M/s L.R.G. Foods Private Limited, Bathinda V. The Assistant Commissioner of Income Tax, Bathinda

ITA 313/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0686 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 12-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH TAKKYAR
• Assessee Lawyers: P N ARORA
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 133A

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.313(ASR)/2014 ASSESSMENT YEAR:2008-09 PAN: AABCL1490R M/S. L. R.G. FOODS PVT. LTD. VS. ASSTT. COMMR. OF I NCOME TAX, PHUL ROAD, RAMPURA PHUL. CIRCLE-1, BATHINDA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA, ADVOCATE RESPONDENT BY: SH. UMESH TAKKYAR, DR DATE OF HEARING: 02/06/2016 DATE OF PRONOUNCEMENT: 13/06/2016 ORDER PER A.D. JAIN, JM THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2008-09, AGAINST THE ORDER, DATED 14.02.2014, PASSED BY THE LD. CIT(A), AMRITSAR. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT NOTIC E U/S 143(2) HAS BEEN ISSUED AS PER GUIDELINES OF THE HONBLE CB DT WHEREAS AS PER EXPLANATION, THE NOTICE U/S 143(2) HAS BEEN ISSUED IN VIOLATION OF GUIDELINES OF THE CBDT. AS S UCH, ASSESSMENT FRAMED ON THE BASIS OF ILLEGAL NOTICE IS VOID ABINITIO AND THE SAME BE CANCELLED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE APPELLANT HAS NOT BROUGHT ON RECORD THE HEAD UNDER WHICH THE INCOME WAS SURRENDERED AS UNDISCLOSED INCOME WITHOUT APPRECIATING THAT AS PER SURRENDER LETTER, INCOME W AS SURRENDERD AS INCOME OF THE YEAR OVER AND ABOVE THE NORMAL INCOME. AS SUCH, THE SURRENDERED INCOME HAS TO BE T REATED AS INCOME FROM BUSINESS OR PROFESSION NOT AS INCOME FROM ITA NO.313(ASR)/2014 ASSTT. YEAR: 2008-09 2 OTHER UNDISCLOSED SOURCES. AS SUCH, THE ADDITION OF RS.15,00,000/- BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING SET OFF OF ADDITIONAL INCOME DECLARED DURING SURVEY AGAINST L OSS COMPUTED AS PER REGULAR BOOKS OF ACCOUNT MAINTAINED AS NO DEFECT IN THE SAME HAS BEEN POINTED OUT BY THE AO. AS SUCH, THE ADDITION OF RS.15,00,000/- BE DELETED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF NAMKEEN & SNACKS A ND ITS SALES. THE DEPARTMENT CONDUCTED SURVEY U/S 133A ON 19.03.2008 AND THE ASSESSEE HAD VOLUNTARILY OFFERED TO DISCLOSE INCOME OF RS. 1 5 LACS OVER AND ABOVE THE NORMAL BOOK PROFIT FOR THE FINANCIAL YEAR 2007 -08 RELEVANT TO THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD CLEARLY CRED ITED THE AMOUNT OF RS. 15 LACS AS SURRENDERED INCOME ALONGWITH VARIOUS OTHER INCOMES IN ITS PROFIT AND LOSS ACCOUNT. THIS FACT WAS VERIFIED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE AO MADE TH E ADDITION OF RS.15 LACS IGNORING THE CLAIM OF UNABSORBED LOSSES/DEPREC IATION. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION OBSERVING AS FOLLOWS: 3.3 GROUND OF APPEAL NO. 3 & 4 ARE REGARDING MAKING AN ADDITION OF RS. 15.00 LACS BY THE AO IN THE RETURNE D INCOME. AS PER FACTS ON FILE A SURVEY HAS BEEN CONDUCTED IN TH IS CASE ON 19- 03-2008. DURING SURVEY AN ADDITIONAL INCOME OF RS. 15.00 LACS HAS BEEN SURRENDERED BY THE ASSESSEE APPELLANT COMPANY. THE ASSESSEE APPELLANT COMPANY HAS MADE A SET OFF OF THIS SURREN DERED INCOME AGAINST LOSS AS PER REGULAR BUSINESS OF THE ASSESSE E APPELLANT COMPUTED ON THE BASIS OF BOOKS OF ACCOUNTS AS MAINT AINED. THE LEARNED AO HAS NOT MADE ANY ADDITION IN THE INCOME COMPUTED ON THE BASIS OF BOOKS OF ACCOUNTS MAINTAINED BUT THE L EARNED AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE APPELLANT BY H OLDING THAT SET OFF OF THIS SURRENDERED INCOME IS NOT ALLOWABLE AGA INST THE NORMAL ITA NO.313(ASR)/2014 ASSTT. YEAR: 2008-09 3 LOSS AS PER BOOKS OF ACCOUNTS. DURING THE APPELLATE PROCEEDINGS, THE A/R OF THE ASSESSEE APPELLANT HAS NOT BROUGHT ANY M ATERIAL ON RECORD TO SHOW THAT THE SURRENDER OF INCOME FALLS U NDER ANY OF THE HEAD OF INCOME UNDER WHICH THE INCOME HAS TO BE COM PUTED AS PER LAW. IN SUCH CIRCUMSTANCES THE INCOME SURRENDERED B Y THE ASSESSEE APPELLANT COULD ONLY BE CONSIDERED AS UNDISCLOSED I NCOME SURRENDERED UNDER SECTION 133A WITHOUT DISCLOSING T HE SOURCE THEREOF. THE HON'BLE PUNJAB & HARYANA HIGH COURT HA S HELD IN THE CASE OF KIM PHARMA (P) LTD. VS. COMMISSIONER OF INC OME TAX & ANR. (2013) 258 CTR (P&H) 454 THAT INCOME FROM UN DISCLOSED SOURCES-VIS-A-VIS BUSINESS INCOME-INCOME SURRENDERE D DURING SURVEV-UNDISCLOSED INCOME SURRENDERED BY THE ASSESS EE DURING THE SURVEY UNDER S. 133A WITHOUT DISCLOSING THE SOURCE THEREOF IS ASSESSABLE AS DEEMED INCOME UNDER S. 69A AND NOT AS BUSINESS INCOME-SAME COULD NOT BE SET OFF AGAINST LOSS UNDER SS. 70 AND 71. IN VIEW OF THE JUDGMENT OF THE HONBLE PUNJAB & HAR YANA HIGH COURT I CONFIRM THE ORDER OF THE AO AND ACCORDINGLY APPEA L OF THE ASSESSEE APPELLANT IS REJECTED. 4. THE LD. COUNSEL FOR THE ASSESSEE, SH.P.N. ARORA, AT THE OUTSET, SUBMITTED THAT THE ISSUE INVOLVED IN PRESENT APPEAL IS SQUARELY COVERED BY THE RECENT DECISION OF THIS BENCH OF THE TRIBUNA L, DATED 19.05.2016 IN THE CASE OF J.B. RESORTS, FAZILKA VS. INCOME TAX O FFICER, ABOHAR, PASSED IN ITA NO.488(ASR)/2015 FOR THE ASSESSMENT YEAR 201 1-12 AND REQUESTED THAT APPEAL OF THE ASSESSEE MAY BE ACCEPTED ACCORDI NGLY. 5. THE LD. DR, ON THE OTHER HAND, STRONGLY RELIED O N THE IMPUGNED ORDER. 6. HAVING HEARD BOTH THE PARTIES IN THE LIGHT OF TH E MATERIAL PLACED ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE FAC TS AND CIRCUMSTANCES OF THE ISSUE INVOLVED IN THE PRESENT APPEAL ARE SIMIL AR, AS WERE DECIDED BY THE BENCH OF THE TRIBUNAL, IN THE CASE OF J.B. RES ORTS, FAZILKA VS. INCOME ITA NO.313(ASR)/2014 ASSTT. YEAR: 2008-09 4 TAX OFFICER, ABOHAR, PASSED IN ITA NO.488(ASR)/201 5 FOR THE ASSESSMENT YEAR 2011-12. THE RELEVANT FINDINGS GIVEN THEREIN, ARE AS UNDER: 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL AVAILABLE ON RECORD. APROPOS THE CONTENTION OF THE LD. DR THAT GAURISH STEELS P. LIMITED (SUPRA), IS PER INCURIA M KIM PHARMA P. LIMITED (SUPRA). THESE ARE ONE AT ONE WITH THE LD. DR. IN GAURISH STEELS P. LIMITED (SUPRA), THE TRIBUNAL HAS TAKEN NOTE OF THE FACT THAT IN KIM PHARMA P. LIMITED (SUPRA), THE ONLY ISSUE WAS TAXABILITY OF THE CASH SURRENDERED DURING THE COURSE OF SURVEY, W HICH WAS ALSO GIVEN IN GAURISH STEELS P. LIMITED (SUPRA). THE T RIBUNAL HELD THAT THE OTHER AMOUNT SURRENDERED, ON ACCOUNT F DISCREPA NCY IN THE COST OF CONSTRUCTION, DISCREPANCY IN STOCK AND DISCREPA NCY IN ADVANCES AND RECEIVABLE, HAS TO BE CONSIDERED AS BUSINESS IN COME, WHEREAS THE CASH SURRENDERED WAS NOT TO BE SO CONSIDERED. I T HAS NOT BEEN SHOWN AS TO HOW THIS ACTION OF THE TRIBUNAL IN GA URISH STEELS P. LIMITED (SUPRA), IS AT VARIANCE WITH KIM PHARMA P . LTD. (SUPRA). ACCORDINGLY, THIS ARGUMENT OF THE LD. DR IS REJECTE D. 9. NOW COMING TO THE FACTS OF THE PRESENT CASE, IN THE SURVEY CONDUCTED, THE ASSESSEE OFFERED RS.10 LAKHS AS ADDI TIONAL INCOME. THE QUESTION AS TO WHETHER THIS CASH IS RELATABLE T O THE BUSINESS OF THE ASSESSEE, IN ACCORDANCE WITH KIM PHARMA P. LIM ITED (SUPRA) AND IF SO, WHETHER IT IS NOT A BUSINESS INCOME. TH E SURVEY IN THIS CASE WAS CONDUCTED ON 24.01.2011. THE ASSESSEE MAIN TAINS THAT ITS MARRIAGE PALACE WAS STARTED BEING LET OUT FROM 10.1 0.2010. A COPY OF THE LEDGER ACCOUNT CONTAINING THE BUILDING ACCOU NT HAS BEEN PLACED ON RECORD IN THE ASSESSMENT PROCEEDINGS. THE SAME HAS BEEN FILED BEFORE US ALSO. THIS IS ALSO FOR THE PERIOD F ROM 01.04.2010 TO 31.03.2011. THE OPENING BALANCE THEREOF STANDS AT R S.34,03,578/-. AS ON 24.01.2011, THE AMOUNT DEBITED ON ACCOUNT OF BUILDING IS RS. 10,00,000/-. AS PER LEDGER ACCOUNT, THE PALACE INCO ME FOR THE PERIOD 01.04.2010 TO 31.03.2011 HAS BEEN SHOWN AT RS.4,65, 000/-. NOW, THE AO ASSESSED THE AMOUNT OF RS.4,65,000/- AS BUSI NESS INCOME. THIS INCLUDED THE RECEIPTS AMOUNTING TO RS.3,44,000 /- FOR THE PERIOD FROM 10.10.2010 TO 16.01.2011, AS ACCOUNTED FOR IN THE PALACE INCOME OF THE ASSESSEE IN THE LEDGER. THIS INCOME H AS BEEN SHOWN ON ACCOUNT OF LETTING OUT OF THE MARRIAGE PALACE FO R THE PERIOD FROM 10.10.2010 TO 16.01.2011. AS SUCH, AS RIGHTLY CONTE NDED. THE AO HAS ACCEPTED THIS INCOME OF THE ASSESSEE AS BUSINES S INCOME. THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR THE PERIO D FROM 04.02.2011 TO 31.03.2011. SHOWN PALACE INCOME BY RS.4,65,000/- , THE DETAILS OF WHICH ARE, AS ABOVE. THEREFORE, THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS CORRECT AND THE SAME IS ACCEPTED. 10. IN KEEPING WITH KIM PHARMA P. LIMITED (SUPRA) , AS RELIED ON IN GAURISH STEELS P. LIMITED (SUPRA), THIS INCOME HAS BEEN ITA NO.313(ASR)/2014 ASSTT. YEAR: 2008-09 5 CONSIDERED AS THE ASSESSEES BUSINESS INCOME AND NO T AS DEEMED INCOME U/S 69A OF THE ACT. AS SUCH, THE BUSINESS L OSSES INCURRED BY THE ASSESSEE DURING THE YEAR CAN BE SET OFF AGAINST THE INCOME SURRENDERED. AS PER THE REQUIREMENT OF SECTION 71 O F THE ACT, THE AO IS DIRECTED TO ACT ACCORDINGLY. THUS, GROUND NOS. 1 TO 3 ARE ACCEPTED. 7. THEREFORE RESPECTFULLY FOLLOWING THE RECENT DEC ISION OF THIS BENCH OF THE TRIBUNAL, IN THE CASE OF J.B. RESORTS, FAZI LKA VS. INCOME TAX OFFICER, ABOHAR, PASSED IN ITA NO.488(ASR)/2015, D ATED 19.05.2016, FOR THE ASSESSMENT YEAR 2011-12, WE REVERSE THE ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 13/06/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. L.R.G. FOODS PVT. LTD. RAMPURA PH UL. 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 (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.