ACIT CENTRAL CIRCLE 2 , MADURAI V. M/S STNDARD SPINNING AND WEAVING MILLS LTD, SIVAKASI

ITA 454/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4449 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 08-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDIPCIT
• Assessee Lawyers: V SUBBARAYAN IT P
• Keywords: Business income; Income from undisclosed sources; Set aside
• Section: 143(3); 153A; 205; 69A; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , ! ' , # '$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.454 & 455/CHNY/2018 % &% /ASSESSMENT YEARS: 2013-14 & 2014-15 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, MADURAI. VS. M/S. STANDARD SPINNING AND WEAVING MILLS LTD., 5-2-15C, POOTHAIAMMAL BUILDING, SATTUR ROAD, SIVAKASI 626 123. [PAN: AADCS 6253K] ( '( /APPELLANT) ( )*'( /RESPONDENT) '( + , / ASSESSEE BY : SHRI V. SUBBARAYAN, ITP )*'( + , /REVENUE BY : SHRI SAILENDRA MAMIDI, PCIT - + .# /DATE OF HEARING : 11.01.2019 /0& + .# / DATE OF PRONOUNCEMENT : 19.03.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY THE REVENUE DIRECTED AG AINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 19, CHENNAI (HEREINAFTER AS CIT(A)) DATED 27.11.2 017 FOR THE ASSESSMENT YEARS (AYS) 2013-14 & 2014-15. 2. SINCE, THE IDENTICAL FACTS AND ISSUE ARE INVOLVE D IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS COMMON ORD ER. ITA NOS.454 & 455/CHNY/2018 (AYS: 2013-14 & 2014-15 ) :- 2 -: 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACT S RELEVANT FOR THE AY 2013-14 IN ITA NO.454/CHNY/2018 ARE STATED HEREI N. 4. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPE AL IN ITA NO.454/CHNY/2018 FOR AY 2013-14: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. 2. THE ID. CIT(A) ERRED IN DIRECTING THE AO TO ALLO W SET OFF OF BUSINESS LOSSES OF EARLIER YEARS AGAINST BUSINESS INCOMES AN D ALLOW SET OFF OF UNABSORBED LOSSES OF PREVIOUS YEARS FOR THE AY2013- 14. 3. HAVING REGARD TO THE DECISION OF THE HONBLE ITA T, CHENNAI IN ITA NO.1042/MDS/2012, AY 2003-04 IN THE CASE OF M/S. AK R POLY INDUSTRIES VS ITO, WHEREIN THE HONBLE ITAT HAD HEL D THAT SEC.71 PERMITS SET OFF OF LOSSES FROM ONE HEAD AGAINST INC OME FROM ANOTHER HEAD OF INCOME AS ENUMERATED IN SEC.14 OF THE IT AC T AND THAT SEC. 68 CANNOT BE ASSESSED UNDER ANY PARTICULAR HEAD OF INCOME INCLUDING INCOME FROM OTHER SOURCES UNDER SECTION.56 AND HAD FURTHER HELD THAT THE BUSINESS LOSS ASSESSED BY THE ASSESSING OFFICER CANNOT BE SET OFF AGAINST THE AMOUNT TAXED UNDER SECTION 68 AS UN EXPLAINED CASH CREDITS TAXED U/S.68 (SEC.69A & C IN THE INSTANT CA SE) CANNOT BE PEGGED TO ANY HEAD OF INCOME, OUGHT TO HAVE UPHELD THE ADDITION MADE BY THE AO FOR THE AY 2013-14. 4. FOR THESE GROUNDS AND ANY OTHER GROUND INCLUDING AMENDMENT OF GROUNDS THAT MAY BE RAISED DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ORDER OF LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS ENGAGED I N THE BUSINESS OF SPINNING AND WEAVING. THE RETURN OF INCOME FOR THE AY 2013-14 WAS FILED ON 26.09.2013 DISCLOSING AS NIL INCOME AFTER SETTIN G OFF EARLIER BUSINESS LOSSES OF RS. 67,87,637/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASST. CIT, CENTRAL CIRCLE-2, MADURAI AT A TOTAL INCOME OF RS. 2,31,00,000/- VIDE ORDER D ATED 27.12.2016 ITA NOS.454 & 455/CHNY/2018 (AYS: 2013-14 & 2014-15 ) :- 3 -: PASSED U/S. 143(3) R/W. 153A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). WHILE DOING SO, THE AO BROUGHT TO TAX A SUM OF RS. 2,30,00,000/- FOR THE ASSESSMENT YEAR 2013-14 AND RS. 3 CRORES FO R THE ASSESSMENT YEAR 2014-15 BASED ON INCRIMINATING MATERIAL AND SW ORN STATEMENT U/S. 132(4) OF THE ACT. ACCORDINGLY, THE AO HAD COMPLET ED THE ASSESSMENT BY TAXING UNDISCLOSED INCOME UNDER THE PROVISIONS O F S. 69A R/W. 115BBE OF THE ACT. 6. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEA L WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER WHILE CO NFIRMING THE ACTION OF ADDITION OF UNDISCLOSED INCOME OF RS. 2.30 CRORES F OR THE ASSESSMENT YEAR 2013-14 AND RS. 3 CRORES FOR THE ASSESSMENT YE AR 2014-15 HAD ALLOWED THE SET OFF OF BROUGHT FORWARD BUSINESS LOS S AGAINST THE INCOME FROM OTHER SOURCES. BEING AGGRIEVED BY THE DECISION OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT APPEA L. 7. THE LD. SR. DEPARTMENTAL REPRESENTATIVE ARGUED T HAT THE BROUGHT FORWARD BUSINESS LOSS CANNOT BE SET OFF AGAINST THE INCOME FROM OTHER SOURCES AS THE PROVISIONS OF S. 71 OF THE ACT, WHIC H PERMITS ONLY THE SET OFF OF CURRENT YEAR BUSINESS LOSS AGAINST THE INCOM E FROM OTHER SOURCES. THUS, HE SUBMITTED THAT THE ORDER OF LD. CIT(A) IS AGAINST THE VERY PLAIN PROVISION OF THE ACT AND THEREFORE, THE FINDINGS OF LD. CIT(A) SHOULD BE REVERSED. ON THE OTHER HAND, THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED ITA NOS.454 & 455/CHNY/2018 (AYS: 2013-14 & 2014-15 ) :- 4 -: THAT THE ADDITION U/S. 69A OF THE ACT SHOULD BE ASS ESSED ONLY UNDER BUSINESS INCOME AND THEREFORE, THE BROUGHT FORWARD BUSINESS LOSS SHOULD BE SET OFF AGAINST THE CURRENT YEAR BUSINESS INCOME . 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ONLY ISSUE THAT ARISES FOR CONSIDERATIO N IN THE PRESENT APPEAL IS WHETHER BROUGHT FORWARD BUSINESS LOSS CAN BE SET OFF AGAINST THE INCOME FROM OTHER SOURCES FOR THE CURRENT YEAR ASSE SSED U/S. 69A OF THE ACT. THE PROVISION OF S. 72 OF THE ACT ONLY PERMIT S THE SET OFF OF THE BROUGHT FORWARD BUSINESS LOSSES AGAINST THE CURRENT YEARS BUSINESS PROFIT. UNDISPUTEDLY, THE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE PROVISIONS OF S. 115BBE OF THE ACT, ARE APPLICABLE ONCE THE ADDITION ARE MADE SPECIFIED SEC TIONS 68, 69, 69A OF THE ACT. HAVING REGARD TO THE PLAIN PROVISION OF S. 72 OF THE ACT, BROUGHT FORWARD BUSINESS LOSS CANNOT BE SET OFF AGAINST THE INCOME UNDER HEAD INCOME FROM OTHER SOURCES. INDISPUTEDLY, THE ADDI TIONS ARE ASSESSABLE UNDER INCOME FROM OTHER SOURCES. THE INCOME FROM UNDISCLOSED SOURCES IS ALWAYS ASSESSABLE UNDER INCOME FROM OT HER SOURCES AS HELD BY HONBLE PATNA HIGH COURT IN THE CASE OF BALDEO PRASAD V. CIT [1987] 166 ITR 205 (PAT.) . FURTHER, THERE IS NOTHING ON RECORD SHOWING THE AVAILABILITY OF UNABSORBED BUSINESS LOSSES FOR SET OFF AGAINST CURRENT YEAR BUSINESS INCOME. FURTHERMORE, IT IS NOT ESTABL ISHED BY LEADING EVIDENCE WHETHER THERE IS ANY BROUGHT FORWARD BUSIN ESS LOSS IN THE ITA NOS.454 & 455/CHNY/2018 (AYS: 2013-14 & 2014-15 ) :- 5 -: HANDS OF THE ASSESSEE. THE LD. CIT(A) WITHOUT DISC USSING/REFERRING TO ANY MATERIAL ON RECORD SHOWING THE AVAILABILITY OF BROUGHT FORWARD BUSINESS LOSS HAD MERELY ALLOWED THE SET OFF OF BRO UGHT FORWARD BUSINESS LOSS AGAINST THE INCOME FROM OTHER SOURCES. THE LD. CIT(A) BLINDLY IGNORED THE PLAIN PROVISIONS OF S. 72 OF THE ACT AN D ALLOWED THE SET OFF OF BROUGHT FORWARD BUSINESS LOSS. IT IS NOT EVEN THE CASE OF THE RESPONDENT- ASSESSEE BEFORE AO OR LD. CIT(A) THAT UNDISCLOSED I NCOME CAN BE TAXED UNDER HEAD BUSINESS INCOME. THE HEAD OF INCOME RE QUIRES TO BE DETERMINED HAVING REGARD TO THE FACTUAL BACKGROUND OF THE ADDITION, WHICH IS A MATTER OF FACT. AS OBSERVED BY US SUPRA, THE LD. CIT(A) HAD NOT DISCUSSED ANY FACTUAL SITUATION OF THE ADDITION AT ALL. THUS, THE ORDER OF LD. CIT(A) IS BEREFT OF ANY REASONING OR MATERIAL. THE REFORE, WE REVERSE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE ORDER OF ASSESSMENT. HENCE, THE APPEAL FILED BY THE REVENUE STANDS ALLOWED. ITA NO.455/CHNY/2018 FOR AY 2014-15 : 9. SINCE, THE FACTS IN ITA NO.455/CHNY/2018 FOR AY 2014-15 ARE IDENTICAL TO THE FACTS IN ITA NO.454/CHNY/2018 FOR AY 2013-14 FOR THE REASONS MENTIONED THEREIN, WE REVERSE THE FINDINGS OF LD. CIT(A) TO ALLOW THE REVENUES APPEAL. HENCE, THE ABOVE CAPTIONED AP PEAL FILED BY THE REVENUE IS ALLOWED. ITA NOS.454 & 455/CHNY/2018 (AYS: 2013-14 & 2014-15 ) :- 6 -: 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE ALLOWED. ORDER PRONOUNCED ON THE 19 TH DAY OF MARCH, 2019 IN CHENNAI. SD/ SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' ) (INTURI RAMA RAO) # /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 19 TH MARCH, 2019. EDN, SR. P.S + ).23 43&. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 36 ). /DR 6. 7% 8 /GF