The ITO,Patan Ward-3, Mehsana V. Shri Mohmadsharaf Nabibhai Mansuri, Mehsana

ITA 2349/AHD/2012

• Counselvise Citation: 234920514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Salary income; Transactions in derivatives; Deemed to accrue or arise in india; Unabsorbed depreciation
• Section: 69C; 43(5); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., !' # # # # SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ' ) & ' ) & ' ) & ' ) ITA NO. 2327/AHD/2012 ASSESSMENT YEARS : 2008-09 SHRI MOHMADASHRAF NABIBHAI MANSURI NAVI VOHARVAD, LALDARWAJA, VISNAGAR-384315 DIST. MEHSANA V/S . THE I.T.O., PATAN, WARD-3, MEHSANA PAN NO. A KPPM4593H (APPELLANT) .. (RESPONDENT) ITA NO. 2349/AHD/2012 ASSESSMENT YEARS : 2008-09 THE I.T.O., PATAN, WARD-3, MEHSANA V/S . SHRI MOHMADASHRAF NABIBHAI MANSURI NAVI VOHARVAD, LALDARWAJA, VISNAGAR-384315 DIST. MEHSANA (APPELLANT) .. (RESPONDENT) ( * + & / BY REVENUE SHRI O. P. BATHEJA, SR. D.R. & * + & /BY ASSESSEE SHRI M. K. PATEL, A.R. , * -%' /DATE OF HEARING 16.01.2014 ./0 * -%' /DATE OF PRONOUNCEMENT 21.02.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THESE TWO APPEALS ARE CROSS APPEALS FILED BY THE AS SESSEE AS WELL AS REVENUE. THESE APPEALS ARE EMANATED FROM THE ORDER OF THE LD. CIT(APPEALS), ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 2 GANDHINAGAR, ORDER DATED 20.07.2012 FOR A.Y. 2008-0 9. BOTH APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE EFFECTIVE GROUNDS OF BOTH APPEALS ARE AS UNDER: GROUNDS OF ITA NO. 2327/AHD/2012 (ASSESSEE'S APPEAL ) (1) THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) H AS GRIEVOUSLY ERRED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED FOR SET OFF OF F&O DERIVATIVE BUSINESS LOSS OR RS.16,06,222/- AGAINST THE UNDISCL OSED INCOME OF THE CURRENT YEAR. (2) THAT ON CORRECT APPRECIATION OF FACTS AND LAW, THE SET OFF OF LOSS OUGHT TO HAVE BEEN ALLOWED, AS PRAYED. GROUNDS OF ITA NO. 2349/AHD/2012 (REVENUE'S APPEAL) (1) THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO ASSESS RS.11,80,000/- REPRESENTING THE UN EXPLAINED DEPOSITS IN THE BANK ACCOUNT I.E. UNEXPLAINED MONEY NOT RECORDED IN BOOKS OF ACCOUNT U/S. 69A OF THE IT ACT., THEREB Y GIVING RELIEF OF RS.15,83,788/- TO THE ASSESSEE. (2) THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN DIRECTING THE AO TO ASSESS THE BUSINESS LOSS OF RS.16,06,222/ - FROM THE TRANSACTIONS THROUGH THE BANK ACCOUNT AS SUCH. FIRST WE TAKE ITA NO. 2327/AHD/2012 (ASSESSEE'S APP EAL) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 11.03.2010 DECLARING TOTAL INCOME AT RS.1,07,910/- ALONG WITH P&L ACCOUNT, BALANCE SHEET, WHICH WAS DUE TO FILE ON 31 ST JULY, 2008. THE A.O. ON THE BASIS OF AIR INFORMATION FOUND THAT THE ASSESSEE HAD DEPO SITED CASH OF ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 3 RS.18,29,999/- IN THE ICICI BANK ACCOUNT NO. 008501 502795. FURTHER, THERE WAS DEPOSIT OF RS.2,45,000/- IN ACCOUNT NO. 3244 MA INTAINED WITH BANK OF INDIA. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEI NG HEARD ON BOTH THE UNDISCLOSED BANK ACCOUNTS TO EXPLAIN THE SOURCE OF THE CASH DEPOSITED IN THESE BANK ACCOUNTS. THERE WAS NO RESPONSE FROM TH E ASSESSEE ON SEVEN DATES OF HEARING GIVEN BY THE A.O. ON 13.12.2010, SHRI MOHAMAD ASHRAF NAVIBHAI MANSURI I.E. ASSESSEE ALONG WITH SHRI V. S . PATEL ATTENDED AND SUBMITTED THAT ASSESSEE WAS RECOVERY OFFICER IN THE MORE FINANCE COMPANY AND TRANSACTIONS MADE IN THESE BANK ACCOUNTS WERE D ONE ON BEHALF OF THE MORE FINANCE COMPANY. IT WAS FURTHER SUBMITTED THA T DISALLOWANCE MAY BE MADE ON PICK CREDIT BASIS. ASSESSEES SUBMISSION W AS NOT FOUND CONVINCING TO THE A.O. AS THE ASSESSEE WAS USING HIS PAN NO. A S WELL AS WAS SIGNING THE CHEQUES. THE ASSESSEE DID NOT FURNISH ANY EXPLANAT ION BEFORE THE A.O. THEREFORE, CREDIT OF RS.27,63,788/- WAS ADDED IN TH E INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD CONFIRMED THE ADDI TION OF RS. 11,80,000/- U/S. 69A OF THE IT ACT AND NO LOSS ON ACCOUNT OF FU TURE & OPTION TRANSACTION (F&O BUSINESS), WAS ALLOWED TO BE CARRY FORWARDED A S ASSESSEE FILED BELATED RETURN I.E. ON 11.03.2010. THE OPERATIVE PORTION O F THE CIT(A)S ORDER IS REPRODUCED AS UNDER: 4.7 I HAVE PERUSED THE FACTS OF THE CASE, INCLUDIN G THE REMAND REPORT AND THE APPELLANTS SUBMISSIONS. FIRST OF ALL, IN THE REJOINDER TO THE REMAND REPORT; THE APPELLANT HAS PUT THE HEADING 'ADDITION AL GROUND NO.6 AND ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 4 REJOINDER'. IT IS BROUGHT ON RECORD THAT NO SUCH AD DITIONAL GROUND HAS BEEN TAKEN OR SOUGHT TO BE TAKEN BEFORE THE UNDERSIGNED. THE FOLLOWING OBSERVATIONS / DECISIONS ARE MA DE AFTER CAREFUL CONSIDERATION OF ALL THE RELEVANT FACTS: A) THE BANK ACCOUNTS WERE NOT DISCLOSED TO THE DEPA RTMENT. THERE WERE NO BOOKS OF ACCOUNTS MAINTAINED IN THE R EGULAR COURSE OF TRANSACTIONS. THE CASH BOOK AND OTHER ACC OUNTS SUBMITTED IN THE APPELLATE PROCEEDINGS CAN BEST BE ACCEPTED AS CASH FLOW AND DETAILS OF TRANSACTION MADE SUBSEQ UENTLY FOR-EXPLAINING THE TRANSACTIONS. B) THE APPELLANT HAVING ACCEPTED THE SOURCE OF THE CASH DEPOSITS AS UNEXPLAINED BY WAY OF OFFERING RS.11,80 ,000/- IN CASH AS UNDISCLOSED INCOME OF CURRENT YEAR (EARLIER TRIED TO BE CLAIMED AS OPENING BALANCE IN HAND). THE UNEXPLA INED CASH AND THE CREDITS BY CHEQUES WERE REPRESENTING T HE SOURCE OF DEPOSITS IN THE BANK ACCOUNTS; AFTER CONS IDERING THE WITHDRAWALS FROM THE SAME BANK ACCOUNTS AS THE SOURCE OF SUBSEQUENT CASH DEPOSITS. THIS AMOUNT I.E. RS.11,80,000/- IS REPRESENTING THE UNEXPLAINED DEPO SITS IN THE BANK ACCOUNT AND THE ADDITION WOULD BE OF UNEXP LAINED MONEY NOT RECORDED IN BOOKS OF ACCOUNT AND THEREFOR E, TAXABLE U/S 69 A OF THE IT ACT. C) NEXT ISSUE IS THE UNDER WHAT HEAD, IF ANY, THE UNEXPLAINED CASH ACCEPTED WOULD BE TAXABLE AND CONSEQUENT CLAIM OF SETTING OFF WITH LOSS UNDER DIFFERENT HEADS AND DEP RECIATION. THE CASE IS SQUARELY COVERED BY THE DECISION .HON'B LE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF FA KIR MOHMED HAJI HASAN 247 ITR 290. IT HAS BEEN HELD THA T OPENING WORDS OF SECTION 14, 'SAVE AS OTHERWISE PRO VIDED BY THIS ACT,' CLEARLY LEAVE SCOPE FOR 'DEEMED INCOME' OF NATURE COVERED UNDER SCHEME OF SECTIONS 69, 69A, 69B AND 6 9C ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 5 BEING TREATED SEPARATELY, BECAUSE SUCH DEEMED INCOM E IS NOT INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, OR CAPITAL GAINS, NOR IS IT INCOME FROM 'OTHER SOURCES'. IT HAS FURTHER BEEN CONCLUDED THAT SCHEME OF SECTIONS 69, 69A AND 69C SHOWS THAT WHERE NATURE AN D SOURCE OF INVESTMENTS OR SOURCE OF ACQUISITION OF M ONEY, BULLION, ETC., OWNED BY ASSESSEE ARE NOT EXPLAINED SATISFACTORILY AND SOME ARE NOT RECORDED IN BOOKS O F ACCOUNT OR EXPENDITURE INCURRED IS UNEXPLAINED, THEN SAME M AY BE DEEMED TO BE INCOME OF SUCH ASSESSEE AND IT WOULD N OT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDER ANY O F HEADS MENTIONED IN SECTION 14 AND, CONSEQUENTLY, NO QUEST ION OF GIVING ANY DEDUCTION UNDER PROVISIONS WHICH CORRESP OND TO SUCH HEADS WOULD ARISE. THEREFORE, THE INCOME OF TH E APPELLANT ON ACCOUNT OF UNEXPLAINED MONEY IS HELD T O BE DEEMED INCOME, TAXABLE NOT UNDER ANY HEAD BUT AS SU CH UNDER CHAPTER VI, ITSELF. NO SET-OFF OF CARRY FORWA RD LOSSES / UNABSORBED DEPRECIATION OR CURRENT YEAR'S LOSSES / DEPRECIATION WOULD BE AVAILABLE TO THE APPELLANT. D) THE TRANSACTIONS WITH OTHER PERSONS (OTHER THAN THE STOCK BROKER) ENTERED BY CHEQUES HAVE BEEN EXPLAINED AND THE AO HAS IN THE REMAND REPORT NOT OBJECTED TO THE GENUINENESS OF THE SOURCE. NO ADDITION IS THEREFORE , CALLED FOR ON THAT BASIS. E) THE BANK ACCOUNTS WERE PRIMA FACIE USED FOR ENTERING INTO TRANSACTIONS IN THE EQUITY MARKET/FUT URE AND OPTIONS. THE TRANSACTIONS WERE NOT DISCLOSED AND TH E ASSESSEE CLAIMED THAT THESE RESULTED INTO LOSS. THE AO IN THE REMAND REPORT HAS NOT DISPUTED THESE. THE TRANS ACTIONS BEING THROUGH THE RECOGNIZED STOCK EXCHANGE AND BEI NG OF FUTURE & OPTIONS ARE COVERED IN PROVISO (D) OF SECT ION 43(5) ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 6 AND THEREFORE, SHALL NOT BE DEEMED TO BE SPECULATIV E TRANSACTIONS AND IS GENERAL BUSINESS LOSS. IN THE LIGHT OF THE ABOVE OBSERVATIONS, TO SUM UP I NSTEAD OF THE ADDITIONS MADE BY THE AO; THE FOLLOWING INCOME /LOS S ARE TO BE ASSESSED: I) RS. 11,80,000/- REPRESENTING THE UNEXPLAINED DEP OSITS IN THE BANK ACCOUNT I.E. UNEXPLAINED MONEY NOT RECORDED IN BOOKS OF ACCOUNT AND THEREFORE, TAXABLE U/S 69 A OF THE I T ACT. NO SET OFF AGAINST ANY OTHER INCOME WOULD BE AVAILABLE TO THE APPELLANT AS DECIDED IN PARA (C) ABOVE. II) THE BUSINESS LOSS FROM THE TRANSACTIONS THROUGH THE BANK ACCOUNT IS RS. 16,06,222/- AND WOULD BE ASSESSABLE AS SUCH. HOWEVER, NO LOSS WOULD BE ALLOWED TO BE CARRI ED FORWARD TO NEXT YEAR AS THE RETURN FILED IS NOT WIT HIN TIME ALLOWED U/S 139(1). THE AO IS DIRECTED TO GIVE EFFECT TO THIS ORDER ACC ORDING TO THE ABOVE DIRECTIONS. THE GROUND OF APPEAL IS DECIDED, ACCORDINGLY. 4. NOW BOTH THE PARTIES ARE BEFORE US. LD. COUNSEL FOR THE ASSESSEE ADMITTED THAT BOTH THE BANK ACCOUNTS WERE UNDISCLOS ED AND LD. CIT(A) RIGHTLY CONFIRMED THE ADDITION AT RS.11,80,000/- ON THE BAS IS OF PICK CREDIT OF BOTH THE ACCOUNTS, BUT HE HAS NOT ALLOWED BUSINESS LOSS OF R S.16,06,222/- AGAINST THE UNDISCLOSED INCOME BY FOLLOWING THE HONBLE GUJARAT HIGH COURT DECISION IN CASE OF FAKIR MOHMED HAJI HASAN VS. CIT (2001) 247 ITR 290 (GUJ), WHEREIN THE DEEMED INCOME WAS HELD NOT PART OF ANY HEAD OF THE INCOME PRESCRIBED U/S. 14 OF THE IT ACT. THUS, HE HAS NOT ALLOWED AD JUSTMENT OF BUSINESS LOSS BUT RECENTLY, THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. SHILPA DYEING & ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 7 PRINTING MILLS P. LTD., (2013) 39 TAXMANN.COM 3 (GU J), BY CONSIDERING THE ORDER OF FAKIR MOHMED HAJI HASAN (SUPRA) AND HELD THAT AN Y UNDISCLOSED INCOME ON ACCOUNT OF SURVEY IS COME UNDER THE HEAD PRESCRIBE D U/S.14 OF THE IT ACT AND ANY BUSINESS LOSS DURING THE YEAR IS TO BE SET OFF AGAINST THE UNDISCLOSED INCOME. THEREFORE, HE REQUESTED TO ALLOW THE ADJUS TMENT OF BUSINESS LOSS AGAINST THE UNDISCLOSED INCOME. AT THE OUTSET, LD. SR. D.R. SUPPORTED THE ORDER OF THE CIT(A) AND ARGUED THAT ASSESSEE HAS FI LED RETURN BELATED AND THIS LOSS HAS NOT BEEN CLAIMED WITHIN TIME PRESCRIBED FO R FILING RETURN U/S.139(1). HE FURTHER ARGUED THAT THE DEPARTMENT HAVE INFORMAT ION THAT ASSESSEE HAS NOT DISCLOSED TWO BANK ACCOUNTS IN THE RETURN. THUS, N O BENEFIT OF ADJUSTMENT OF BUSINESS LOSS U/S.71 OF THE IT ACT IS TO BE ALLOWED . 5. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED T HE MATERIAL ON RECORD. WHEN THE DEPARTMENT HAS INFORMATION THROUGH AIR THA T THE ASSESSEE HAS NOT DISCLOSED TWO BANK ACCOUNTS AS MENTIONED ABOVE, GAV E THE NOTICE TO SCRUTINIZE THE CASE U/S. 143(2) OF THE IT ACT. BEF ORE THE A.O., THE ASSESSEE HAS NOT COOPERATED AT ALL. THERE WAS NO CLAIM OF A NY BUSINESS LOSS BEFORE THE A.O. EVEN LAW DOES NOT PERMIT ANY LOSS TO BE ADJUST ED UNDER THE YEAR UNDER CONSIDERATION WHEN LOSS WAS NOT CLAIMED IN RETURN F ILED U/S. 139(1) OF THE IT ACT. THUS, BOTH THE GROUNDS OF ASSESSEES APPEAL A RE DISMISSED. NOW WE TAKE ITA NO. 2349/AHD/2012 (REVENUE'S APPEAL ) 6. THE FIRST GROUND OF REVENUES APPEAL IS AGA INST REDUCING THE ADDITION ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 8 FROM RS.27,63,788/- TO RS.11,80,000/- BY GIVING THE RELIEF OF RS.15,83,788/-. LD. SR. D.R. RELIED UPON THE ORDER OF THE A.O. AND LD. A.R. FOR THE APPELLANT SUPPORTING THE ORDER OF CIT(A) AND ARGUED THAT THIS AMOUNT WAS PICK CREDIT OF BOTH THE ACCOUNTS AS UNDISCLOSED INCOME. THEREFORE , HE REQUESTED TO CONFIRM THE ADDITION TO THE EXTENT OF RS.11,80,000/-. WE H AVE GONE THROUGH THE ORDER OF THE CIT(A) AT PAGE 14, WHERE IT HAS BEEN STATED BY HIM THAT THIS AMOUNT OF RS.11,80,000/- IS REPRESENTING THE UNEXPLAINED DEPO SIT IN THE BANK ACCOUNT, WHICH HAS BEEN ACCEPTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING. THUS, WE DO NOT FIND ANY REASON TO INTERVENE IN THE ORDER OF THE CIT(A). ACCORDINGLY, THIS GROUND OF REVENUES APPEAL IS DIS MISSED. 7. GROUND NO.2 OF THE REVENUE IS AGAINST ASSESSING THE BUSINESS LOSS OF RS.16,06,222/-. LD. SR. D.R. RELIED UPON THE ORDER OF THE A.O. AND ARGUED THAT THE ASSESSEE DID NOT FILE RETURN IN TIME PRESCRIBED U/S. 139(1) AND LD. CIT(A) WRONGLY DECIDED THE BUSINESS LOSS AT RS.16,06,222/- . AT THE OUTSET, LD. A.R. FOR THE ASSESSEE ARGUED THAT THIS LOSS IS RIGHTLY D ETERMINED AND IS TO BE ADJUSTED AGAINST THE CURRENT YEARS INCOME. WE HAV E ALREADY DECIDED THIS ISSUE THAT ASSESSEE HAS NOT FILED RETURN IN WITHIN TIME U/S. 139(1) OF THE IT ACT. THE DEPARTMENT ON THE BASIS OF AIR REPORT HAD COME TO KNOW THAT ASSESSEE HAD TWO BANK ACCOUNTS UNDISCLOSED. ACCORDINGLY, PI CK CREDIT HAS BEEN ASSESSED BY THE LD. CIT(A) AT RS.11,80,000/-. HE S IMPLY GAVE THE OBSERVATION OF BUSINESS LOSS, WHICH WAS NOT ALLOWED TO BE CARRY FORWARDED AS ASSESSEES ITA NOS. 2327 & 2349/AHD/2012, A.Y. 08-09 SHRI MOHMADASHRAF N. MANSURI VS. ITO, PATAN PAGE 9 RETURN WAS FILED BELATED. THUS, WE DISMISS THIS GR OUND OF APPEAL OF THE REVENUE. 8. IN THE RESULT, THE ASSESSEES APPEAL AND THE REV ENUES APPEAL BOTH ARE DISMISSED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 21.02.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &1 &1 &1 &1 * ** * 2-3 2-3 2-3 2-3 4&30- 4&30- 4&30- 4&30- / COPY OF ORDER FORWARDED TO:- 1. (/ REVENUE 2. & / ASSESSEE 3. ## - 9 / CONCERNED CIT 4. 9- / CIT (A) 5. 3= 2- , , / DR, ITAT, AHMEDABAD 6. ? @A / GUARD FILE. BY ORDER/ &1 &, / # , )