Sh. Inderjit Mehta Prop. Mehta Mega Mart, Bathinda V. The Asstt. Commissioner of Income-tax, Bathinda

ITA 31/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0758 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 12-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income; Depreciation; Loose papers; Deemed to accrue or arise in india; Wrong claim; Difference of opinion; Surrender of tenancy right
• Section: 69C; 133A; 69; 27; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.405(ASR)/2013 ASSESSMENT YEAR:2007-08 PAN:ABQPM6434M SH. INDERJIT MEHTA PROP. VS. ASSTT. COMMR. OF INCO ME TAX, M/S. MEHTAS MEGA MART, CIRCLE-1, BATHINDA. G-1817, BIRLA MILL COLONY, BATHINDA. (APPELLANT) (RESPONDENT) ITA NO.31(ASR)/2015 ASSESSMENT YEAR:2007-08 PAN:ABQPM6434M SH. INDERJIT MEHTA PROP. VS. ASSTT. COMMR. OF INCO ME TAX, M/S. MEHTAS MEGA MART, CIRCLE-1, BATHINDA. G-1817, BIRLA MILL COLONY, BATHINDA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. ASHWANI KALIA, CA RESPONDENT BY: SH. UMESH TAKYAR, DR DATE OF HEARING: 16/05/2016 DATE OF PRONOUNCEMENT: 18/05/2016 ORDER PER A.D. JAIN, JM: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 2 SEPARATE ORDERS OF CIT(A), BATHINDA, DATED 28.03.20 13 AND 19.12.2014, EACH FOR THE ASSESSMENT YEAR 2007-08. 2. FIRST, WE WILL DEAL WITH ITA NO. 405(ASR)/2013. WHERE THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) BATHINDA HAS ERRED IN CONFI RMING THE FINDING OF THE A.O. THAT THE INCOME SURRENDERED DUR ING THE COURSE OF SURVEY OF BUSINESS PREMISES OF THE ASSESS EE ON ACCOUNT OF UNEXPLAINED STOCK, CASH AND THE AMOUNT I NVOLVED IN TRANSACTIONS NOTED IN LOOSE PAPERS WAS LIABLE TO THE TAXED AS DEEMED INCOME AND NOT UNDER THE HEAD INCOME FR OM BUSINESS & PROFESSION. 2. THAT THE LD. CIT(A) BATHINDA HAS ERRED IN LAW AN D ON FACTS IN HOLDING THAT DEPRECIATION OF RS.11,38,703/- CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE AS DEDUCTION FROM INCOME SURRENDERED DURING THE COURSE OF SURVEY PROCEEDINGS AS ADDITIONAL BUSINESS PREMISES. 3. THAT THE LD. CIT(A) BATHINDA HAS ERRED IN CONFI RMING THAT BROUGHT FORWARD LOSS AND DEPRECIATION AMOUNTING TO RS.13,52,969/- CANNOT BE SET OFF AGAINST THE SURREN DERED INCOME DURING THE COURSE OF SURVEY PROCEEDINGS. 4. THAT THE LD. CIT(A) BATHINDA HAS ERRED IN LAW AN D ON FACTS, WHILE HOLDING THAT ADDITION INCOME OF RS.47,00,000/ - ON ACCOUNT OF SURRENDER MADE DURING THE COURSE OF SURV EY IS NOT ASSESSABLE UNDER ANY OF THE SIX HEADS OF INCOME ENUMERATED IN SECTION 14 OF THE ACT. 5. THAT THE LD. CIT(A) BATHINDA HAS ERRED IN LAW AN D ON FACTS, CONFIRMING THE ADDITION OF RS.1,16,184/- MADE ON AC COUNT OF LOW G.P. RATE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE RETAIL BUSINESS OF READYMADE GARMENTS, TOYS, FOOTWEAR, COSMETICS ETC., UNDER THE NAME AND STYLE OF M/S. MEHTA MEGA M ART, BATHINDA. DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YE AR 2007-08 SURVEY ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 3 U/S 133A WAS CONDUCTED AT BUSINESS PREMISES OF THE ASSESSEE ON 12.3.2007. THE SURVEY PARTY WORKED OUT THE VALUE OF STOCKS AT RS.1,40,11,741/- AS AGAINST THE VALUE OF STOCKS AS PER BOOKS WORKED OUT BY THEM AT RS. 1,10,,05,000 ON THE BASIS OF G.P. RA TE. HOWEVER, IN ORDER TO AVOID LITIGATION AND IN ORDER TO PURCHASE PEACE OF MIND THE ASSESSEE SURRENDERED A SUM OF RS.32 LACS ON ACCOUNT OF EXCES S STOCK EVEN THOUGH THE DIFFERENCE WAS ONLY RS.3006741. SIMILARLY THE S URRENDER OF EXCESS CASH RS.5 LACS AS WELL AS SURRENDER OF RS. 10 EACH IN RESPECT OF CERTAIN UNRECORDED ENTRIES WERE MADE SIMPLY TO PURCHASE PEA CE AND TO AVOID LITIGATION. THAT THE TOTAL SURRENDER OF RS.47 LACS WAS MADE BY THE ASSESSEE WITH A SPECIFIC CONDITION THAT SURRENDER W AS BEING MADE TO AVOID LITIGATION AND PURCHASE PEACE OF MIND SUBJECT TO NO PENAL ACTION U/S 271(L)(C). THE ABOVE AMOUNTS SURRENDERED WERE ENTERED IN THE BOOKS OF ACCOUNT AND SHOWN IN THE TRADING AND PROFIT & LO SS A/C FILED BY THE ASSESSEE WITH THE RETURN OF INCOME. THE EXCESS VALU E OF STOCK WAS CREDITED TO TRADING A/C BY INCLUDING THE SAME IN TH E CLOSING STOCK WHEREAS THE OTHER TWO AMOUNTS WERE CREDITED TO PROF IT & LOSS A/C. THUS, THE PROFIT OF BUSINESS DECLARED INCLUDED THIS SURRE NDERED AMOUNT OF RS.47 LACS. 4. WHILE FRAMING THE ASSESSMENT, THE AO ASSESSED T HE TOTAL SURRENDER AMOUNT OF RS.47 LACS SEPARATELY AS DEEMED INCOME RELYING UPON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF FAQIR MOHD HAAJI HASSAN VS. CIT (2001) 247 ITR 290 AND DID NOT ALLOW SET OFF ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 4 OF LOSS AND UNABSORBED BROUGHT FORWARD DEPRECIATION AGAINST THE SURRENDERED AMOUNT OF RS.47 LACS. 5. THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO, A GAIN RELYING UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF FAQIR MOHD HAAJI HASSAN (SUPRA). 6. IN THIS REGARD, THE ASSESSEE HAS RAISED GROUND N OS.1 TO 4. 7. IT HAS BEEN CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE AUTHORITIES BELOW HAVE ERRED IN RELYING ON FAQIR MOHD HAAJI HASSAN VS. CIT, 247 ITR 290 (GUJ.). ALONGSIDE THE ARGUMENTS M ADE, WRITTEN SUBMISSIONS HAVE BEEN FILED, WHICH ARE AS UNDER: FIRST OF ALL IT IS SUBMITTED THAT GUJARAT HIGH COU RT HAS ALREADY OVER TURNED ITS OWN DECISION IN THE CASE OF FAQIR MOHD HAAJI HASSAN (SUPRA) IN THE FOLLOWING TWO SUBSEQUEN T DECISIONS:- I) CIT V RADHE DEVELOPERS INDIA LTD (2010) 329 ITR 1(RAJ.) II) CIT V SHILPA DYEING & PRINTING MILLS PVT. LTD. (2013) 39 TAXMANN.COM 3 (RAJ.) 2. THE GUJARAT HIGH COURT IN ITS DECISION IN THE CA SE OF CIT V RADHE DEVELOPERS INDIA LTD.(SUPRA), HAS OV ER TURNED ITS DECISION IN THE CASE OF FAQIR MOHD HAJI HASSAN AFTE R MAKING THE FOLLOWING ORDER:- 'THE DECISIONS OF THIS COURT IN THE CASE OF FAKIR M OHMED HAJI HASAN (SUIPRA) AND KRISHNA TEXTILES (SUPRA) ARE NEI THER RELEVANT NOR GERMANE TO THE ISSUE CONSIDERING THE F ACT THAT IN NONE OF THE DECISIONS THE LEGISLATIVE SCHEME EMANAT ING FROM CONJOINT READING OF PROVISIONS OF SECTION 14 & 56 O F THE ACT HAVE BEEN CONSIDERED. THE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR PVT. LTD. (SUPRA) HAS DEALT WIT H THIS ISSUE WHILE DECIDING THE TREATMENT TO BE GIVEN TO A TRANSACTION OF SURRENDER OF TENANCY RIGHT. THE EARLIER DECISION S OF THE APEX ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 5 COURT COMMENCING FROM CASE OF UNITED COMMERCIAL BAN K LTD V CIT (1957) 32 ITR 688 (SC) HAVE BEEN CONSIDERED BY THE APEX COURT AND HENCE IT IS NOT NECESSARY TO REPEAT THE S AME. SUFFICE IT TO STATE THAT THE ACT DOES NOT ENVISAGE TAXINS A NY INCOME UNDER THE HEAD NOT SPECIFIED IN SECTION 14 OF THE A CT. IN THE CIRCUMSTANCES, THERE IS NO QUESTION OF TRYING TO RE AD ANY CONFLICT IN THE TWO JUDGMENTS OF THIS COURT AS SUBM ITTED BY THE ID. COUNSEL FOR THE REVENUE '. 3. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. CHENSING VENTURES (2007) 291 ITR258 (MAD) DEALT WIT H THE SAME ISSUE AND ALSO CATEGORICALLY HELD THAT INCOME SURRENDERED DURING THE COURSE OF SURVEY CAN BE SET OFF AGAINST LOSS DETERMINED UNDER ANY OTHER HEAD OF INC OME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71 AND IT WAS HELD AS UNDER:- HEARD COUNSEL. THE A O 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 OF LOSS AGA INST INCOME UNDER ANY OTHER HEAD. AFTER SETTING OFF LOSS ES AGAINST THE INCOME UNDER THE SAME HEAD, IF THE NET RESULT IS STILL A LOSS, THE ASSESSEE CAN SET OFF TH E SAID LOSS U/S 71 OF THE ACT AGAINST INCOME OF THE SAME Y EAR UNDER ANY OTHER HEAD, EXCEPT FOR LOSSES WHICH ARISE UNDER THE HEAD CAPITAL GAINS . THE INCOME TAX IS ONLY ONE TAX AND LEVIED ON THE SUM TOTAL OF THE INCOME CLASSIFIED AND CHARGEABLE UNDER THE VARIOUS HEADS. SECTION 14 HAS CLASSIFIED THE DIFFERENT HEADS OF INCOME AND INCOME UNDER EACH HEAD IS SEPARATELY COMPUTED. INCOME WHICH IS COMPUTED IN ACCORDANCE WITH LAW ME INCOME AND IT IS NOT A COLLECTION OF DISTINCT TAX L EVIED SEPARATELY ON EACH HEAD OF INCOME AND IT IS NOT AN AGGREGATE OF VARIOUS TAXES COMPUTED WITH REFERENCE TO EACH OF THE DIFFERENT SOURCES SEPARATELY. THERE IS ONLY ONE ASSESSMENT AND THE SAME IS MADE AFTER THE TOTAL INCOME HAS BEEN ASCERTAINED. THE ASSESSEE IS SUBJEC T TO INCOME TAX ON HIS TOTAL INCOME THOUGH HIS INCOME UN DER EACH HEAD MAY BE WELL BELOW THE TAXABLE LIMIT. HENC E THE LOSS SUSTAINED IN ANY YEAR UNDER THE HEADS OF INCOME WILL HAVE TO BE SET OFF AGAINST INCOME UNDER ANY OTHER HEAD. IN THIS CASE, THE AO MADE ADDITION OF RS.28,50,000 AS UNDISCLOSED INCOME U/S 69 OF THE AC T. ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 6 ONCE THE LOSS IS DETERMINED, THE SAME SHOULD BE SET OFF AGAINST THE INCOME DETERMINED UNDER ANY OTHER HEAD OF INCOME. IN THE ASSESSMENT, NO REASONS WERE GIVEN BY THE AO TO DENY THE BENEFIT OF SECTION 71 OF THE ACT . THE BENEFIT PROVIDED U/S 71 OF THE ACT CANNOT BE DENIED AND THE ID. STANDING COUNSEL APPEARING FOR THE REVENUE IS ALSO UNABLE TO EXPLAIN OR GIVE REASONS WHY THE ASSE SSEE IS NOT ENTITLED TO THE BENEFIT OF SECTION 71 OF THE ACT. THE REASONS GIVEN BY THE TRIBUNAL ARE BASED ON VALID MATERIALS AND EVIDENCE AND THE SAME IS IN ACCORDANC E WITH THE PROVISIONS OF SECTION 71 OF THE ACT. WE FI ND NO ERROR OR LEGAL INFIRMITY IN THE IMPUGNED ORDER 4. THE HONBLE GUJARAT HIGH COURT IN ITS DECISION I N THE CASE OF SHILPA DYEING & PT. MILLS (SUPRA) HAS DISCU SSED BOTH THE EARLIER DECISION OF GUJARAT HIGH COURT IN THE C ASE OF FAQIR MOHD HAZI HASSAN AND RADHE DEVELOPERS INDIA LTD AS WELL AS THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CHENSING VENTURES AND AFTER CONSIDERING ALL THESE DECISION H AS HELD THAT THE STATUTORY PROVISIONS CONTAINED IN SECTION 71 ARE APPLICABLE IN THE PRESENT CASE AND LOSS SUFFERED CA N BE SET OF AGAINST INCOME SURRENDERED IN SURVEY. 5. THERE IS NO DENYING THE FACT THAT HONBLE P&H H IGH COURT IN THE CASE OF KIM PHARMA LTD V CIT (2013) 25 8 CTR 454 HAS RELYING ON THE JUDGMENT OF GUJARAT HIGH COU RT IN THE CASE OF FAQIR MOHD HAAJI HASSAN (SUPRA) HAS HEL D THAT THE AMOUNT SURRENDER BY THE ASSESSEE DURING THE COU RSE OF SURVEY U/S 133 A COULD NOT FORM PART OF BUSINESS IN COME AND WAS ASSESSABLE U/S 69A. THERE BY THE SAME CANNO T BE SET OFF AGAINST THE BUSINESS LOSS AND DEPRECATION. 6. FROM THE READING OF JUDGMENT OF HONBLE P&H HIG H COURT IT WILL BE OBSERVED THAT HIGH COURT HAS ABSOL UTELY RELIED ON THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF FAQIR MOHD HAAJI HASSAN. AFTER QUOTING THE DECISION OF GUJARAT HIGH COURT IN PARA 6 OF ITS ORDER P & H HIG H COURT HAS PASSED ONE LINE JUDGMENT VIDE PARA 7 AS UNDER:- 7. THE HONBLE P&H HIGH COURT HAD NO OCCASION TO DISCUSS SUBSEQUENT TWO JUDGMENTS OF GUJARAT HIGH COURT WHERE HONBLE GUJARAT HIGH COURT HAS CATEGORICALLY STATED THAT INCOME HAS TO BE ASSESSED IN ANY OF HEADS SPEC IFIED IN SECTION 14 OF THE ACT AND ACCORDINGLY AFTER SETTING OFF LOSSES AGAINST THE INCOME UNDER THE SAME HEAD IF THE NET R ESULT IS STILL LOSS THE ASSESSEE CAN SET OFF THE LOSS U/S 71 OF THE ACT ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 7 AGAINST THE INCOME OF SAME YEAR UNDER ANY OTHER HEA D EXCEPT FOR LOSSES UNDER THE HEAD CAPITAL GAIN. 8. FURTHER, FROM THE DECISION OF GUJARAT HIGH COUR T IN THE CASE OF RADHE DEVELOPERS INDIA LTD. (SUPRA) REP RODUCED ABOVE IT WILL BE OBSERVED THAT DECISION OF HONBLE SUPREME COURT IN THE CASE OF D.P SANDU BROS CHEMBUR (P) LTD 142 TAXMANN 713 & (2005) 273 ITR 1 WAS NOT TAKEN INTO CONSIDERATION BY GUJARAT HIGH COURT IN ITS EARLIER DECISION IN THE CASE OF FAQIR MOHD. HAAZI HASSAN AND ACCORDINGL Y HONBLE P&H HIGH COURT ALSO IN ITS DECISION IN THE CASE OF KIM PHARMA IGNORED THE SAID DECISION OF HONBLE SUP REME COURT IN THE CASE OF D.P SANDU BROS. CHEMBUR (P) LT D ACCORDINGLY THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF KIM PHARMA IS PER INCURIAM. IT IS AN ESTABLISHED LAW THAT DECISION OF COURT IS NOT BINDING PRECEDENT IF GIVEN PER INCURIAM I.E. WITHOUT THE COURTS ATTENTION HAVING BEEN DRA WN TO THE RELEVANT AUTHORITIES OR STATUTES. KINDLY REF ER CHANDRA PILLAI V UNION OF INDIA AIR (1992) ORI 261 (FB) IN THIS FULL BENCH JUDGMENT OF ORISSA HIGH COURT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MUNICIPAL CORPORATION OF DELHI V. GURNAM KAUR AIR (1989) SC 38 HAS BEEN QUOTED. 9. APEX COURT IN THE CASE OF D.P SANDU BROS. CHAMB UR (P) LTD (SUPRA) HAS HELD THAT INCOME CAN ONLY BE AS SESSED UNDER SPECIFIED HEADS PROVIDED UNDER THE INCOME TAX ACT AND NOT UNDER ANY OTHER HEAD OF INCOME. SECTION 14 OF THE INCOME TAX ACT PROVIDES FIVE SPECIFIED HEADS OF INC OME AND INCOME CAN ONLY BE ASSESSED UNDER OF THESE HEADS. O NCE THE INCOME IS ASSESSED UNDER THESE FIVE HEADS THE PROVI SIONS OF SECTION 71 WILL APPLY AUTOMATICALLY. 10. FURTHER, IT WILL NOT BE OUT OF PLACE TO MENTIO N THAT THE ASSESSEES CASE IS TOTALLY DISTINGUISHABLE FROM THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF KIM PHARMA (S UPRA) AS ELABORATED BELOW: I) IN THE CASE OF KIM PHARMA THE ASSESSE HAD MADE CASH SURRENDER OF RS.5 LAC UNDER THE HEAD INCOME FROM OTHER SOURCES AND SAID AMOUNT WAS NOT CREDITED IN THE BOOKS OF ACCOUNT AND THERE WAS NO REFERENCE TO THE SOURCE OF AMOUNT DECLARED. HOWEVER IN THE ASSESSEES CASE THE AMOUNT WAS SURRENDERED AS BUSINESS INCOME AND THE SAME IS DULY APPEARING IN THE TRADING & PROFIT & LOSS A/C. THE ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 8 STOCK DECLARED IS LYING CREDITED IN THE TRADING A/C WHEREAS THE CASH AND UNACCOUNTED ENTRIES ARE INCLUDED IN THE PROFIT & LOSS A/C. II. IN THE CASE OF KIM PHARMA IT WAS PLAIN SURRENDER OF CASH OF RS.5 LACS NOT ANYTHING ELSE. IN THE CASE OF APPELLANT THE SURRENDER IN RESPECT OF STOCK WAS NOT BY WAY OF EXCESS STOCK FOUND DURIN G THE COURSE OF SURVEY. THE DIFFERENCE WAS ONLY IN VA LUE AND THAT TOO BECAUSE OF LARGE QUANTITY OF OBSOLETE STOCK WAS ALSO VALUED AT COST PRICE BY THE SURVEY T EAM AND MANY STOCK ITEMS WERE VALUED AT THE PURCHASE RATES IGNORING THE DISCOUNT ALLOWED BY SUPPLIERS. S INCE THE STOCK WAS IN CONNECTION WITH THE BUSINESS CARRI ED ON BY THE ASSESSEE. IT IS APPARENT THAT THE SURREND ER PERTAINED TO THE BUSINESS CARRIED ON BY THE ASSESSE E. SIMILAR IS THE POSITION IN RESPECT OF SURRENDER OF CASH AND CERTAIN BUSINESS TRANSACTIONS NOT ENTERED IN TH E BOOKS OF ACCOUNT. III) IN THE CASE OF KIM PHARMA THE SURRENDER OF CAS H WAS ASSESSED U/S 69A PURELY ON THE GROUND THAT IN RESPECT OF CASH SURRENDERED DURING THE COURSE OF SURVEY WHICH, WAS NOT IN THE BOOKS OF ACCOUNT, NO SOURCE WAS DECLARED BY THE ASSESSEE AND IN THE ABSENCE OF NATURE OF SOURCE OF CASH BEING PROVED TH E SAME IS NOT ASSESSABLE AS BUSINESS. HOWEVER, IN THE CASE OF ASSESSEE THE DIFFERENCE IN THE VALUE OF STOCK HAS ALREADY BEEN EXPLAINED AND SIMILARLY THE TRANSACTIONS NOT FOUND MATCHING WITH THE BOOKS WERE COMPLETELY IN THE NATURE OF BUSINESS. TH E SURRENDERED AMOUNTS ARE DULY REFLECTED IN THE TRADI NG & PROFIT & LOSS A/C AND HAVE ALSO BEEN REFLECTED IN THE BOOKS OF ACCOUNT. KINDLY REFER PARA 5 OF THE ASSESSMENT ORDER AT LAST PARA OF PAGE 3 RD AND 4 LH WHERE THE AO HAS HIMSELF CONFIRMED THE FOLLOWING FACTS:- IT IS SEEN THAT YOU HAVE ACCOUNTED FOR THESE ENTRI ES IN YOUR REGULAR HOOKS OF ACCOUNT BY TREATING THEM AS Y OUR INCOME/DEEMED INCOME FROM BUSINESS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED THAT THE AMOUNT OF RS. 32 LACS HAS BEEN CREDITED BY YOU IN THE TRADING ACCOUNT IN COMPUTING VALUE OF CLOSIN G STOCK. AND THE AMOUNT OF RS.15 LACS HAS BEEN CREDIT ED ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 9 BY YOU IN THE PROFIT & LOSS ACCOUNT AS MISC. INCOM E. IT IS BEING MENTIONED HERE THAT AFTER TAKING INTO ACCO UNT THESE TWO CREDIT ENTRIES, THE NET PROFIT FROM BUSIN ESS HAS BEEN DECLARED AT RS. 2491672 APART FROM SALARY OF R S. 360000. IF THESE TWO CREDIT ENTRIES ARE TAKEN IN TH E BOOKS OF ACCOUNT, THERE WOULD HAVE BEEN BUSINESS LO SS OF RS. 2208328 11. FURTHER THE ATTENTION OF THE HONBLE BENCH IS I NVITED TO THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF RAJIV SHAKDAR NEW DELHI V INCOME TAX OFFICE IN ITA NO.5069/DEL/2012. THE ABOVE JUDGEMENT OF DELHI BENC H HAS BEEN UPHELD BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT V JUSTICE RAJIV SHAKDAR IN ITA NO.173/2 014 WHERE THE HIGH COURT HAS HELD AS UNDER VIDE PARA 3 OF THE ORDER:- THIS COURT IS OF THE OPINION THAT HAVING REGARD TO THE PREVIOUS RULINGS, JUDGMENTS OF THIS COURT AND THE REASONING ADOPTED AND WITH THE OMISSION TO CARRY FORWARD THINGS TO BRING TO TAX SUCH AMOUNTS BY INDICATING THE RELEVANT HEAD OF INCOME UNDER SECTIO N 14, THE QUESTION IS FAIRLY WELL SETTLED. THIS IS ALSO I N ACCORD WITH THE RULING OF THE SUPREME COURT IN CIT V AJAZ PRODUCTS LTD 55 1TR 741 (SC) THAT THE SUBJECT IS NO T TO BE TAXED UNLESS THE CHARGING PROVISION CLEARLY SAYS SO. THIS VIEW HAS BEEN FOLLOWED BY THE TRIBUNAL IN THI S CASE 12. FINALLY WE ARE SUBMITTING HEREWITH COPY OF THE ORDER OF THE AMRITSAR BENCH OF ITAT IN THE CASE OF BOMBAY CL OTH HOUSE IN ITA NO.412/ASR/1997 WHERE THE TRIBUNAL HAS HELD THAT THE AMOUNT OF RS.4 LACS SURRENDERED BY TH E ASSESSEE DURING THE COURSE OF SURVEY U/S 133A WAS R ELATED TO BUSINESS OF THE ASSESSEE AND AS SUCH FOR THE PUR POSES OF DEDUCTION OF SALARY ALLOWABLE TO PARTNERS THE SURRE NDERED AMOUNT IS TO BE TAKEN AS PART OF BUSINESS INCOME. IN VIEW OF THE ABOVE JUDGMENTS AND SUBMISSIONS MAD E ABOVE IT IS REQUESTED THAT THE SET OFF OF LOSES, BUSINESS INCOME AND DEPRECIATION CLAIMED BY THE APPELLANT IS THE AMOUNT SURRENDERED DURING THE COURSE OF SURVEY AS BUSINESS INCOME MAY KINDLY BE ALLOWED. ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 10 8. THE SUM AND SUBSTANCE OF THE ABOVE SUBMISSIONS O F THE ASSESSEE IS THAT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KIM PHARMA LTD. VS. CIT, 258 CTR 454, IS A PER INCURIAM DECISION, SINCE IT DOES NOT TAKE INTO CONSIDERATION CIT VS . RADHE DEVELOPERS INDIA LTD., 329 ITR 1 (RAJ.) AND CIT VS. SHILPA DYEING & PRINTING MILLS PVT. LTD., 39 TAXMAN.COM 3 (RAJ.), WHEREIN, THE HONBLE GUJARAT HIGH COURT HAS OVER-RULED FAQIR MOHD. HAJI HASSAN (SUPRA). 9. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER, AS ALSO ON KIM PHARMA LTD., (SUPR A). 10. IN FAQIR MOHD. HAJI HASSAN, (SUPRA), THE HON BLE GUJARAT HIGH COURT HELD THAT WHERE THE ASSESSEE OFFERS NO EXPLAN ATION REGARDING THE SOURCE OF THE RECOVERY MADE FROM HIS POSSESSION, TH E VALUE OF THE RECOVERY (IN THAT CASE GOLD) IS INCLUDIBLE IN THE A SSESSEES INCOME UNDER SECTION 69A OF THE ACT. IT WAS HELD THAT WHEN THE P ROVISIONS OF SECTIONS 69, 69A, 69B OR 69C APPLY AND NO SOURCE IS DISCLOSE D AT ALL, IT WOULD NOT BE POSSIBLE TO CLASSIFY THE DEEMED INCOME UNDER ON E OF THE SPECIFIC HEADS OF INCOME; THAT THE OPENING WORDS OF SECTION 14 CLEARLY LEAVE SCOPE FOR SUCH DEEMED INCOME BEING TREATED SEPARATELY; TH AT THE SOURCE NOT BEING KNOWN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD INCOME FROM OTHER SOURCES; AND THAT CONSEQUENTLY , CORRESPONDING DEDUCTIONS, WHICH ARE ALLOWABLE UNDER VARIOUS HEADS , CANNOT BE ALLOWED IN A CASE OF DEEMED INCOME. ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 11 11. IN KIM PHARMA LTD. (SUPRA), APPLYING FAQIR MOHD. HAJI HASSAN, (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT WHERE THE SOURCE OF THE UNEXPLAINED CASH SURRENDERED DURING SURVEY IS NOT EXPLAINED, THE SAME IS RIGHTLY ASSESSABLE AS DEEMED INCOME UNDER S ECTION 69A AND IT CANNOT BE ASSESSED AS BUSINESS INCOME. 12. THE STAND OF THE ASSESSEE, TO THE EFFECT THAT KIM PHARMA LTD. (SUPRA), IS PER INCURIAM TWO DECISIONS OF THE OF T HE HONBLE GUJARAT HIGH COURT, WHEREIN, FAQIR MOHD. HAJI HASSAN, (SUPRA), HAS BEEN OVER-RULED, IS NOT FOUND TO CARRY ANY FORCE WHATSOEVER. IN OUR CONSIDERED OPINION, THIS ARGUMENT MIGHT BE AVAILABLE TO THE ASSESSEE IN APPROPRIATE PROCEEDINGS BEFORE THE HONBLE HIGH COURT, OR BEFOR E THE HONBLE SUPREME COURT. HOWEVER, THE ARGUMENTS OF THE ASSESS EE THEMSELVES SHOW THAT KIM PHARMA LTD. (SUPRA), HAS NOT BEEN HITHERTO HELD TO BE PER INCURIAM IN ANY PROCEEDING. MOREOVER, AS AN INF ERIOR TRIBUNAL, WE ARE BOUND BY THE ORDERS OF THE HONBLE JURISDICTIONAL H IGH COURT. THE ORDERS OF THE HONBLE JURISDICTIONAL HIGH COURT ARE BINDIN G ON US. THEIR LORDSHIPS IN KIM PHARMA LTD. (SUPRA), HAVE HELD UNEXPLAINED MONEY RECOVERED IN SURRENDER TO BE ASSESSABLE AS DEEMED I NCOME U/S 69A AND NOT AS BUSINESS INCOME. THE RATIO IS DOWN-RIGHT BIN DING ON US. THIS ARGUMENT OF THE ASSESSEE, IS ACCORDINGLY, REJECTED. KIM PHARMA (SUPRA) IS DIRECTLY APPLICABLE TO THE AMOUNT OF RS.5 LAKHS SURRENDERED ON ACCOUNT OF EXCESS CASH FOUND IN THE BOOKS. THEREFOR E, THE ADDITION OF RS. 5 LAKHS SURRENDERED ON ACCOUNT OF EXCESS CASH FOUND PHYSICALLY AS ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 12 AGAINST THAT RECORDED IN THE BOOKS OF ACCOUNT IS C ONFIRMED. HOWEVER, SO FAR AS REGARDS THE OTHER TWO ADDITIONS OF RS.32 LAK HS ON ACCOUNT OF EXCESS STOCK FOUND IN THE BOOKS OF ACCOUNT AND RS. 10 LAKHS ON ACCOUNT OF UNEXPLAINED ENTRIES NOT RECORDED IN THE BOOKS O F ACCOUNT ARE DELETED. TO QUOTE FROM KIM PHARMA (SUPRA) ITSELF, SUCH AMO UNTS HAVE BEEN HELD TO BE ASSESSABLE AS BUSINESS INCOME: IN THE FACTS OF THE PRESENT CASE, WE FIND THAT ASS ESSEE DURING THE COURSE OF SURVEY HAD SURRENDERED THE INCOME AS INCO ME FROM OTHER SOURCES, THOUGH A PLEA HAS BEEN RAISED BY THE ASSES SEE THAT THE INCOME WAS SURRENDERED AS INCOME FROM JOB WORK BUT NO EVIDENCE TO PROVE THE STAND OF THE ASSESSEE HAS BEEN BROUGHT ON RECORD. THE ASSESSEE HAD ALSO SURRENDERED ADDITIONAL INCOME OF RS.10 LACS IN ASSESSMENT YEAR 2005-06 ON ACCOUNT OF SUNDRY CREDIT S, REPAIRS TO BUILDING AND ADVANCES TO STAFF, WHICH BEING RELATA BLE TO BUSINESS CARRIED ON BY ASSESSEE WAS INCLUDED AS INCOME FROM BUSINESS. HOWEVER, IN RESPECT OF CASH FOUND DURING SURVEY, WH ICH WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT, NO SOURCE WAS DE CLARED BY THE ASSESSEE AND IN THE ABSENCE OF NATURE OF SOURCE OF CASH BEING PROVED; THE SAME IS NOT ASSESSABLE AS INCOME FROM B USINESS. IN THE CIRCUMSTANCES, WE HOLD THE ORDER OF THE CIT(A) IN I NCLUDING THE ADDITIONAL INCOME AS DEEMED INCOME U/S 69A OF THE A CT AND NOT ALLOWING THE BENEFIT OF THE BUSINESS LOSSES DETERMI NED AGAINST THE SAID DEEMED INCOME. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. 12.1 FROM THE ABOVE FINDING, IT IS APPARENT THAT TH E SURRENDER MADE ON ACCOUNT OF SUNDRY CREDITS, REPAIRS TO BUILDING AND ADVANCES TO STAFF HAVE BEEN HELD TO BE RELATABLE TO BUSINESS, WHEREAS O NLY IN RESPECT OF CASH, IT WAS HELD TO BE NOT RELATABLE TO BUSINESS. THEREF ORE, THE SURRENDER ON ACCOUNT OF STOCK AND UNEXPLAINED INVESTMENT RELATE D TO BUSINESS, WHEREAS THE CASH IS NOT ASSESSABLE AS INCOME FROM B USINESS. ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 13 13. ACCORDINGLY, RELIANCE ON FAQIR MOHD. HAJI HAS SAN, (SUPRA), BY THE TAXING AUTHORITIES ALSO CANNOT BE SAID TO BE IN CORRECT. THEREFORE, THE GRIEVANCE OF THE ASSESSEE BY WAY OF GROUND NOS. 1 T O 4 IS PARTLY REJECTED. 14. AS REGARDS GROUND NO.5, THE AO MADE AN ADDITION OF RS.1,16,184/- ON ACCOUNT OF LOW G.P. RATE. THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 14. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT SINCE THE AMOUNT INVOLVED IN THIS ADDITION WAS A PART OF THE SURREN DERED INCOME OF RS.47,00,000/-, NO SUCH ADDITION WAS CALLED FOR. 15. ON THE OTHER HAND, THE LD. DR HAS AGAIN PLACED RELIANCE ON THE IMPUGNED ORDER. 16. WHILE CONFIRMING THE ADDITION, THE LD. CIT(A) H AS OBSERVED THAT THE ASSESSEE COULD NOT FURNISH INVENTORY OF OPENING STO CK AND CLOSING STOCK AND THUS, THE BOOK RESULTS SHOWN WERE NOT SUBJECT T O VERIFICATION, DUE TO WHICH, FOR POSSIBLE LEAKAGE OF PROFITS, A REASONABL E AND FAIR ADDITION WAS REQUIRED TO BE MADE. 17. THE ASSESSEE MAINTAINS THAT THE SURRENDERED AMO UNT COVERED ALL THE DISCREPANCIES AND THAT FOR THE A.Y. 2005-06, TH E G.P. RATE OF 16.34% WAS ACCEPTED BY THE TRIBUNAL. 18. HERE, THE GRIEVANCE OF THE ASSESSEE, IN OUR CON SIDERED OPINION, IS JUSTIFIED. IN THE SURVEY CONDUCTED, A SURRENDER OF RS.47,00,000/- HAS ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 14 BEEN MADE WHICH INCLUDED DISCREPANCIES IN STOCK ALS O AND THEREFORE, SEPARATE ADDITION IS NOT CALLED FOR. THEREFORE, THE LD. CIT(A) WAS NOT CORRECT IN CONFIRMING THE ADDITION MADE OF RS.1,16, 184/-. ACCORDINGLY, THE GRIEVANCE OF THE ASSESSEE IS ACCEPTED AND THIS GROUND OF APPEAL IS ALLOWED. 19. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. 20. NOW, WE TAKE UP THE ASSESSEES APPEAL IN ITA N O.31(ASR)/2015 FOR THE ASSESSMENT YEAR 2007-08, AGAINST THE CONFIRMATI ON OF LEVY OF CONCEALMENT PENALTY OF RS.16 LAKHS UNDER SECTION 27 1(1)(C) OF THE INCOME TAX ACT, 1961. 21. THE FACTS ARE THAT A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE, IN WHICH, TH E ASSESSEE SURRENDERED RS.47,00,000/-. OUT OF THIS, SURRENDER OF RS.32 LAKHS WAS FOUND ON ACCOUNT OF EXCESS STOCK FOUND IN THE BOOKS OF ACCOUNT, RS. 5 LAKHS WAS ON ACCOUNT OF EXCESS CASH FOUND IN THE BO OKS OF ACCOUNT AND RS.10 LAKHS ON ACCOUNT OF UNEXPLAINED ENTRIES NOT RECORDED IN THE BOOKS OF ACCOUNT. THE AO TREATED THE DISCLOSURE AS THE D EEMED INCOME OF THE ASSESSEE, DENYING THE BENEFIT OF DEPRECIATION AND B ROUGHT FORWARD BUSINESS LOSSES. 22. THE LD. CIT(A) CONFIRMED THE AOS ACTION. 23. THE PENALTY OF RS.16,00,000/- WAS LEVIED FOR AL LEGED INTENTIONAL AND DELIBERATE CONCEALMENT. THIS WAS UPHELD BY THE LD. CIT(A). ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 15 24. CHALLENGING THE IMPUGNED ORDER, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN CONF IRMING THE PENALTY WRONGLY LEVIED, WHILE OBSERVING THAT THE INCOME DE CLARED AMOUNTS TO LEVY OF PENALTY, THOUGH IT WAS DULY DISCLOSED IN THE RET URN OF INCOME BY THE ASSESSEE. 25. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 26. HAVING CONSIDERED THE RIVAL CONTENTIONS, IT IS SEEN THAT THE CLAIM OF THE ASSESSEE CAN AT WORST BE SAID TO BE A WRONG CLA IM. NOW, IN CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., 322 ITR 158(SC) , IT HAS BEEN HELD THAT MERE MAKING OF WRONG CLAIM, WHICH IS NOT SUSTAINABL E IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTIC ULARS AND THAT A BONAFIDE CLAIM, WITHOUT INTENTIONAL AND MOTIVATED M ISTAKE, SHALL NOT CONSTITUTE CONCEALMENT OF INCOME. IF THE INCOME SUR RENDERED WAS ASSESSED WITHOUT GRANTING TO THE ASSESSEE SET OFF O F CURRENT BROUGHT FORWARD LOSSES, NO ADDITION ON THIS ACCOUNT WAS MAD E. THE ASSESSEE HAD RELIED ON HONBLE SUPREME COURT JUDGMENT IN HIS FAV OUR, WHICH RELIANCE, HOWEVER, WAS NOT ACCEPTED BY THE AO. THAT BEING SO, IT WAS A CLEAR DIFFERENCE OF OPINION, ON WHICH, IT IS TRITE THAT N O CONCEALMENT PENALTY CAN BE LEVIED. ITA NO.405(ASR)2/05 ITA NO.31(ASR)/2015 16 27. FOR THE ABOVE, WE DO NOT FIND THE CIT(A)S ORDE R TO BE SUSTAINABLE. THE GRIEVANCE OF THE ASSESSEE IS ACCEPTED. THE ORDE R UNDER APPEAL IS ACCORDINGLY CANCELLED. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.405(ASR)/2013 IS PARTLY ALLOWED AND THAT IN ITA NO.31(ASR)/2015 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON /05/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: /05/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.INDERJIT MEHTA, BATHINDA. 2. THE ACIT, CIRCLE-1, BATHINDA. 3. THE CIT(A), BATHINDA 4. THE CIT, BATHINDA 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER