OF 11 13. AS ALREADY OBSERVED EARLIER, THE LEARNED ASSESS ING OFFICER IN HIS WRITTEN SUBMISSION FILED IN COURSE OF THE APPELLATE PROCEEDINGS, HAS REQUESTED THAT HIS ARGUMENTS AS CONTAINED THEREIN, BE CONSIDERED OR THE MATTER MAY BE REMANDED TO HIM FOR FURTHER INVES TIGATION. AS MAY BE SEEN FROM THE DETAILED DISCUSSION THROUGHOUT THI S ORDER ALL HIS OBJECTIONS AND CONTENTIONS AND ARGUMENTS HAVE BEEN TAKEN INTO CONSIDERATION, WHICH MEANS THAT THERE REMAINS NO RE ASON TO REMAND THE CASE. THE ADDL.CIT RANGE-3 HAS GIVEN HIS VIEW T HAT THERE IS NO REQUIREMENT TO REMAND THE MATTER TO THE LEARNED ASS ESSING OFFICER. MOST IMPORTANTLY, THE LEARNED ASSESSING OFFICER CAN NOT BE GIVEN A SECOND INNINGS, ESPECIALLY WHEN ALL THE REQUISITE D ETAILS AND EXPLANATIONS HAD BEEN DULY FURNISHED BEFORE HIM, EV EN THOUGH HE HOLDS THE VIEW THAT NOTHING WAS FURNISHED. 14. GIVEN SUCH FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES BOOK RESULTS UNDER SECTION 145(3) OF THE I.T. ACT. CONSEQUENTLY, THE ADDITION OF THE SUM OF `.19,43,99 7/- WILL STAND DELETED. 13. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATI VE ARGUED THAT IN THE INSTANT CASE `.1.15 CRORES WAS DISCLOSED BY THE ASSESSEE DURING THE COURSE OF THE SURVEY AS UNDISCLOSED INCOME AND THE SAME IS ASSESSABLE TO TAX UNDER SECTION 68 OR 69 OF THE ACT. HE FURTHER C ONTENDED THAT FROM SUCH DEEMED INCOME LOSSES SUFFERED BY THE ASSESSEE UNDER ANY OTHER HEAD OF INCOME CANNOT BE LEGALLY SET-OFF. THEREFORE THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN ALLOWING SET-OFF OF BUSINESS LOSS OF `.19,43,997/- FROM DEEMED INCOME OF `.1.15 CRORES. WE FIND THAT AS PER PROVISIONS OF SECTION 14 OF THE ACT ALL THE INCOME WHICH FORMS PART OF TOTAL INCOME FOR THE PURPOSES OF CHARGING TO TAX HAVE TO BE SPECIFIED IN ONE OF THE FIVE HEADS OF INCOME NAMELY SALARIES, INCOME FR OM HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, CAPITA L GAINS, INCOME FROM OTHER SOURCES. THUS THE AMOUNT WHICH IS DEEMED INCOME EIT HER UNDER SECTION 68 0R 69 HAS TO BE CLASSIFIED EITHER AS INCOME FROM OT HER SOURCES OR UNDER ANY OTHER HEAD AS INDICATED BY THE FACTS OF THE CASE. I N THE INSTANT CASE THE AMOUNT OF `.1.15 CRORES IS ASSESSABLE AS INCOME EIT HER UNDER THE HEAD INCOME FROM OTHER SOURCES OR UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION. AS PER PROVISIONS OF SECTIO N 70 OF THE ACT LOSS UNDER THE HEAD BUSINESS PROFITS AND GAINS CAN BE SET-OFF AGAINST ANY INCOME ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES OF THE SAME YEAR AND PAGE 11 OF 11 IT IS NOT IN DISPUTE THAT BUSINESS LOSS SUFFERED FR OM ONE SOURCE CAN BE SET-OFF AGAINST THE BUSINESS INCOME DERIVED FROM OTHER BUSI NESS. THUS IRRESPECTIVE OF THE HEAD UNDER WHICH AMOUNT OF `.1.15 CRORES IS FOUND ASSESSABLE BUSINESS LOSS OF `.19,43,997/- OF THE YEAR CAN BE S ET-OFF AGAINST THE SAME. WE THEREFORE DO NOT FIND ANY GOOD REASONS TO INTERF ERE WITH ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND TH E SAME IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 15 TH DAY OF FEBRUARY, 2011. SD/- SD/- ( MAHAVIR SINGH) (N.S. S AINI) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: AHMEDABAD, 15 TH DAY OF FEBRUARY, 2011. COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUA RD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 4-2-2011 ---------------- --- 2. DRAFT PLACED BEFORE AUTHORITY 10-2-2011 ------ ------------- 3. DRAFT PROPOSED & PLACED 10-2-2011 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED --------------- ---- --------------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- -------------------