Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 0022 (ITAT-RANCHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-09-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
2012-2013
Appeal Filed On
29-10-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA NO. 300 / RAN / 2014 ASSESSMENT YEAR :2012-13 SUBHASH CHANDRA MOOKA, ASHA, 9 TH AVENUE, SOUTH PARK, BISTUPUR, JAMSHEDPUR-831 001 [ PAN NO.AETPM 4090 H ] V/S . ACIT, CENTRAL CIRCLE, JAMSHEDPUR /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI R.R. MITTAL, CA /BY RESPONDENT SHRI CHOUDHURY ORAN, DR /DATE OF HEARING 07-09-2016 /DATE OF PRONOUNCEMENT 12-09-2016 / O R D E R PER N.V.VASUDEVAN, JUDICIAL MEMBER:- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED OF COMMISSIONER OF INCOME TAX (APPEALS) JAMSHEDPUR REL ATING TO ASSESSMENT YEAR (AY) 2012-13. 2. GROUND 1 RAISED BY ASSESSEE READS AS FOLLOWS:- 1) FOR THAT THE ORDER OF LEARNED LOWE AUTHORITIES ARE BAD IN LAW, CONTRARY TO THE FACTS ON RECORDS IN DISALLOWING RS. 33,36,330/- INCURRED AS A LOSS DURING THE COURSE OF BUSINESS OF BUILDER AND DEVELOPER OUT OF ADVANCE PAID FOR THE PURCHASE OF LAND SITUATED AT 8 , JUBLIEE ROAD, ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 2 BELDIH TRIANGLE, BISTUPUR, JAMSHEDPUR ON THE GROUND THAT INVESTMENT IN PURCHASE OF LAND WAS MADE OUT OF INCOME FROM OTHER SOURCES DISCLOSED IN THE RETURN AND FRAUD. THE DISALLOWANCE IS LIABLE TO BE DELETED IN TO-TO. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT AND EARNING INCOME FROM REAL E STATE TRANSACTION. THE ASSESSEE ENTERED INTO AN AGREEMENT FOR SALE FOR PUR CHASE OF PROPERTY AT 8, JUBLIEE ROAD, BELIH TRIANGLE, BISTDUPUR, JAMSHEDPUR , (HEREINAFTER CALLED THE THE PROPERTY) WITH SOME PERSONS. THE AGREEMENT WA S DATED 14.05.2011. THE PROPERTY WAS AGREED TO BE PURCHASED BY THE ASSESSEE FOR A SUM OF 6.05 CRORES. THE ASSESSEE HAD PAID A SUM OF RS.1.51 CROR ES AS ADVANCE TO THE VENDORS. IT LATER TURNED OUT THAT THE VENDORS WERE NOT THE REAL OWNERS OF THE PROPERTY AND THAT THEY HAD WITH CRIMINAL INTENT TO CHEAT THE ASSESSEE CLAIMED OWNERSHIP OVER THE PROPERTY. AN FIR WAS LODGED BY T HE ASSESSEE IN BISTOPUR POLICE STATION, JAMSHEDPUR. THE POLICE REGISTERED T HE FIR AND AFTER DUE ACTION COULD RECOVER A SUM OF 1,17,73,676/- WHICH COMPRIS ED OF CASH OF RS.95,93,670/- AND RS.19.60 LAKH IN THE FORM OF FDR AND RS.2.20 LAKH IN THE FORM OF SAVINGS BANK DEPOSIT. THE ASSESSEE COULD NO T RECOVER REMAINING BALANCE OF RS.33,26,330/-. 4. THE DDIT (INVESTIGATION) JAMSHEDPUR COMING TO KN OW ABOUT THE RECOVERY OF CASH PURSUANT TO INVESTIGATION BY POLIC E REQUISITIONED THE DETAILS U/S. 132A OF THE INCOME TAX ACT, 1961 (THE ACT FO R SHORT). AFTER SUCH REQUISITION, NOTICE U/S 153A OF THE ACT WAS ISSUED BY THE AO ON 19.11.2012 CALLING UPON THE ASSESSEE TO FILE RETURN OF INCOME FOR ASSESSMENT YEARS 2006- 07 TO 2012-13. EVEN PRIOR TO ISSUE OF THIS NOTICE, THERE WAS A SURVEY U/S.133A OF THE ACT CONDUCTED IN THE BUSINESS PREMISES OF AS SESSEE ON 15.06.2011. 5. IN RESPONSE TO NOTICE U/S. 153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME FOR AY 2012-13 DECLARING TOTAL INCOME OF 42 ,77,350/-. IT MAY BE MENTIONED THAT THE ASSESSEE DECLARED UNDISCLOSED IN COME FOR AYS 2006-07 TO ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 3 2012-13 DECLARING A SUM OF RS.1,50,00,900/- FOR THE VARIOUS ASSESSMENT YEARS AS FOLLOWS:- AY ADDITIONAL INCOME (OTHER SOURCE) DISCLOSED AS PER SU-5 ADDITIONAL INCOME (CAPITAL GAIN) DISCLOSED AS PER SU-4 & SU-8 TOTAL ADDITIONAL INCOME DISCLOSED U/S. 153A 2006-07 0 0 0 2007-08 10,75,000 0 10,75,000 2008-09 8,09,800 0 8,09,800 2009-10 5,60,000 250000 8,10,000 2010-11 62,61,613 200000 64,61,613 2011-12 0 0 0 2012-13 58,44,487 0 58,44,487 TOTAL 1,45,50,900 450000 1,50,00,900 THE ABOVE DECLARATION OF INCOME BY THE ASSESSEE WAS AFTER RECONSIDERING THE BOOKS OF ACCOUNT INCLUDING CERTAIN BOOKS OF ACCOUNT WHICH WAS IMPOUNDED AT THE TIME OF SURVEY AND MARKED AS SU-5, SU-4 AND SU- 8. ACCORDING TO AO, ALTHOUGH A SUM OF RS.1,50,00,900/- HAS BEEN ADMITTE D AS ITS TOTAL UNACCOUNTED / UNDISCLOSED INCOME, ONLY A SUM OF RS. 1,16,74,570/- HAS BEEN OFFERED FOR TAXATION IN ITS RETURN OF INCOME FOR TH E RELEVANT ASSESSMENT YEARS. ACCORDING TO THE AO THE ASSESSEE IN DECLARING UNDIS CLOSED INCOME, CLAIMED AS DEDUCTION A SUM OF RS.33,26,330/- WHICH WAS THE SUM WHICH REMAINED UNRECOVERED BY THE POLICE FROM THE VENDORS OF THE P ROPERTY. ACCORDING TO THE AO THIS SUM CANNOT BE ALLOWED AS A DEDUCTION IN COM PUTING INCOME DECLARED BY THE ASSESSEE. THE QUESTION FOR CONSIDERATION IN GR.NO.1 RAISED BY THE ASSESSEE IS AS TO WHETHER THE REVENUE AUTHORITIES W ERE JUSTIFIED IN NOT ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF A SUM OF RS.33,26,330/- IN COMPUTING ITS INCOME FOR AY 12-13 WHICH WAS THE AY IN WHICH THE DEDUCTION WAS CLAIMED BY THE ASSESSEE. 6. IN AY 2012-13 THE ASSESSEE DECLARED TAXABLE UND ISCLOSED INCOME UNDER THE HEAD INCOME FROM OTHER SOURCE. THE INCOME SO DECLARED WAS AFTER SETTING OFF THE UNRECOVERED CASH OF RS.33,26,330/- FROM THE ACTUAL UNDISCLOSED ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 4 INCOME OF RS.58,44,487/- (RS.58,44,487/- MINUS 33,26,330/-). THE ASSESSEE CLAIMED BEFORE THE AO THAT T HE INCOME DECLARED FOR AY 2012-13 WAS ACTUALLY HIS INCOME FROM BUSINESS & PROFESSION AND THE AMO UNT NOT RECOVERED BY THE POLICE SHOULD BE TREATED AS BUSINESS LOSS. THE AO H OWEVER HELD THAT THE ASSESSEE IN ARRIVING AT THE INCOME DECLARED FOR AY 2012-13 OF A SUM OF RS.58,44,487/- HAS NOT GIVEN ANY SOURCE BY WHICH TH E INCOME WAS EARNED AND HAD DECLARED INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES . AS NO DEFINITE SOURCE COULD BE FOUND OUT FROM THE BOOKS & RECORDS AVAILABLE WITH THE ASSESSEE AND THE PERSON MAINTAINING THE BOOKS OF AC COUNT WAS UNTRACEABLE TO GET SOME FEEDBACK AS STATED BY THE ASSESSEE BEFO RE THE AO, THE AO HELD THAT THE INCOME DECLARED WAS INCOME FROM OTHER SOUR CES. THE AO FURTHER OBSERVED THAT THE ASSESSEE ON THE ONE HAND IN THE R ETURN OF INCOME ADMITTED INCOME UNDER THE HEAD INCOME FROM OTHER SOURCE AS N O DEFINITE SOURCE OR NATURE COULD BE PROVIDED OR KNOWN TO ASSESSEE. ON T HE OTHER HAND, THE ASSESSEE CLAIMS THAT THE SUM OF RS1.51 CRORE WAS AN INVESTMENT MADE FOR THE PURPOSE OF BUSINESS, HENCE THE AMOUNT WHICH COU LD NOT BE RECOVERED BY THE POLICE TILL DATE, SHOULD BE ALLOWED AS A BUSINE SS LOSS. THE AO ALSO HELD THAT THE ASSESSEE WAS UNABLE TO EXPLAIN THE DEFINIT E SOURCE OF THE AMOUNT PAID AND ADMITTED THAT THE SAME WAS ACTUALLY HIS UN ACCOUNTED INCOME GENERATED OVER THE PERIOD AND HAS BEEN OFFERED FOR TAXATION WITH THE HELP OF RECONSTRUCTION OF ITS BOOKS OF ACCOUNT VIS--VIS IM POUNDED REGISTER MARKED AS SU-5. SINCE, NO DEFINITE SOURCE OR NATURE WAS KNOWN , THE INCOME WAS OFFERED FOR TAXATION UNDER THE HEAD OTHER SOURCE OF INCOME . THE AO HELD THAT SINCE INCOME WAS DECLARED AND WAS BEING ASSESSED UNDER TH E HEAD INCOME FROM OTHER SOURCES, NO DEDUCTION IS ALLOWABLE / ADMISSI BLE TO THE ASSESSEE IN TERMS OF SECTION 57 OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE CONCLUSION, THE AO ALSO HELD THAT EVEN IF THE SUM UNRECOVERED BY TH E POLICE IS TREATED AS AMOUNT INVESTED FOR THE PURPOSE OF BUSINESS, THE SA ID INVESTMENTS WAS CLEARLY A CAPITAL INVESTMENT MADE OUT OF UNACCOUNTED / UNEX PLAINED SOURCE OF INCOME. ACCORDINGLY, ANY LOSS THAT HAS BEEN ALLEGED LY SUFFERED BY THE ASSESSEE IS A CAPITAL LOSS AND CANNOT BE ALLOWED AS A LOSS OR DEDUCTION FROM ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 5 THE UNACCOUNTED INCOME OF REVENUE IN NATURE. IN SUP PORT OF THE ABOVE CONCLUSION, THE AO PLACED RELIANCE ON THE FOLLOWING JUDGMENTS: (A)HONBLE SUPREME COURT IN THE CASE OF HASIMARA INDUSTRIES LTD. VS. CIT (SC) 230 ITR 927 (SC) (B) CIT VS. R.G. SCIENTIFIC ENTERPRISE S PVT LTD. (DEL) 311 ITR 401 AND (C) KWALITY FUN FOODS & RESTAURANTS PVT. LTD. VS. DCIT (ITAST, CHENNAI), 108 ITD 274. WITHOUT PREJUDICE TO THE AB OVE CONCLUSION, THE AO FURTHER HELD THAT THE MATTER WAS STILL UNDER INVEST IGATION BY THE POLICE AND THE AMOUNT IN QUESTION HAS NOT YET BEEN DECLARED AS IRR ECOVERABLE AND THEREFORE CANNOT BE SAID TO HAVE ACCRUED AS LIABILITY OF THE PREVIOUS YEAR TO THE ASSESSEE. FOR ALL THE ABOVE REASONS, THE DEDUCTION /LOSS AMOUNTING TO RS.33,26,330/- WAS HELD BY THE AO TO BE INADMISSIBL E AND WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE FOR THE AY 2012-13 AS HIS UNDISCLOSED INCOME. 7. AGGRIEVED BY THE AFORESAID ACTION OF THE AO, TH E ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). THE CIT(A), HOWEVER CONF IRMED THE ORDER OF THE AO OBSERVING AS FOLLOWS:- 3.13. I HAVE CONSIDERED THE ARGUMENTS OF THE AR AN D THE FACTS OF THE CASE. IN THIS CASE THE ASSESSEE HAD DISCLOSED THE I NCOME OF RS.1.51 CRORES INCLUDING RS.58,44,487/- FOR AY 2012-13 AS INCOME FROM OTHER SOURCES. FROM THE FACTS OF THIS CASE IT IS SEEN TH AT IT IS UNDISPUTED THAT THE ASSESSEE HAD PAID A SUM OF RS.1.51 CRORES TO TH E SO CALLED SELLERS OF THE PROPERTY FOR WHICH THE PAYMENT WAS MADE AND FOR WHICH AN FIR WAS LODGED THAT THE ASSESSEE WAS DUPED OF RS.1 .51 CRORES. THEREFORE, IT IS UNDISPUTED THAT THE UNDISCLOSED INCOME OF RS .1.51 CRORES WAS ALREADY EARNED BY THE ASSESSEE AND THE AMOUNT NOT R ECOVERABLE AMOUNTING TO THE TUNE OF RS.33,26,330/- WAS NOT EVE N REMOTELY CONNECTED WITH THE EARNING OF RS.1.51 CRORES. THE A MOUNT OF RS.33,26,330/- WAS THE APPLICATION OF THE UNDISCLOS ED INCOME OF RS.1.51 CRORES EARNED BY THE APPELLANT AND DISCLOSE D BY HIM. THEREFORE, THE CLAIM FOR ALLOWANCE OF DEDUCTION OF RS.33,26,330/- IS NOT ALLOWABLE EITHER U/S. 57(III) OR EVEN AS BUSINESS E XPENSES EVEN THOUGH THE CLAIM OF THE ASSESSEE OF EARNING RS.1.51 CRORES AS UNDISCLOSED BUSINESS INCOME HAS BEEN RIGHTLY REJECTED BY THE AO BEING AN AFTERTHOUGHT. THE CASE LAWS RELIED BY THE AO ALSO S UPPORTS THE ASSESSMENT ORDER. THEREFORE, THE AO WAS JUSTIFIED I N NOT ALLOWING ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 6 DEDUCTION OF RS.33,26,330/- AND THE SAME IS CONFIRM ED. GROUND NO.2 OF THE APPEAL IS DISMISSED. 8. AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE PLACED GROUND NO.1 BEFORE TRIBUNAL. 9. WE HAVE HEARD SUBMISSION OF THE LD. COUNSEL FO R THE ASSESSEE WHO SUBMITTED THAT THE SUM OF RS.33,26,330/- WAS NOT ON CAPITAL ACCOUNT AS HELD BY LD. CIT(A). IN THIS REGARD, IT WAS SUBMITTED BY HIM THAT THE ASSESSEE WAS IN THE BUSINESS OF PROPERTY DEVELOPMENT AND THE PRO PERTY WAS PURCHASED FOR THE PURPOSE OF BUSINESS AND ANY LOSS THAT ARISES IN THE COURSE OF SUCH BUSINESS HAD TO BE CONSIDERED AS LOSS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. IT WAS FURTHER SUBMITTED BY HIM THAT THE FINAL REPORT BY THE POLICE, A COPY PLACED ON 26 OF THE PAPER BOOK DATED 28.08.201 1 CLEARLY SHOWED THAT THE SUM IN QUESTION WAS NOT RECOVERABLE FROM THE AC CUSED AND THEREFORE IT WAS NOT A CASE WHERE THE LIABILITY OF ASSESSEE CANN OT BE SAID TO HAVE NOT ACCRUED AND ARISEN. IT WAS ALSO SUBMITTED BY HIM IN THE EVENT OF THE ASSESSEE RECOVERING ANY AMOUNT, THE SAME CAN ALWAYS BROUGHT TO TAX BY THE REVENUE U/S 41(1) OF THE ACT. IT WAS FURTHER SUBMITTED BY H IM THE CONCLUSION OF THE REVENUE AUTHORITIES THAT THE DECLARATION OF INCOME BY THE ASSESSEE WAS UNDER THE HEAD INCOME FROM BUSINESS IS NOT CORRECT. IN THIS REGARD, HE POINTED OUT THAT EVEN OFFER EARLIER ASSESSMENT YEARS, THE ASSE SSEE REGULARLY RETURNED INCOME UNDER THE HEAD INCOME FROM BUSINESS AND TH ERE WAS NO OTHER SOURCE FROM WHICH THE ASSESSEE COULD HAVE EARNED THE SUM O F RS.1,50,00,900/- THAT WAS DECLARED AS UNDISCLOSED INCOME FOR AYS 2006-07 TO 2012-13. HE THEREFORE SUBMITTED THAT THE DEDUCTION OF RS.33,26, 330/- HAS TO BE ALLOWED U/S. 28 OR SEC.37 OF THE ACT AS LOSS INCIDENTAL TO THE BUSINESS AND THE PROVISION OF SEC. 57(III) OF THE ACT ARE NOT APPLIC ABLE AT ALL. LD. DR RELIED ON THE ORDER OF LD. CIT(A). 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS. THE FIRST QUESTION TO BE DECIDED IS AS TO WHETHER THE LOSS IN QUESTION CAN BE SAID TO BE CAPITAL ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 7 LOSS WHICH CANNOT BE ALLOWED AS A DEDUCTION. THE A O HAS RELIED ON THE FOLLOWING CASES TO TREAT THE LOSS IN QUESTION AS CA PITAL LOSS:- (A) HASIMARA INDUSTRIES LTD. VS. CIT (SC) 230 ITR 9 27:- IN THIS CASE DEPOSIT WAS MADE WITH LICENSOR COMPANY FOR THE PURPOSE OF S ECURING LICENSE. ASSESSEE WAS NOT DOING BUSINESS IN COTTON AND DEPOS IT WAS MADE TO ACQUIRE PROFIT MAKING ASSET. FACTS OF THE CASE OF ASSESSEE IS COMPLETELY DIFFERENT AS ASSESSEE WAS ADMITTEDLY WORKING AS REAL ESTATE DEVE LOPER SINCE SEVERAL YEARS, THE LAND WAS PURCHASED AS STOCK-IN-TRADE TO CONSTRUCT THE RESIDENTIAL FLATS ON THE ABOVE LAND WHICH WERE INTENDED TO BE S OLD. (B) IN CIT VS. RG SCIENTIFIC ENTERPRISES PVT. LTD. (DEL) 311 ITR 401, IRRECOVERABLE ADVANCE WAS PAID FOR THE PURCHASE OF CAPITAL ASSETS. ASSESSEE IN THE PRESENT CASE HAS PAID THE MONEY FOR PURCHASE OF LAND FOR THE CONSTRUCTION OF FLATS AND SALE FOR THOSE FLAT, WHIC H IS THE NORMAL TRADING ACTIVITY OF THE ASSESSEE. EVEN THE PURCHASE OF THE LAND IS I NCIDENTAL TO THE BUSINESS OF THE ASSESSEE OF REAL ESTATE DEVELOPER. (C) KWALITY FUND FOODS & RESTS PVT. LTD. VS. DCIT ( ITAT CHENNAI) 108 TTJ 274:- IRRECOVERABLE ADVANCE WAS PAID FOR THE CONSTR UCTION OF PLANT WHICH WAS AGAIN A CAPITAL ASSET. THE ASSESSEE IN THE PRESENT CASE AS WE HAVE ALREADY MENTIONED HAS PAID THE MONEY FOR PURCHASE OF LAND F OR THE CONSTRUCTION OF FLATS AND SALE OF THOSE FLAT, WHICH IS THE NORMAL T RADING ACTIVITY OF THE ASSESSEE. ALL THESE CASES ARE DISTINGUISHABLE ON THE FACTS AS IN THE CASE OF THE ASSESSEE PURCHASE WAS LAND WHICH IS STOCK-IN-TRADE AND AMOUN T INCURRED IS DEBITED AS PART OF THE EXPENSE OF THE REAL ESTATE DEVELOPMENT. 11. IT IS NECESSARY TO VERIFY WHETHER THE EXPENDIT URE WAS INCURRED IN THE CAPITAL FIELD OR REVENUE FIELD AND WHETHER IT IS CO ST TOWARDS THE PROFIT-EARNING APPARATUS OR OPERATING THE PROFIT EARNING APPARATUS . SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD. VS. CIT (1980) 124 ITR 1 (SC) LAID DOWN THAT WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE A DVANTAGE IN A COMMERCIAL ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 8 SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSES SEES TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEE S BUSINESS TO BE CARRIED ON MORE EFFICIENTLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUG H THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THE TEST OF ENDURI NG BENEFIT IS, THEREFORE NOT A CERTAIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMST ANCES OF A GIVEN CASE. THE HONBLE SUPREME COURT IN CIT VS. ABDULLABHAI ABDULKADAR (1961) 41 ITR 545 (SC), HAS HELD THAT UNLESS THE ADVANCE MADE WAS IN THE COURSE OF TRADING OR INCIDENTAL TO THE BUSINESS OF THE ASSESSEE, THE BAD DEBT ARISING THEREFROM COULD NOT BE TREATED AS A BUSINESS LOSS AND WAS NOT ADMISSIBLE AS A DEDUCTION AND THIS TEST IS SATISFIED IN THE CASE OF THE ASSESSEE. SIMILARLY THE HONBLE SUPREME COURT IN EMPIRE JUTE CO. LTD. VS. CIT (1980) 124 ITR 1 (SC) HAS ALSO HELD THAT IN DISTINGUISHING BETWEEN CAPITA L AND REVENUE EXPENDITURE AND OBSERVED NO TEST WAS PARAMOUNT OR CONCLUSIVE. SUPREME COURT IN CIT VS. MYSORE SUGAR CO. LTD. (1962) 46 ITR 649 HELD THAT MONEY AND CONSUMABLES ADVANCED TO SUGAR CANE GROWERS WHERE SUCH ADVANCES WERE ADJUSTABLE AGAINST PRICE OF THE SUGARCANE TO BE SUPPLIED TO TH E ASSESSEE AND WHERE OWING TO CROP FAILURE ADVANCES AND COST OF CONSUMAB LES SUPPLIED BECOME IRRECOVERABLE, IT WAS HELD THAT ADVANCES MADE BY T HE ASSESSEE WAS NOT BY WAY OF INVESTMENT AND THAT IRRECOVERABLE AMOUNTS BE ING REVENUE LOSS WAS DEDUCTIBLE IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. THE HIGH COURT OF MADRAS IN CIT VS. CRESCENT FILMS (P) LTD. (2001) 248 ITR 670 HELD THAT WHERE ADVANCES WERE GIVEN TO FILM PRODUCER BY ASSES SEE, A FILM DISTRIBUTOR, TO ENABLE HIM TO COMPLETE THE FILM, IT WAS HELD THAT L ENDING WAS A SEPARATE TRANSACTION AND WAS NOT A PART OF DISTRIBUTION ARRA NGEMENT AND THAT EVERY ADVANCE CLAIMED AS A TRADING ADVANCE NEED NOT BE MA DE BY A PERSON WHO CARRIES ON BUSINESS OF MONEY-LENDING AND THE CONTEN TION THAT ANY MONEY SPENT TO SALVAGE THE CAPITAL WOULD AUTOMATICALLY BE CAPITAL EXPENDITURE CANNOT ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 9 BE ACCEPTED. FROM ALL THESE CASES AND FACT OF THE ASSESSEES CASE, THE PURCHASE OF LAND BY THE ASSESSEE WAS IN THE COURSE OF TRADING OR INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. 12. THE NEXT QUESTION TO BE ADDRESSED IS AS TO WHE THER THE INCOME OF THE ASSESSEE WAS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. IT IS THE PLEA OF THE AO THAT SINCE THE UNDISCLOSED INCOM E HAS BEEN SHOWN AS INCOME FROM OTHER SOURCES IN HIS RETURNS, IT CANN OT BE CONSIDERED AS BUSINESS INCOME. THE LAW IS WELL SETTLED THAT THERE CANNOT BE ANY ESTOPPELS IN THESE MATTERS. THE SUBSTANCE OF EACH CASE HAS TO B E SEEN RATHER THAN TO GO BY ANY INADVERTENT ERROR WHILE FILING RETURN OF INC OME. THE ASSESSEE EXPLAINED ITS NATURE OF BUSINESS AND HOW THE UNDISCLOSED INCO ME WAS EARNED. THE AO HAS ALSO VERIFIED THE SUBMISSION OF THE ASSESSEE AN D THIS HAS BEEN TAKEN NOTE IN THE ASSESSMENT ORDER THAT THE UNDISCLOSED INCOME HAS BEEN CALCULATED FROM IMPOUNDED BOOKS OF ACCOUNT. IN THE RETURN, IT HAS BEEN SHOWN SEPARATELY FROM THE REGULAR INCOME DISCLOSED TO EXPLAIN THE UN DISCLOSED INCOME OFFERED AND DISCLOSED IN THE RETURN FILED. COURTS HAVE UNIF ORMLY HELD THAT IN TAXATION MATTERS, SUBSTANCE PREVAILS OVER FORM. THE NAME GIV EN TO A TRANSACTION BY THE CONTRACTING PARTIES DOES NOT, NECESSARILY, DECIDE T HE NATURE OF THE TRANSACTION. THE QUESTION ALWAYS IS WHAT IS THE REAL CHARACTER O F THE TRANSACTION, NOT WHAT THE PARTIES CALL IT. THE HONBLE SUPREME COURT IN CIT VS. MOTORS & GENERAL STORES (P) LTD. [1967] 66 ITR 692 (SC) CONFIRMING T HE VIEW EXPRESSED BY VISCOUNT SIMON IN IRC VS. WESLEYAN & GENERAL ASSURA NCE SOCIETY HELD THAT THE TAXING AUTHORITY IS NOT RESTRICTED MERELY TO TH E LETTER OF THE DOCUMENT. HE MUST ENQUIRE INTO THE TRUE NATURE OF THE TRANSACTIO N AFTER EXAMINING THE RELEVANT MATERIALS, AND SHOULD ASCERTAIN WHETHER IT PARTAKES THE NATURE OF THE TRANSACTION WHICH THE STATUTE RENDERS TAXABLE. HE I S, IN ASCERTAINING THE TRUE NATURE OF THE CONTRACT, ALSO ENTITLED TO CONSIDER H OW THE CONTRACT WAS PERFORMED. THE EXPRESSION BUSINESS IS DEFINED IN S.2(13) OF THE IT ACT, READS AS UNDER:- ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 10 BUSINESS INCLUDES ANY TRADE, COMMERCE OR MANUFAC TURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMER CE OR MANUFACTURE THE HONBLE SUPREME COURT IN STATE OF ANDHRA PRADES H VS. H. ABDUL BAKSHI & BROS. (1964) 15 STC 644 (SC), HAD CONSIDERED THE DE FINITION OF BUSINESS , AND OBSERVED: THE EXPRESSION BUSINESS THOUGH EXTENSIVELY USED I S A WORD OF INDEFINITE IMPORT. IN TAXING STATUTES, IT IS USE D IN THE SENSE OF AN OCCUPATION, OR PROFESSION. WHICH OCCUPIES THE TIME, ATTENTION AND LABOUR OF A PERSON, NORMALLY WITH THE OBJECT OF MAKING PROFIT. TO REGAR D AN ACTIVITY AS BUSINESS, THERE MUST BE A COURSE OF DEALINGS, EITHER ACTUALLY CONTINUED OR CONTEMPLATED TO BE CONTINUED WITH A PROFIT MOTIVE, AND NOT FOR S UPPORT OR PLEASURE. KEEPING IN MIND THE ABOVE JUDICIAL PRONOUNCEMENTS AND KEEPI NG IN MIND THE FACT THAT THE ASSESSEES SOURCE OF INCOME ALL THROUGH HAS NOT BEEN DOUBTED BY THE AO AS ONE FROM REAL ESTATE TRANSACTIONS, IT CANNOT BE SAID THAT UNDISCLOSED INCOME OF THE ASSESSEE IS NOT FROM BUSINESS BUT FRO M SOME OTHER UNDISCLOSED SOURCE. THE CONCLUSION OF THE REVENUE AUTHORITIES THAT THE INCOME IN QUESTION IS INCOME FROM OTHER SOURCES IS THEREFORE NOT CORRECT. THE INCOME IN QUESTION HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. WE HOLD ACCORDINGLY. 13. THE NEXT QUESTION IS AS TO WHETHER THE LIABILI TY IN QUESTION CAN BE SAID TO HAVE CRYSTALLIZED AS EXPENDITURE OF THE PREVIOUS YE AR. ASSESSING OFFICER HAS EXPRESSED THE VIEW THAT THE CASE OF FRAUD IS STILL UNDER INVESTIGATION BY THE POLICE AND AMOUNT HAS NOT YET BEEN DECLARED AS IRRE COVERABLE. THIS IS NOT BASED ON THE CORRECT FACT AS THE POLICE HAD SUBMITT ED THE FINAL REPORT TO THE COURT, WHICH WE HAVE ALREADY REFERRED TO IN THE SUB MISSIONS OF THE ASSESSEE. THEREFORE, THE LIABILITY IN QUESTION HAS TO BE REGA RDED AS HAVING ACCRUED AND ARISEN DURING THE PREVIOUS YEAR. AS ALREADY STATED IN THE EVENT OF ANY RECOVERY OF ANY SUM, THE SAME SHALL BE BROUGHT TO T AX BY THE REVENUE U/S.41 OF THE ACT. ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 11 14. IN VIEW OF THE ABOVE, WE HOLD THAT THE SUM IN QUESTION HAS TO BE ALLOWED AS DEDUCTION AS CLAIMED BY THE ASSESSEE. THE RELEV ANT GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 15. GROUND 2 RAISED BY ASSESSEE READS AS FOLLOWS:- 2) FOR THAT ADDITION OF RS.99,100/- BEING DIFFEREN CE OF THE AMOUNT FROM, DISCLOSED IN THE STATEMENT U/S./ 131(1) OF RS.1,51, 00,000/- IN THE RETURN OF INCOME IN VARIOUS YEARS AMOU8NTING TO RS.1,50,00 ,900/- IN AGGREGATE. THE AMOUNT DISCLOSED IN THE STATEMENT WA S LUMP SUM BASED ON THE ADVANCE PAYMENT MADE FOR THE LAND AND ON CAL CULATION OF THE AMOUNT AT THE TIME OF PREPARING THE RETURN, THE AMO UNT WHICH WAS FOUND UNDISCLOSED HAS BEEN DISCLOSED. AS SUCH THE ADDITIO N OF RS.9,100/- WITHOUT ANY ADVERSE FINDING IS LIABLE TO BE DELETED IN TO-TO. 16. WE ALREADY SEEN THAT THE TOTAL ADVANCE GIVEN B Y ASSESSEE FOR PURCHASE OF PROPERTY WAS A SUM OF RS.1.51 CRORES. HOWEVER, I N THE RETURN FILED FOR AYS 2006-07 TO 2012-13 THE ASSESSEE HAD DECLARED ONLY U NDISCLOSED INCOME OF RS.1,50,00,900/-. THE DIFFERENCE OF RS.99,100/- WAS BROUGHT TO TAX BY AO AS INCOME NOT DISCLOSED BY THE ASSESSEE IN THE RETURN INCOME, THE ORDER OF AO WAS CONFIRMED BY LD. CIT(A) 17. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS SE EN THAT THE BOOKS OF ACCOUNTS HAVE BEEN DULY RECONSTRUCTED BY THE ASSESS EE AND THE TOTAL UNDISCLOSED INCOME HAS BEEN DULY OFFERED FOR TAX. A O HAS NOT POINTED OUT ANY DEFECT IN THE REVISED CALCULATION / BOOKS OF ACCOUN T AND DETAILS SUBMITTED. SIMPLY HE HAS WITHOUT ASSIGNING ANY REASON HE HAS M ADE ADDITION ON THE BASIS OF THE SUBMISSION MADE. RELIANCE OF THE AO SI MPLY ON THE STATEMENT U/S.131(1) IS NOT BASED ON THE FACT OR CORRECT APPR ECIATION OF LAW. THE JURISDICTIONAL HIGH COURT OF IN THE CASE OF M/S SHREE GANESH TRADING CO. VS. CIT, DHANBAD IN TAX CASE NO. 8 OF 1999P HAS HELD THAT STATEMENT RECORDED U/S 132(4) OF THE INCOME TAX ACT, 1961 IS EVIDENCE BUT ITS RELIABILITY DEPENDS UPON THE FACTS OF THE CASE AND PARTICULARLY SURROUN DING CIRCUMSTANCES. DRAWING INFERENCE FROM THE FACTS IS A QUESTION OF L AW. HERE IN THIS CASE, ALL THE AUTHORITIES BELOW HAVE MERELY REACHED TO THE CONCLU SION OF ONE CONCLUSION ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 12 MERELY ON THE BASIS OF ASSUMPTION RESULTING INTO FA STENING OF THE LIABILITY UPON THE ASSESSEE. THE STATEMENT ON OATH OF THE ASSESSE E IS A PIECE OF EVIDENCE AS PER SECTION 132(4) OF THE INCOME TAX ACT AND WHE N THERE IS INCRIMINATING ADMISSION AGAINST HIMSELF, THEN IT IS REQUIRED TO BE EXAMINED WITH DUE CARE AND CAUTION. HERE IN THIS CASE ALSO, NO SPECIFIC RE ASON HAS BEEN GIVEN FOR REJECTION OF THE ASSESSEES CONTENTION BY WHICH THE ASSESSEE HAS RETRACTED FROM HIS ADMISSION. MERE READING OF STATEMENT OF AS SESSEE IS NOT THE ASSESSMENT OF EVIDENTIARY VALUE OF THE EVIDENCE WHE N SUCH STATEMENT IS SELF INCRIMINATING. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT IN THE PRESENT CASE, A WRONG INFERENCE HAD BEEN DRAWN BY THE AUTHO RITIES BELOW IN HOLDING THAT THERE WAS UNDISCLOSED INCOME. WE THEREFORE DI RECT THAT THE ADDITION MADE BY REVENUE AUTHORITY BE DELETED. GR.NO.2 IS A LLOWED. 18. GROUND 3 RAISED BY ASSESSEE READS AS FOLLOWS:- 3) FOR THAT THE LEARNED LOWER AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING A SUM OF RS.1,01,366/- UNDER THE HEAD LABOUR CHARGE S ON THE GROUND THAT PAYMENTS WERE MADE IN CASH AND THE ACCOUNTS WE RE NOT AUDITED IGNORING THE FACT THAT DAILY LABOUR HAS TO BE PAID IN CASH, WITHOUT ANY ADVERSE FINDING AND ON ESTIMATE WITHOUT ANY EVIDENC E THE SAME IS LIABLE TO BE DELETED IN TO-TO. 19. THE AO ON PERUSAL OF THE UNAUDITED PROFIT & LO SS A/C. BALANCE SHEET ETC, NOTICED THAT THE TURNOVER OF THE BUSINESS M/.S SATY A SAI BUILDERS FOR FY 2010- 11 WAS AT RS.74,83,00/. AGAINST THIS RECEIPT, A SUM OF RS.28,35,071/- HAD BEEN DEBITED AS LABOUR CHARGES GIVING A RATIO OF LABOR CHARGES TO TURNOVER AT 37.88%. THE AO NOTICED THAT THE TURNOVER FOR THE FY 2011-12 WAS RS.74,17,250/- VIS--VIS THE LABOR PAYMENT OF RS.20 ,27,322/- GIVING A RATIO OF LABOR CHARGES TO TURNOVER AT @ 27.33%. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON WHY A RELATIVELY HIGHER LABOUR CHARGE WA S CLAIMED IN FY 2011-12. IN RESPONSE, THE ASSESSEE STATED THAT SINCE THE BUI LDING WAS UNDER PROGRESS, THE LABOUR CHARGES SHOULD BE CALCULATED AS A RATIO UPON SALES INCLUDING WORK- IN-PROGRESS WHICH COMES AROUND TO 26.13% FOR THE FY 2011-12 AND AROUND 27.17% FOR THE FY 2010-11 AS CAN BE REFLECTED FROM THE CHART GIVEN BELOW:- ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 13 FY SALES OPENING WIP CLOSING WIP ALTERNATION CHARGES LABOUR CHARGES RATION OF SUM OF SALES, ALTERATION CHARGES AND FOR THE YEAR WIP TO LABOUR CHARGES 10-11 7483000 3720815 6886255 200000 2835071 26.13% 11-12 7417250 6886255 6202314 727500 2027322 27.17% THE AO WAS OF THE VIEW THAT FROM A PERUSAL OF LABO UR CHARGES THAT THE PAYMENTS WERE MADE IN CASH TO LABOURERS. THE AO WAS OF THE VIEW THAT THE PAYMENT WHICH WAS MADE IN CASH WAS NOT AMENABLE TO VERIFICATION AND AS SUCH AN INFLATED EXPENDITURE UNDER THIS HEAD COULD NOT BE RULED OUT. FURTHER, THERE WAS NO EPF PAYMENTS IN RESPECT OF LABOURS ENG AGED. MOREOVER, EVEN THOUGH THE GROSS RECEIPT OF THE ASSESSEE FOR THE YE AR EXCEED THE LIMIT PRESCRIBED FOR STATUTORY AUDIT AS PROVIDED IN SECTI ON 44AB OF THE ACT, THE ASSESSEE FAILED TO COMPLY WITH THE SAME. IN ABSENCE OF THE STATUTORY AUDIT, THE BOOKS OF ACCOUNT OR THE VOUCHERS CANNOT BE SAID TO HAVE BEEN AUTHENTICATED. FOR WHICH THE GENUINENESS OF THE GROSS RECEIPT VIS- -VIS THE EXPENDITURES CLAIMED ALSO COULD NOT BE SUBSTANTIATED BEYOND DOUB T IN ABSENCE OF STATUTORY AUDIT, WHETHER THE AMOUNT WAS ACTUALLY PAID TO THE LABOURERS DIRECTLY OR THROUGH A CONTRACTOR ALSO COULD NOT BE VERIFIED ALT HOUGH IT WAS CLARIFIED BY THE ASSESSEE THAT THE PAYMENTS WERE DIRECTLY MADE IN CA SH TO THE LABOURERS AND AS SUCH NO CONTRACTOR WAS ENGAGED FOR THESE PAYMENT S. ACCORDINGLY THE VIOLATION, IF ANY, OF VARIOUS PROVISIONS OF TDS ALS O REMAINED UNVERIFIABLE. 20. QUOTING THE ABOVE REASONS, THE AO CONCLUDED TH AT THE ABOVE FACTS GO ON TO INDICATE THAT THE CLAIM OF LABOUR PAYMENTS WAS N OT VERIFIABLE AS THE POSSIBILITY OF INFLATED EXPENDITURE UNDER THIS HEAD COULD NOT BE RULED OUT. THUS, THE CLAIM OF EXPENDITURE UNDER THE HEAD LABOUR CHA RGES IN ITS ENTIRETY COULD NOT BE TERMED AS MADE TOWARDS BUSINESS PURPOSES ONL Y. KEEPING IN VIEW THE ABOVE DISCUSSION, THE FACTS OF THE CASE INCLUDING T HE INCONSISTENCY IN THE CLAIM OF EXPENDITURE UNDER THE HEAD LABOUR CHARGES VIS- -VIS ITS RELATION WITH THE TURNOVER, THE MANNER IN WHICH IT WAS PAID WHICH REN DERS IT UNVERIFIABLE AND TO BE FAIR TO THE ASSESSEE, A DISALLOWANCE @ 5% THE LA BOUR CHARGES WAS MADE BY THE AO AS EXCESS CLAIM ON ACCOUNT OF LABOUR CHA RGES AND NOT ALLOWABLE ITA NO.300/RAN/2014 A.Y. 2012-13 SUBHASH CH. MOONKA VS. ACIT, CC-JSR PAGE 14 AND ACCORDINGLY A SUM OF RS.1,01,366/- (5% OF RS.20 ,27,322/-) WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 21. ON APPEAL BY ASSESSEE LD. CIT(A) CONFIRMED THE ORDER OF AO. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VI EW THAT THE ADDITION MADE BY AO AND SUSTAINED BY LD. CIT(A) IS NOT PROPER AND ADDITION HAS BEEN MADE PURELY ON THE BASIS OF ASSUMPTION AND SURMISE. SINC E THERE IS NO BASIS FOR THE IMPUGNED DISALLOWANCE THE SAME IS DIRECTED TO BE DE LETED. GROUND NO.3 RAISED BY ASSESSEE IS ACCORDINGLY ALLOWED. 22. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT 12/ 09/2016 SD/- SD/- ( ) ('# ) (M.BALAGANESH) (N.V.VASUDEVAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) RANCHI, *DKP $- 12 / 09 /201 6 RANCHI / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SUBHASH CHANDRA MOONKA, ASHA, 9 TH AVENUE, SOUTH PARK, BISTUPUR, JAMSHEDPUR-8310 01 2. /RESPONDENT-ACIT, CENTRAL CIRCLE, JAMSHEDPUR 3. / 2 / CONCERNED CIT RANCHI 4. 2- / CIT (A) RANCHI 5. 5 ##/, /, / DR, ITAT, RANCHI 6. ; / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR.PS, I TAT, RANCHI
