M/s J.B. Resorts, Fazilka V. The Income Tax Officer, Abohar

ITA 488/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0762 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Deemed to accrue or arise in india; Retrospective amendment; Unabsorbed depreciation; Bonafide mistake
• Section: 69C; 234B; 69; 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.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 PAN: AAHFJ6707G M/. J.B. RESORTS, VS. INCOME TAX OFFICER, F.F. ROAD, WARD II(4), FAZILKA. ABOHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SUDHIR SEHGAL, RESPONDENT BY: SH. TARSEM LAL, DR DATE OF HEARING: 06/04/2016 DATE OF PRONOUNCEMENT: 19/05/2016 ORDER PER A.D. JAIN, JM: THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2011-12, AGAINST THE ORDER, DATED 30.06.2015, PASSED BY THE LD. CIT(A), BATHINDA. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1.A. THAT ON THE FACT AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED BOTH IN LAW AS WELL AS ON FACTS BY NOT CO NSIDERING THE VOLUNTARY SURRENDERED INCOME OF RS. 10 LACS U/S 133 OF THE I.T.ACT. NEITHER UNDER THE HEAD PROFITS AND GAI NS OF BUSINESS NOR UNDER THE HEAD INCOME FROM OTHER SOURC ES WITHOUT CONSIDERING THE SECTION 14 OF THE I.T. ACT WHICH CLEARLY LAYS DOWN COMPLETE INTEGRATED CODE FOR CHAR GEABILITY OF INCOME UNDER VARIOUS HEADS OF INCOME. B. THAT THE LD. CIT(A) ALSO ERRED IN LAW AND ON FACTS BY NOT ASSESSING VOLUNTARY SURRENDERED INCOME EVEN UNDER H EAD INCOME FROM OTHER SOURCES I.E. U/S 56 OF THE I.T.AC T WHICH BRINGS IN ITS AMBIT ALL RESIDUARY INCOMES WHICH CAN NOT BE ITA NO.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 2 CHARGED UNDER ANY OF SPECIFIED HEADS MENTIONED IN S ECTION 14 OF THE I.T. ACT I.E. ITEMS A TO E. C. THAT THE LD. CIT(A) ALSO ERRED IN LAW AND ON FACTS , CIRCUMSTANCES AND IN LAW, BY NOT CONSIDERING ACTUAL FACTS THAT THE CASE OF ASSESSEE RELATES TO ADMITTED VOLUNTARY SURRENDERED INCOME, DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, CREDITED TO PROFIT & LOSS ACCOUNT AS BUSINESS INCOME AND ALSO D ULY REFLECTED AS PART OF FIXED ASSETS OF THE FIRM I.E. BUILDING ACCOUNT HAVING DIRECT NEXUS WITH THE BUSINESS OF ASSESSEE F IRM AND EVEN NOTHING HAS BEEN CONTROVERTED BY THE DEPARTMEN T AGAINST THE SAME. 2. THAT THE LD. CIT(A) ALSO ERRED IN LAW AND ON FAC TS BY NOT ALLOWING SET OFF BUSINESS LOSS RS.8,51,000/- DULY DETERMINED AND ACCEPTED U/S 70 TO 72 OF THE INCOME TAX ACT WHI CH INCLUDES UNABSORVED CURRENT YEAR DEPRECIATION ALLOW ANCE OF RS.4,85,180/- WITHOUT APPRECIATING THE FACT TAT IN COME TAX IS ONLY ONE TAX AND CHARGEABLE ON TOTAL INCOME AFTER COMPUTING SAME UNDER VARIOUS HEADS OF INCOME AND ADJUSTMENT O F SETTING OF CURRENT YEAR LOSSES, CARRY FORWARD LOSS, STATUTO RY ALLOWANCES AND DEDUCTIONS ETC.ETC. 3. THAT THE LD. CIT(A) ALSO ERRED IN LAW AND ON FAC TS, BY TAKING SUPPORT OF NEW INSERTED SECTION 115BBB BY FINANCE A CT, 2012 I.E., W.E.F. 01.04.2013 WHICH CANNOT BE APPLICABLE TO ASSESSMENT YEAR 2011-12 AS IT HAS NO RETROSPECTIVE EFFECT. MOREOVER, THIS SECTION ONLY PROVIDES TAX RATE TO BE CHARGED ON SPECIFIC INCOME AND IT DOES NOT CREATE ANY CHARGEAB ILITY OF PARTICULAR INCOME UNDER THE INCOME TAX ACT, WHICH I S ONLY PROVIDED U/S 14 OF THE INCOME TAX ACT. 4. THAT CHARGING OF INTEREST U/S 234A, 234B AND 234 D ARE ALSO NOT ACCORDING TO LAW. 2. IN THIS APPEAL, THERE WAS DELAY IN DEPOSIT OF FE E. AN APPLICATION HAS BEEN FILED ON BEHALF OF THE ASSESSEE, CONTENDING TH AT THE FEE OF RS.5000/- WAS PAID ON 25.08.2015, WELL WITHIN THE STATUTORY T IME ALLOWED; THAT DEFICIENCY MEMO WAS RECEIVED ON 22.12.2015, POINTIN G OUT SHORTFALL OF TRIBUNAL APPEAL FEE BY RS.5000/-; THAT THE AMOUNT O F RS.5000/- WAS IMMEDIATELY PAID ON 23.12.2015; THAT THE SHORTFALL IN THE APPEAL FILING ITA NO.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 3 FEE OCCURRED DUE TO INADVERTENT MIS-CALCULATION @ % OF THE ASSESSED INCOME, INSTEAD OF 1% OF TOTAL ASSESSED INCOME, AS REQUIRED; THAT THIS WAS A CLERICAL MISTAKE OF THE STAFF OF THE ASSESSE ES COUNSEL AND IT WAS A BONA FIDE AND UNINTENTIONAL MISTAKE AND THAT AS S UCH, THIS DELAY BE CONDONED. 3. FINDING MERIT IN THE CONTENTIONS OF THE ASSESSEE , SINCE THE DELAY INVOLVED OCCURRED DUE TO INADVERTENT CLERICAL MISTA KE, THE SAME IS CONDONED. 4. THE FACTS ARE THAT THE ASSESSEE IS A REGISTERED PARTNERSHIP FIRM, HAVING INCOME FROM RUNNING A MARRIAGE PALACE. IN A SURVEY, THE ASSESSEE DISCLOSED RS.10,00,000/-. IN ITS RETURN OF INCOME, THE ASSESSEE DISCLOSED A NET PROFIT FROM BUSINESS AT RS.1,48,500/-, AFTER ADJUSTING THE OTHERWISE BUSINESS LOSS OF RS.8,51,000/- FROM THE SURRENDERED INCOME OF RS.10,00,000/-. THE A.O. FOLLOWING THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KIM PHARMA (P) LTD., VS. CIT, PANCHKULA & OTHERS, ORDER DATED 27.04.2011 IN ITA NO.106 OF 2011 (O & M) TREATED THE ADDITIONAL INCOME OF RS.10,00,000/- DISCLOSED BY THE ASSESSEE DURING THE SURVEY OPERATION AS DEEMED INCO ME U/S 69 OF THE INCOME TAX ACT, 1961 AND BROUGHT TO TAX WITHOUT ALL OWING THE SET OFF OF SUCH INCOME WITH THE BUSINESS LOSS OF RS.8,51,000/ -. THOUGH THIS LOSS WAS ALLOWED TO BE CARRIED FORWARD, THE LD. CIT(A) D ISMISSED THE ASSESSEES APPEAL. THE QUESTION AS TO WHETHER THE LD. CIT(A)S ACTION IS JUSTIFIED. 5. THE LD. CIT(A) HAS HELD AS FOLLOWS: ITA NO.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 4 5. THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONS IDERED AND THE JUDICIAL PRECEDENTS CITED HAVE BEEN RESPECTFULL Y PERUSED. THE CHANDIGARH TRIBUNAL, WHILE DELIVERING THE DECISION IN THE LIBERTY PLYWOOD CASE (SUPRA), HAD AN OCCASION TO EXAMINE TH E LAW AS POSTULATED BY THE JURISDICTIONAL HIGH COURT OF PUNJ AB & HARYANA ON THE ISSUE OF TAXABILITY OF SURRENDERED INCOME AS DE EMED INCOME WITHOUT SETTING OFF OF THE LOSSES UNDER SECTIONS 7 0 AND 71 OF THE ACT IN THE CASE OF KIM PHARMA (P) LIMITED. HAVING CONSI DERED THE SAID CASE AS ALSO THE CONTRARY DECISIONS OF THE GUJARAT AND MADRAS HIGH COURTS, THE CHANDIGARH TRIBUNAL NOTED IN PARA 11 T HUS: WE ARE BOUND TO FOLLOW THE DECISION OF THE HONBL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. KIM PHARMA (P) LIMITED AND FOLLOWING THE SAME, WE HOLD THAT SURREN DERED INCOME HAS TO BE ASSESSED SEPARATELY AS DEEMED INCO ME. 6. IN THE SAME CASE OF LIBERTY PLYWOOD (P) LIMITED, THE HONBLE CHANDIGARH TRIBUNAL HELD THAT THE DECISION OF THE H ONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. KIM PHARMA ( P) LIMITED DID NOT DEAL WITH THE ISSUE OF SETTING OFF OF DEPRECIAT ION U/S 32(2) OF THE ACT FROM THE SURRENDERED INCOME AND WENT ON TO HOLD THAT IF THE DEPRECIATION CANNOT BE FULLY ADJUSTED AGAINST THE P ROFITS AND GAINS CHARGEABLE IN THE RELEVANT YEAR BECAUSE OF INSUFFIC IENCY OF THE PROFITS, THEN THE SAME WOULD BE ADDED TO THE DEPREC IATION OF THE FOLLOWING YEAR, WHICH MEANS THAT UNABSORBED DEPREC IATION WHICH CANNOT BE SET OFF IN A PARTICULAR YEAR, WOULD BECOM E CURRENT DEPRECIATION IN THE FOLLOWING YEAR AND THERE IS NO RESTRICTION AGAINST SUCH SET OFF. DRAWING FROM THIS DECISION OF THE HON BLE CHANDIGARH TRIBUNAL, THE APPELLANT MADE THE ALTERNATIVE PLEA B Y WAY OF AMENDMENT OF GROUND NO.3 THAT THE CURRENT DEPRECIAT ION BE ALLOWED TO BE SET OFF FROM THE SURRENDERED INCOME. 7. THIS PLEA OF THE APPELLANT IS INADMISSIBLE AS IT WOULD MEAN PIGEONHOLING OR OVERLY RESTRICTING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT WHICH CATEGORICALLY PROSC RIBED INTER HEAD ADJUSTMENT FROM THE DEEMED INCOMES WHICH ARE COVERE D UNDER THE PROVISIONS OF SECTION 69, 69, 69B AND 69C OF THE AC T. BESIDES, IN THE APPELLANTS CASE, THE IMPUGNED ISSUE PERTAINS TO TH E CURRENT YEARS DEPRECIATION OF RS.4,85,180/- AND NOT UNABSORBED D EPRECIATION BROUGHT FORWARD FROM THE EARLIER YEARS AND TAKING THE HUE OF CURRENT DEPRECIATION BY THE OPERATION OF SECTION 32(2) OF T HE ACT. REFERENCE TO THE PROSPECTIVE INSERTION OF THE PROVISIONS OF SECT ION 115BBE W.E.F. 01.04.2013 ALSO DOES NOT PROVIDE ANY HELP T THE APP ELLANT AS IT IS EVIDENTLY CLEAR THAT SUCH AN INSERTION IS ONLY CONS ISTENT WITH THE SPIRIT OF THE DECISION IN THE CASE OF FAKIR MOHMED HAJI HASAN AND KIM PHARMA (P) LTD. PRIOR TO THIS SECTION BECOMING EFFECTIVE, THE LAW ITA NO.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 5 AS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN TH E CASE OF KIN PHARMA WAS OPERATIVE. IT IS, THEREFORE, HELD THAT T HE APPELLANT IS NOT ENTITLED TO EITHER SET OFF ITS BUSINESS LOSS FROM T HE SURRENDERED INCOME OR TO SET OFF THE UNABSORBED DEPRECIATION A LLOWANCE. ALL THE GROUNDS OF APPEAL PERTAINING TO THE AFORESAID ISSUE , THUS, STAND REJECTED. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON GAURISH STEELS PVT. LTD. VS. ACIT, 43 ITR (TRIB.) 414 (CHD.), IN THIS KIM PHARMA (P) LIMITED. (SUPRA) HAS BEEN RELIED ON. I N GAURISH STEELS PVT. LTD. (SUPRA), A SURRENDER OF RS.70,000/- WAS MADE BY THE ASSESSEE IN SURVEY PROCEEDINGS AND IT WAS CLAIMED THAT THE SURR ENDERED INCOME TO BE TREATED AS BUSINESS INCOME. THE AO HELD THE SURREND ERED INCOME TO BE ON ACCOUNT OF INVESTMENTS, CASH AND EXPENSES, WHICH WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT. THE AO, THUS, TREATED THE SURRENDERED INCOME AS DEEMED INCOME AND DENIED THE BENEFIT OF SET OFF OF BUSINESS LOSSES INCURRED BY THE ASSESSEE AGAINST THE INCOME SURREND ERED. THE LD. CIT(A) CONFIRMED THIS ACTION OF THE A.O. THE TRIBUNAL HEL D THAT THE AO DID NOT DISPUTE THE BUSINESS LOSSES INCURRED BY THE ASSESS EE AND DID NOT REJECT THE BOOKS OF ACCOUNT; THAT THE SURRENDER WAS ON ACC OUNT OF CASH FOUND DURING THE COURSE OF SURVEY, DISCREPANCIES IN THE C OST OF CONSTRUCTION OF BUILDING, IN STOCK AND IN ADVANCES AND RECEIVABLES; THAT THESE INCOMES APART FROM CASH COULD NOT BE CONSIDERED AS INCOME U NDER ANY HEAD OTHER THAN BUSINESS INCOME; THAT THE AO AND SURVEY TEA M FAILED TO FIND ANY OTHER SOURCE OF INCOME EXCEPT THE BUSINESS INCOME; THAT THEREFORE, APART FROM CASH, ALL OTHER INCOMES SURRENDERED COULD BE BROUGHT TO TAX UNDER THE HEAD OF BUSINESS INCOME, WHILE THE CASH WAS TO BE TAXED UNDER THE ITA NO.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 6 HEAD DEEMED INCOME U/S 69A OF THE ACT; THAT THE BUS INESS LOSSES INCURRED BY THE ASSESSEE DURING THE YEAR, COULD BE SET OFF AGAINST THE INCOME SURRENDERED DURING THE COURSE OF SURVEY EXCE PT FOR THE AMOUNT OF CASH SURRENDERED, AS IT WAS TO BE TAXED UNDER A DI FFERENT HEAD. 7. THE LD. DR WOULD CONTEND THAT IN KIM PHARMA (P) LTD. (SUPRA), THE CASH FOUND DURING SURVEY AND SURRENDERED AS ADDITIO NAL INCOME WAS ASSESSED BY THE AO, AS UNEXPLAINED MONEY U/S 69A OF THE ACT. THIS ACTION WAS UPHELD BY THE HONBLE HIGH COURT; THAT I N GAURISH STEELS P. LTD. (SUPRA), ACCORDING TO THE LD. DR, THE AMOUNT OF RS.21 LAKHS WHICH REPRESENTED DISCREPANCY IN COST OF CONSTRUCTION, W AS TAKEN AS BUSINESS INCOME; AND THAT THIS IS AGAINST KIM PHARMA (P) LI MITED (SUPRA) AND THEREFORE, IN THE CONTENTION OF THE LD. DR, GAURIS H STEELS P. LTD. (SUPRA) IS PER INCURIAM KIM PHARMA P. LIMITED (SUPRA). 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL AVAILABLE ON RECORD. APROPOS THE CONTENTION OF THE LD. DR THA T GAURISH STEELS P. LIMITED (SUPRA), IS PER INCURIAM KIM PHARMA P. LI MITED (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 PH ARMA P. LIMITED (SUPRA), THE ONLY ISSUE WAS TAXABILITY OF THE CASH SURRENDERED DURING THE COURSE OF SURVEY, WHICH WAS ALSO GIVEN IN GAURISH STEELS P. LIMITED (SUPRA). THE TRIBUNAL HELD THAT THE OTHER AMOUNT S URRENDERED, ON ACCOUNT F DISCREPANCY IN THE COST OF CONSTRUCTION, DISCREPANCY IN STOCK AND DISCREPANCY IN ADVANCES AND RECEIVABLE, HAS TO BE CONSIDERED AS ITA NO.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 7 BUSINESS INCOME, WHEREAS THE CASH SURRENDERED WAS N OT TO BE SO CONSIDERED. IT HAS NOT BEEN SHOWN AS TO HOW THIS AC TION OF THE TRIBUNAL IN GAURISH STEELS P. LIMITED (SUPRA), IS AT VARIA NCE WITH KIM PHARMA P. LTD. (SUPRA). ACCORDINGLY, THIS ARGUMENT OF THE LD . DR IS REJECTED. 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 TO TH E BUSINESS OF THE ASSESSEE, IN ACCORDANCE WITH KIM PHARMA P. LIMITED (SUPRA) AND IF SO, WHETHER IT IS NOT A BUSINESS INCOME. THE SURVEY IN THIS CASE WAS CONDUCTED ON 24.01.2011. THE ASSESSEE MAINTAINS THA T ITS MARRIAGE PALACE WAS STARTED BEING LET OUT FROM 10.10.2010. A COPY OF THE LEDGER ACCOUNT CONTAINING THE BUILDING ACCOUNT HAS BEEN PL ACED ON RECORD IN THE ASSESSMENT PROCEEDINGS. THE SAME HAS BEEN FILED BEFORE US ALSO. THIS IS ALSO FOR THE PERIOD FROM 01.04.2010 TO 31.03.201 1. THE OPENING BALANCE THEREOF STANDS AT RS.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 INCOME FOR THE PERIOD 01.04.2010 TO 31.0 3.2011 HAS BEEN SHOWN AT RS.4,65,000/-. NOW, THE AO ASSESSED THE AM OUNT OF RS.4,65,000/- AS BUSINESS 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 HAS BEEN SHOWN ON ACCOUNT OF LETTING OUT OF THE MARRIAGE PALACE FOR THE PERIOD FROM 10.10.2010 TO 16.01.2011. AS SU CH, AS RIGHTLY ITA NO.488(ASR)/2015 ASSESSMENT YEAR: 2011-12 8 CONTENDED. THE AO HAS ACCEPTED THIS INCOME OF THE A SSESSEE AS BUSINESS INCOME. THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE F OR THE PERIOD 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 GRIE VANCE 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 HA S BEEN CONSIDERED AS THE ASSESSEES BUSINESS INCOME AND NOT AS DEEMED IN COME U/S 69A OF THE ACT. AS SUCH, THE BUSINESS LOSSES INCURRED BY THE ASSESSEE DURING THE YEAR CAN BE SET OFF AGAINST THE INCOME SURRENDE RED. AS PER THE REQUIREMENT OF SECTION 71 OF THE ACT, THE AO IS DIR ECTED TO ACT ACCORDINGLY. THUS, GROUND NOS. 1 TO 3 ARE ACCEPTED. 11. GROUND NO.4 IS CONSEQUENTIAL. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/05/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 19/05/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S.J.B. RESORTS, FAZILKA. 2. THE ITO WARD II(4), ABOHAR. 3. THE CIT(A), BATHINDA 4. THE CIT, BATHINDA. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER