SH. VARINDER ARORA, JALANDHAR V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-I, JALANDHAR

ITA 472/ASR/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6826 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-07-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 14-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AABHA RANI SINGH
• Assessee Lawyers: J S BHASIN
• Keywords: Business income; Search and seizure; Principle of natural justice; Deemed to accrue or arise in india
• Section: 32; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. VIKRAM SINGH YADAV , ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO. 471 & 472/ASR/2017 ASSESSMENT YEAR: 2011 -12 & 2012-13 SH. VARINDER ARORA 19- NEW KAILASH NAGAR, SODAL ROAD, JALANDHAR [PAN:AATPK2147D] VS. DY. CIT, CENTRAL CIRCLE-1, JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J. S. BHASIN (ADV.) RESPONDENT BY: SMT. AABHA RANI SINGH (CIT DR) DATE OF HEARING: 24.07.2019 DATE OF PRONOUNCEMENT: 26.07.2019 ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE R ESPECTIVE ORDERS OF LD. CIT(A)-1, JALANDHAR DATED 27.04.2017 F OR THE ASSESSMENT YEAR 2011-12 & 2012-13 RESPECTIVELY. 1. IN ITA NO. 471/ASR/2017, THE ASSESSEE HAS TAKEN THE F OLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND O N FACTS, IN UPHOLDING THE VAGUE AND TENTATIVE FINDINGS OF THE LD . AO THAT THE SURRENDER OF RS. 6,55,000/- SUO MOTO MADE BY ASSESSEE, IN THE RETURN FILED, WAS NOT ELIGIBLE TO BE SET OFF AGAINST BUSINESS L OSS OF RS. 1,02,200/-. 2. THAT THE LD. CIT(A) WAS NOT JUSTIFIED AND RATHER A CTED AGAINST THE PRINCIPLES OF NATURAL JUSTICE, IN UPHOLDING THE ABOVE F INDINGS OF THE LD. ITA NO. 471 & 472/ASR/2017 SH. VARINDER ARORA, JALANDHA R VS. DCIT, CENTRAL CIRCLE-1, JALANDHAR 2 AO, BY PLACING RELIANCE ON THE DECISION OF HONBLE P & H HIGH COURT IN THE CASE OF KIM PHARMA P LTD. VS. CIT, OF HER OWN, WIT HOUT CONFRONTING THE SAME TO ASSESSEE, MORE SO WHEN THE LD. ASSESSING OFFICER HAD NOT RELIED UPON ANY SUCH JUDICIAL DECISION IN HIS ORDER. 3. THAT THE LD. CIT(A) ALSO ERRED TO HOLD THAT THE A SSESSEE WAS NOT ENTITLED TO CARRY FORWARD THIS LOSS OF RS. 1,02,200/- FO R ADJUSTMENT IN FUTURE RETURNS. 2. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE OF SET OFF OF BUSINESS LOSS AGAINST THE INCOME SURRENDERED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. IT WAS SUBMITTED THAT THE LD. CIT(A) HAS EXAMINED THE SAID ISSUE FOR THE FIRST TIME AND PLACING RELIANCE ON THE DECISION OF HONBLE PU NJAB AND HARYANA HIGH COURT IN CASE OF M/S KIM PHARMA PVT. LTD. VS. CIT H AS DENIED THE SAID CLAIM OF THE ASSESSEE. IT WAS SUBMITTED THAT WHILE DOING SO, THE LD. CIT(A) HAS NOT CONFRONTED THE ASSESSEE AND THE ASSESSEE HAS THUS NOT BEEN PROVIDED WITH THE OPPORTUNITY TO PUT FORWARD HIS ARG UMENTS. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) HAS NOT CONSIDERED THE CLARIFICATIONS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES VIDE CIRCULAR NO. 11 /2009 DATED 19 TH JUNE, 2019 WHEREIN IT HAS BEEN CLARIFIED THAT THE ASSESSEE IS EN TITLED TO CLAIM SET OFF OF LOSS AGAINST THE INCOME DETERMINED U/S 115BBE FOR ALL ASSESSMENT YEARS TILL A.Y 2016-17. 3. TO APPRECIATE THE AFORESAID CONTENTIONS SO ADVANCED BY THE LD AR, WE REFER TO THE RELEVANT FACTS AS EMANATING FROM THE RECO RDS. BRIEFLY STATED, THE FACTS OF CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 1 32 WAS CARRIED OUT ON THE ASSESSEE ON 03.04.2012. SUBSEQUENTLY, IN RESPONSE T O NOTICE U/S 153A, THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TO TAL INCOME OF RS. 5,22,800/-. AS PER THE ASSESSING OFFICER, DURING THE COUR SE OF SEARCH PROCEEDINGS, SOME INCRIMINATING DOCUMENTS WERE FOUND FROM THE RESIDENTIAL ITA NO. 471 & 472/ASR/2017 SH. VARINDER ARORA, JALANDHA R VS. DCIT, CENTRAL CIRCLE-1, JALANDHAR 3 PREMISES OF THE ASSESSEE WHO ADMITTED THAT SAID DOCUMENTS B ELONGED TO HIM AND HAS SURRENDERED RS. 10,00,000/- ON ACCOUNT OF SAID INCRIMINATING DOCUMENTS. AS PER THE ASSESSING OFFICER, THE ASSESSEE WAS REQUIR ED TO HONOUR THE SAID SURRENDER CLEARLY AND SEPARATELY IN HIS RETURN OF INCOME IN ADDITION TO THE REGULAR BUSINESS INCOME. THEREFORE, T HE AMOUNT OF RS. 10,00,000/- WAS ADDED TO THE RETURNED INCOME AND INCO ME WAS ASSESSED AT RS. 5,22,800/-. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE LD. CIT(A). AS PER LD. CIT(A), THE ASSESSEE HAS SHOWN BU SINESS INCOME OF RS. 2,22,865/- IN M/S UTTAM PAINTS AND A LOSS OF RS. 3,25,06 5/- FROM M/S SHRI KRISHNA INTERNATIONAL. THUS, THERE WAS A NET LOSS OF RS. 1,02,200/- FROM THE ASSESSEES BUSINESS AND THE SAID LOSS HAS TO BE TREATED AS GEN UINE LOSS. FURTHER, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS RE STRICTED HIS SURRENDER OF RS. 10,00,000/- TO RS. 6,55,000/-. HOWEVER THE ASSESSING OFFICER HAS NOT BEEN ABLE TO IDENTIFY EITHER ANY SOURCE OF INCOME OR INVESTMENT FOR THE BALANCE RS. 3,45,000/- WHICH THE ASSE SSEE SURRENDERED DURING SEARCH BUT DID NOT DECLARE IN HIS RETURN OF INCO ME. IN THE ABSENCE OF ANY EVIDENCE BROUGHT OUT BY THE ASSESSING OFFICER REGARD ING UNDISCLOSED INCOME OF RS. 3,45,000/-, THERE IS NO OPTION BUT TO RE STRICT THE SAME TO THE SUO MOTU SURRENDER OF RS. 6,55,000/- MADE BY THE ASSESSEE IN HIS RETURN OF INCOME. 5. FURTHER, THE LD CIT(A) OBSERVED THAT WHETHER THE ASSESSEE CAN SET OFF THE SURRENDERED AMOUNT AGAINST BUSINESS LOSS AS HE HAS DONE IN HIS COMPUTATION OF INCOME IS A QUESTION THAT NEEDS TO BE ANS WERED. THEREAFTER, SHE REFERRED TO THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF M/S KIM PHARMA PVT. LTD. VS. CIT IN ITA NO. 106 OF 2011 (O & M) FOR THE PROPOSITION THAT THAT INCOME DECLARED/ SURRENDERED IN THE COURSE OF SURVEY/SEARCH ACTION IS NOT INCOME FROM OTHER SOURCES AND G IVEN THAT THE ITA NO. 471 & 472/ASR/2017 SH. VARINDER ARORA, JALANDHA R VS. DCIT, CENTRAL CIRCLE-1, JALANDHAR 4 ASSESSEE HAS ALSO NOT DECLARED THE EXACT SOURCE AND NATURE O F THIS INCOME, IT IS NOT ASSESSABLE UNDER ANY HEAD OF INCOME AND IS IN NATUR E OF DEEMED INCOME WHICH CANNOT BE SET OFF AGAINST BUSINESS LOSS. 6. WE THEREFORE AGREE WITH THE CONTENTIONS SO ADVANCED BY THE LD AR THAT THE ISSUE OF SET OFF BUSINESS INCOME AGAINST THE INCOME SUR RENDERED AND OFFERED IN THE RETURN OF INCOME WAS EXAMINED FOR THE FIRST TIME BY THE LD CIT(A) AND WHERE THE LD CIT(A) PROPOSES TO DENY THE S ET OFF, SHE SHOULD HAVE ALLOWED AN OPPORTUNITY TO THE ASSESSEE TO PUT FOR TH HIS SUBMISSIONS. WE ALSO FIND THAT IN TERMS OF SUBSEQUENT DEVELOPMENT TO THE DECISION OF HONBLE HIGH COURT IN CASE OF KIM PHARMA (SUPRA), RECENTL Y THE CBDT HAS ISSUED A CIRCULAR NO. 11/2019 DATED 19.06.2019 WHEREIN MATTER RELATING TO SET OFF OF LOSSES AGAINST DEEMED INCOME HAS BEEN CLARIFIE D AND THE AUTHORITIES HAVE BEEN ASKED TO CONSIDER THE SAME IN RESPE CT OF PENDING ASSESSMENTS AS WELL AS LITIGATIONS ON THE MATTER. WE THERE FORE SET-ASIDE THE MATTER TO THE FILE OF THE LD CIT(A) WHO HAS DECIDE TH E MATTER AFRESH TAKING INTO CONSIDER THE AFORESAID CBDT CIRCULAR AND AFTER PR OVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. 7. IN ITA NO. 472/ASR/2017, BOTH THE PARTIES FAIRLY SUBMITTED THAT SIMILAR ISSUE IS INVOLVED AS IN ITA NO. 471/ASR/2017. T HEREFORE, OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 471/ASR/2 017 SHALL APPLY MUTATIS MUTANDIS TO THIS MATTER AS WELL. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE AR E ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.07.2019. SD/- SD/- (N.K.CHOUDHRY) ( VIKRAM SINGH YADAV ) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO. 471 & 472/ASR/2017 SH. VARINDER ARORA, JALANDHA R VS. DCIT, CENTRAL CIRCLE-1, JALANDHAR 5 DATED: 26.07.2019 GANESH KR. PS COPY OF THE ORDER FORWARDED TO: (1) SH. VARINDER ARORA, JALANDHAR (2) DCIT, CENTRAL CIRCLE-1, JALANDHAR (3) THE CIT(A)-1, JALANDHAR (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER