The DCIT, Circle-10, Ahmedabad V. Shah Khodidas & Co., Ahmedabad

ITA 531/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1779 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 13-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH
• Keywords: Unexplained investment; Unexplained expenditure; Capital asset; Business income; Depreciation; Income from undisclosed sources; Deemed to accrue or arise in india; Speculation loss; Capital Gains
• Section: 69C; 40(b); 133A; 69B; 69

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM DY. C.I.T., CIRCLE-10, AHMEDABAD. VS. M/S SHAH KHODIDAS & CO., 4, NAMRATA, B/H, PETROL PUMP, STADIUM ROAD, NAVRANGPURA, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K. MADHUSUDAN, SR.DR RESPONDENT BY:- SHRI A. C. SHAH, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE AO TO RECOMPUTED THE PROFIT UNDER THE HEAD PROFIT AND GAIN OF BUSINESS AFTER TREATING THE UNDISCLOSED INCOME OF R S.42,87,228/- AS INCOME FROM PROFIT AND GAIN OF BUSINESS AS PER C HAMPTER - IV-D. (2) THE INCOME DISCLOSED AT THE TIME OF SURVEY WAS DEEM ED INCOME U/S 69B AND IT CANNOT BE SET OFF AGAINST BUSINESS L OSS IN VIEW OF THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF F AKIR MOHAMMAD 247 ITR 290. (3) THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ORDER PA SSED BY THE A.O. 2. THE FACTS OF THE CASE ARE THAT A SURVEY UNDER SE CTION 133A WAS CARRIED OUT ON 3.10.2003 AT THE BUSINESS PREMISES O F THE ASSESSEE AND ITA NO.531/AHD/2008 ASST. YEAR 2004-05 ITA NO.531/AHD/2008 ASST. YEAR 2004-05 2 EXCESS STOCK OF TOBACCO OF 166.191 KG. WAS FOUND WH ICH WAS VALUED AT RS.42.87 LACS. THIS AMOUNT WAS SURRENDERED BY THE A SSESSEE AT THE TIME OF SURVEY BUT IN THE RETURN OF INCOME TOTAL INCOME WAS DISCLOSED AT RS.32,87,000/- ONLY. THE ASSESSEE HAD DISCLOSED THE SUM OF RS.42.82 LACS IN THE PROFIT AND LOSS ACCOUNT BUT IF THE AMOUNT OF DISCLOSURE IS EXCLUDED, THERE WOULD BE LOSS IN THE NORMAL BUSINESS. THE ASS ESSEE IS DEALING IN TOBACCO AND ITS INCOME WAS ESTIMATED BY APPLYING TH E PROVISIONS OF SECTION 145(3). DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE AO TREATED THE SUM OF RS.42,87,228/- AS DEEMED INCOME AND WORKED OUT THE BUSINESS LOSS AT RS.6,87,734/- AND ALLOWED IT TO CA RRY FORWARD. IN ADDITION TO THIS HE ALSO ALLOWED THE SUM OF RS.1,29,691/- BE ING DEPRECIATION TO BE CARRIED FORWARD TO NEXT YEARS. THE LD. CIT(A) TREAT ED THE DISCLOSED SUM OF RS.42,87,228/- AS INCOME FROM PROFITS AND GAINS AS PER CHAPTER IV-D ON THE GROUND THAT EXCESS STOCK REPRESENTED UNACCOUNTE D STOCK FROM THE FIRM AND IT WAS FOUND FROM THE GODOWN OF THE FIRM, THERE FORE, IT WAS UNDISCLOSED INCOME UNDER THE HEAD BUSINESS. 3. THE LD. DR SUBMITTED THAT IN VIEW OF THE DECISIO N OF HON. GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHAMMAD HAJI HASAN VS. CIT 247 ITR 290 THIS SHOULD BE TREATED AS UNACCOUNTED INVESTMEN T TO BE SEPARATELY TAXED U/S 69B AND NO ADJUSTMENT OF ANY BUSINESS LOS S OR DEPRECIATION BE ALLOWED. 4. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDE R OF THE TRIBUNAL IN THE CASE OF M/S FASHION WORLD VS. ACIT IN ITA NO.16 34/AHD/2006 FOR ASST. YEAR 2002-03 WHEREIN IT WAS HELD THAT IF EXCE SS STOCK DOES NOT HAVE SEPARATE PHYSICAL IDENTITY BUT IS A MIXED LOT OF DE CLARED AND UNDECLARED STOCK, THEN UNDECLARED STOCK WOULD BE TREATED AS BU SINESS INCOME. IN THIS REGARD WE REFER TO THE FOLLOWING PORTION FROM THAT JUDGMENT :- ITA NO.531/AHD/2008 ASST. YEAR 2004-05 3 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS SOME MIS UNDERSTANDING ABOUT THE INTERPRETATION OF DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN VS. CIT (SUPRA). FOR THE SA KE OF CONVENIENCE WE REPRODUCE THE HEAD NOTES FROM THAT DECISION AS U NDER :- THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C OF THE INCOME-TAX ACT, 1961, WOULD SHOW THAT IN CASES WHERE THE NATURE AND SOURCE OF I NVESTMENTS MADE BY THE ASSESSEE OR THE NATURE AND SOURCE OF ACQUISITION OF MONEY, B ULLION, ETC., OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY THE ASSESS EE ARE NOT EXPLAINED AT ALL, OR NOT SATISFACTORILY EXPLAINED, THEN, THE VALUE OF SUCH I NVESTMENTS AND MONEY OR VALUE OF ARTICLES NOT RECORDED IN THE BOOKS OF ACCOUNT OR TH E UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF SUCH ASSESSEE. IT FOLLOW S THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOUT SUCH NATURE AND SOURCE B Y THE ASSESSEE, THEN THE SOURCE WOULD STAND DISCLOSED AND WILL, THEREFORE, BE KNOWN AND THE INCOME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCOME FOR ASSESSMENT AS PER THE PROVISIONS OF THE ACT. WHEN THE INCOME CANNOT BE SO CLASSIFIED UNDER ANY O NE OF THE HEADS OF INCOME UNDER SECTION 14, IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCTIONS UNDER THE PROVISIONS WHICH CORRESPOND TO SUCH HEADS OF INCOME WILL NOT A RISE. THE PROVISIONS OF SECTIONS 69, 69A, 69B AND 69C, TREAT UNEXPLAINED INVESTMENTS , UNEXPLAINED MONEY, BULLION, ETC., AND UNEXPLAINED EXPENDITURE AS DEEMED INCOME WHERE THE NATURE AND SOURCE OF INVESTMENT, ACQUISITION OR EXPENDITURE, AS THE CASE MAY BE, HAVE NOT BEEN EXPLAINED OR SATISFACTORILY EXPLAINED. THEREFORE, IN THESE CA SES, THE SOURCE NOT BEING KNOWN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEA D 'INCOME FROM OTHER SOURCES'. THEREFORE, THE CORRESPONDING DEDUCTIONS WHICH ARE A PPLICABLE TO THE INCOMES UNDER ANY OF THESE VARIOUS HEADS, WILL NOT BE ATTRACTED I N THE CASE OF DEEMED INCOMES WHICH ARE COVERED UNDER THE PROVISIONS OF SECTIONS 69, 69 A, 69B AND 69C OF THE ACT IN VIEW OF THE SCHEME OF THOSE PROVISIONS : HELD, _ ON THE FACTS, THAT IT WAS CLEAR THAT WHEN THE INV ESTMENT IN OR ACQUISITION OF GOLD, WHICH WAS RECOVERED FROM THE ASSESSEE WAS NOT RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE OFFERED NO EXPLANATION ABO UT THE NATURE AND SOURCE OF SUCH INVESTMENT OR ACQUISITION AND THE VALUE OF SUCH GOL D WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, NOR THE NATURE AND SOURCE OF ITS ACQUISITI ON EXPLAINED, THERE COULD ARISE NO QUESTION OF TREATING THE VALUE OF SUCH GOLD, WHICH WAS DEEMED TO BE THE INCOME OF THE ASSESSEE, AS A DEDUCTIBLE TRADING LOSS ON ITS CONFI SCATION, BECAUSE SUCH DEEMED INCOME DID NOT FALL UNDER THE HEAD OF INCOME PROFI TS AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, THE TRIBUNAL WAS PERFECTLY RIGHT IN HOLDING THAT THE VALUE OF THE GOLD WAS LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AS THE SOURCE OF INVESTMENT IN THE GOLD OR OF ITS ACQUISITION WAS NO T EXPLAINED AND THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM THAT THE VALUE OF THE GOL D SHOULD BE ALLOWED AS A DEDUCTION FROM HIS INCOME. IF WE CLOSELY EXAMINE ABOVE JUDGMENT WE FIND THAT F OR INVOKING PROVISIONS OF SECTIONS 69, 69A, 69B & 69C TWO CONDI TIONS ARE REQUIRED TO BE SATISFIED. THEY ARE (I) INVESTMENT/EXPENDITURE A RE NOT RECORDED IN THE BOOKS OF ACCOUNT OF ASSESSEE & (II) THE NATURE AND SOURCE OF ACQUISITION ITA NO.531/AHD/2008 ASST. YEAR 2004-05 4 OF ASSETS OR EXPENDITURE ARE NOT EXPLAINED OR NOT E XPLAINED SATISFACTORILY THE EXPRESSION NATURE AND SOURCE USED IN THIS SEC TION SHOULD BE UNDERSTOOD TO MEAN REQUIREMENT OF IDENTIFICATION OF SOURCE AND ITS GENUINENESS. TO EXPLAIN NATURE IT WOULD REQUIRE T HE ASSESSEE TO EXPLAIN WHAT IS DESCRIPTION OF INVESTMENT OR EXPEND ITURE, PERIOD AND THE MANNER IN WHICH IT WAS DONE. TO EXPLAIN THE SOURCE IT WOULD REQUIRE THE ASSESSEE TO EXPLAIN THE CORPUS OR FUND FROM WHERE I NVESTMENT OR EXPENDITURE HAS BEEN MET AND ALSO THE HEAD UNDER WH ICH THE INVESTMENT OR EXPENDITURE WOULD FALL SUCH AS WHETHER INVESTMEN T/EXPENDITURE PERTAINS TO BUSINESS OR RELATES TO ACQUISITION OF C APITAL ASSET OR TO OTHER SOURCE OR TO AGRICULTURE. WHERE THE ASSESSEE IS ABL E TO EXPLAIN NATURE AND SOURCE OF INVESTMENT/EXPENDITURE AND ALSO IF THEY A RE RECORDED IN THE BOOKS OF ACCOUNT THEN SUCH INVESTMENT/EXPENDITURE W ILL NOT BE TREATED AS DEEMED INCOME BUT WHERE INVESTMENT /EXPENDITURE IS NOT RECORDED IN THE BOOKS OF ACCOUNT AND/OR THEIR NATURE AND SOURCE IS NOT EXPLAINED OR NOT SATISFACTORY EXPLAINED, DEEMING PROVISION UNDER THE SE FOUR SECTIONS CAN BE INVOKED BY THE AO AND INVESTMENT/EXPENDITURE WOU LD BE TREATED AS DEEMED INCOME OF THE ASSESSEE. THUS FOR INVOKING TH ESE DEEMING SECTIONS FIRST CONDITION HAS TO BE NECESSARILY SATISFIED THA T THEY ARE NOT RECORDED IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE AS SESSEE. BUT FOR ESTABLISHING NEXUS OF SUCH INVESTMENT/EXPENDITURE W ITH A HEAD OF INCOME AND TO TAKE THE BENEFIT OF SET OFF, ASSESSEE HAS TO NECESSARILY EXPLAIN THE NATURE AND SOURCE OF SUCH INVESTMENT/EXPENDITURE AN D ESTABLISH ITS NEXUS WITH ANY HEAD OF INCOME. HON. GUJARAT HIGH COURT FU RTHER HELD THAT FOR CLAIMING TRADING LOSS IN RESPECT OF AN ASSET WHOSE INVESTMENT WAS FOUND UNEXPLAINED, IT WAS NECESSARY FOR THE ASSESSEE TO E XPLAIN THE NATURE AND SOURCE OF ITS ACQUISITION AND ON ITS FAILURE TO DO SO THE TRADING LOSS ON THE CONFISCATION OF THE ASSET COULD NOT BE SET OFF. 10. WE NOTICE THAT THE SET OFF OF ANY TRADING LOSS AGAINST DEEMED INCOME ASSESSED UNDER SECTIONS 69, 69A, 69B & 69C I S NOT DIRECTLY DISCERNIBLE FROM SECTIONS 72 TO 79 FALLING IN CHAPT ER-VI. TO SUMMARILY REFER TO THESE PROVISIONS WE NOTE THAT IN CHAPTER V I, SECTION 70 PROVIDES SET OFF OF LOSS FROM ONE SOURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME. IN OTHER WORDS, IF UNDER T HE HEAD BUSINESS THERE ARE TWO BUSINESSES ONE IS RESULTING IN INCOM E AND THE OTHER IS RESULTING IN LOSS, THEY ARE TO BE SET OFF AGAINST E ACH OTHER. SIMILARLY, IF THERE IS A LOSS UNDER THE HEAD CAPITAL GAINS IN RES PECT OF SHORT-TERM CAPITAL GAINS AND THERE IS INCOME IN RESPECT OF OTH ER CAPITAL ASSETS THEN THAT CAN BE SET OFF AS PER SECTION 70. SECTION 71 P ROVIDES SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER HEAD. THU S WHERE THERE IS A LOSS UNDER ONE HEAD BEING LOSS OTHER THAN LOSS UNDE R THE HEAD CAPITAL ITA NO.531/AHD/2008 ASST. YEAR 2004-05 5 GAINS THEN IT CAN BE SET OFF AGAINST ANY INCOME ASS ESSABLE UNDER ANOTHER HEAD. SECTION 71A AND SECTION 71B PROVIDE FOR CARRY FORWARD OF SET OFF OF LOSS FROM HOUSE PROPERTY. SECTION 72 PROVIDES FOR C ARRY FORWARD OF BUSINESS LOSS. ACCORDING TO THIS SECTION IF LOSS UN DER THE HEAD BUSINESS, OTHER THAN SPECULATION LOSS, CANNOT BE SET OFF AGAI NST INCOME UNDER ANY OTHER HEAD IN ACCORDANCE WITH SECTION 71, THEN IT H AS TO BE CARRIED FORWARD TO THE FOLLOWING ASST. YEARS. SECTION 72A P ROVIDES PROVISIONS OF CARRY FORWARD AND ACCUMULATED LOSS AND UNABSORBED D EPRECIATION ALLOWANCE IN AMALGAMATION OR DEMERGER. SIMILARLY SE CTION 72AA PROVIDES SUCH SET OFF AND CARRY FORWARD IN THE CASE OF BANKING COMPANY AND SEC.72AB PROVIDES SET OFF IN THE CASE OF CO-OP. BANKS. SECTION 73 PROVIDES FOR TREATMENT OF LOSS IN SPECULATION BUSIN ESS. SECTION 74 PROVIDES FOR TREATMENT OF LOSS UNDER THE HEAD CAPIT AL GAINS AND SECTION 74A PROVIDES FOR TREATMENT TO LOSS ARISING FROM SOU RCES UNDER THE HEAD INCOME FROM OTHER SOURCES. SECTION 75 PROVIDES FO R LOSSES IN CASE OF FIRM AND SECTION 78 IN RESPECT OF CARRY FORWARD AND SET OFF OF LOSS IN CASE OF CHANGE IN CONSTITUTION OF THE FIRM AND SECTION 7 9 PROVIDES FOR CARRY FORWARD AND SET OFF OF LOSS IN THE CASES OF CERTAIN COMPANIES. THUS TREATMENT OF LOSS ARISING UNDER THE HEAD BUSINESS I S PROVIDED ONLY UNDER SECTION 72 WHICH DIRECTS TO CARRY FORWARD THE UNABS ORBED LOSS TO THE NEXT YEAR UNLESS IT IS OTHERWISE PROVIDED IN ANY OTHER S ECTION OF CHAPTER VI. WE HAVE GONE THROUGH ALL THE SECTIONS UNDER CHAPTER VI AND WE DO NOT FIND ANY PROVISION FOR SETTING OFF OF BUSINESS LOSS AGAINST DEEMED INCOME UNDER SECTIONS 69, 69A, 69B & 69C. 11. BUT THIS DOES NOT MEAN THAT LOSS COMPUTED UNDER ANY OF THE FIVE HEADS MENTIONED IN SECTION 14 (I) SALARY, (II) INCOME FROM HOUSE PROPERTY, (III) PROFITS AND GAINS FROM BUSINESS O R PROFESSION, (IV) CAPITAL GAINS AND (V) INCOME FROM OTHER SOURCES CANNOT AT ALL BE ADJUSTED AGAINST UNEXPLAINED INVESTMENT OR EXPENDIT URE. WHAT IS NECESSARY AS PER HON. GUJARAT HIGH COURT IS THAT SO URCE OF ACQUISITION OF ASSET OR EXPENDITURE SHOULD BE CLEARLY IDENTIFIABLE . IN THE CASE BEFORE HON. GUJARAT HIGH COURT THE SOURCE OF GOLD CONFISCA TED WAS NOT IDENTIFIABLE AND HENCE ADJUSTMENT WAS NOT PERMITTED . 12. THUS THE IMPORTANT ASPECT THAT EMERGES FROM THE ENTIRE DISCUSSION IS THAT FOR INVOKING DEEMING PROVISIONS UNDER SECTI ONS 69, 69A, 69B & 69C THERE SHOULD BE CLEARLY IDENTIFIABLE ASSET OR E XPENDITURE. IN THE PRESENT CASE WE FIND THAT ENTIRE PHYSICAL STOCK OF RS.25,14,306/- WAS PART OF THE SAME BUSINESS. BOTH KIND OF STOCK I.E. WHAT IS RECORDED IN THE BOOKS AND WHAT WAS FOUND OVER AND ABOVE THE STOCK RECORDE D IN THE BOOKS, WERE HELD AND DEALT UNIFORMLY BY THE ASSESSEE. THERE WAS NO PHYSICAL ITA NO.531/AHD/2008 ASST. YEAR 2004-05 6 DISTINCTION BETWEEN THE ACCOUNTED STOCK OR UNACCOUN TED STOCK. NO SUCH PHYSICAL DISTINCTION WAS FOUND BY THE REVENUE EITHE R. THE ASSESSEE HAS REPEATEDLY CLAIMED THAT UNACCOUNTED BUSINESS INCOME IS INVESTED IN STOCK AND THERE IS NO AMOUNT SEPARATELY TAXABLE UNDER SEC TION 69. THE DEPARTMENT HAS IGNORED THIS CLAIM OF THE ASSESSEE A ND SOUGHT TO TAX THE DIFFERENCE BETWEEN BOOK-STOCK AND PHYSICAL-STOCK AS UNACCOUNTED INVESTMENT UNDER SECTION 69 WITHOUT CONSIDERING THE CLAIM OF THE ASSESSEE THAT FIRST THE BUSINESS RECEIPT HAS TO BE CONSIDERE D AND THEN INVESTMENT SHOULD BE TREATED AS COMING OUT OF SUCH UNACCOUNTED INCOME. THE DIFFERENCE IN STOCK SO WORKED OUT BY THE AUTHORITIE S BELOW HAD NO INDEPENDENT IDENTITY OF ITS OWN AND IT IS PART AND PARCEL OF ENTIRE LOT OF STOCK. THE DIFFERENCE BETWEEN DECLARED STOCK IN THE BOOKS AND WHAT IS PHYSICALLY FOUND WOULD ONLY BE A MATHEMATICAL EXPRE SSION IN TERMS OF VALUE AND NOT A SEPARATE INDEPENDENT IDENTIFIABLE A SSET. THEREFORE, IT CANNOT BE SAID THAT THERE IS AN UNDISCLOSED ASSET E XISTED INDEPENDENTLY. ONCE THIS IS SO THEN WHAT IS NOT DECLARED TO THE DE PARTMENT IS RECEIPT FROM BUSINESS AND NOT ANY INVESTMENT AS IT CANNOT BE CO- RELATED WITH ANY SPECIFIC ASSET. 13. THUS IN A CASE WHERE SOURCE OF INVESTMENT/EXPEN DITURE IS CLEARLY IDENTIFIABLE AND ALLEGED UNDISCLOSED ASSET HAS NO I NDEPENDENT EXISTENCE OF ITS OWN OR THERE IS NO SEPARATE PHYSICAL IDENTIT Y OF SUCH INVESTMENT/EXPENDITURE THEN FIRST WHAT IS TO BE TAX ED IS THE UNDISCLOSED BUSINESS RECEIPT INVESTED IN UNIDENTIFIABLE UNACCOU NTED ASSET AND ONLY ON FAILURE IT SHOULD BE CONSIDERED TO BE TAXED UNDER S ECTION 69 ON THE PREMISES THAT SUCH EXCESS INVESTMENT IS NOT RECORDE D IN THE BOOKS OF ACCOUNT AND ITS NATURE AND SOURCE IS NOT IDENTIFIAB LE. ONCE SUCH EXCESS INVESTMENT IS TAXED AS UNDECLARED BUSINESS RECEIPT THEN TAXING IT FURTHER AS DEEMED INCOME UNDER SECTION 69 WOULD NOT BE NECE SSARY. THEREFORE, THE FIRST ATTEMPT OF THE ASSESSING AUTHORITY SHOULD BE TO FIND OUT LINK OF UNDECLARED INVESTMENT/EXPENDITURE WITH THE KNOWN HE AD, GIVE OPPORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS AND IF IT IS SAT ISFACTORILY ESTABLISHED THEN FIRST SUCH INVESTMENT SHOULD BE CONSIDERED AS UNDECLARED RECEIPT UNDER THAT PARTICULAR HEAD. IT IS ONLY WHERE NO NEX US IS ESTABLISHED WITH ANY HEAD THEN IT SHOULD BE CONSIDERED AS DEEMED INC OME UNDER SECTION 69, 69A, 69B & 69C AS THE CASE MAY BE. IT IS BECAUS E WHEN ASSESSEE FAILS TO EXPLAIN SATISFACTORILY THE SOURCE OF SUCH INVEST MENT THEN IT SHOULD BE TAXED UNDER SECTION 69, 69A, 69B & 69C AS THE CASE MAY BE. IT SHOULD NOT BE DONE AT THE FIRST INSTANCE WITHOUT GIVING OPPORT UNITY TO THE ASSESSEE TO ESTABLISH NEXUS. THEREFORE, THERE IS NO CONFLICT WI TH THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN (SUPRA) WHERE INVESTMENT IN AN ASSET OR EXPENDITURE IS NOT IDENTIFIABLE AND NO ITA NO.531/AHD/2008 ASST. YEAR 2004-05 7 NEXUS WAS ESTABLISHED THEN WITH ANY HEAD OF INCOME AND THUS WAS NOT AVAILABLE FOR SET OFF AGAINST ANY LOSS UNDER ANY OT HER HEAD. THEREFORE, WE HOLD THAT WHERE ASSET IN WHICH UNDECLARED INVESTMEN T IS SOUGHT TO BE TAXED IS NOT CLEARLY IDENTIFIABLE OR DOES NOT HAVE INDEPENDENT IDENTITY BUT IS INTEGRAL AND INSEPARABLE (MIXED) PART OF DECLARE D ASSET, FALLING UNDER A PARTICULAR HEAD, THEN THE DIFFERENCE SHOULD BE TREA TED AS UNDECLARED BUSINESS INCOME EXPLAINING THE INVESTMENT. 14. TO CONCLUDE SUM OF RS.8,10,011/- BEING DIFFEREN CE IN STOCK IS REPRESENTED BY UNDECLARED BUSINESS INCOME. IT DOES NOT HAVE A SEPARATE PHYSICAL IDENTITY. IT IS TO BE ONLY TAXED UNDER THE HEAD BUSINESS. OTHER ASSETS HAVE SEPARATE PHYSICAL IDENTITY BEING FURNIT URE AND FIXTURES, AIR CONDITIONERS ETC. THEY CANNOT HAVE A DIRECT NEXUS W ITH BUSINESS AND THEREFORE INVESTMENT THEREIN HAS TO BE CONSIDERED U NDER SECTION 69 ONLY. 15. IN VIEW OF THE ABOVE, AO IS DIRECTED TO CONSIDE R THE SUM OF RS.8,10,011/- AS UNDISCLOSED BUSINESS INCOME ASSESS ABLE UNDER THE HEAD BUSINESS AND OTHER TWO SUMS UNDER SECTION 69. THE BUSINESS INCOME INCLUDING APPLICATION OF SECTION 40(B) HAS TO BE CO NSIDERED ACCORDINGLY. FOR CALCULATION OF INCOME IN VIEW OF OUR ABOVE OBSE RVATIONS, WE RESTORE THE MATTER TO THE FILE OF AO. THUS IN THE ABOVE CASE IT IS HELD THAT EXCESS STOCK SHOULD BE TREATED AS PART OF THE BUSINESS AS IT DOES NOT HAVE ANY SEPARA TE PHYSICAL IDENTITY. 5. SINCE THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER EXCESS STOCK SHOULD BE TREATED AS FROM BUSINESS OR AS DEEMED INC OME AND OTHER CONSEQUENCES WOULD FOLLOW, WE HOLD, FOLLOWING THE D ECISION IN THE CASE OF M/S FASHION WORLD VS. ACIT (SUPRA), THAT EXCESS STOCK SO FOUND AND HAVING NO SEPARATE PHYSICAL IDENTITY WOULD BE UNDIS CLOSED BUSINESS INCOME. ACCORDINGLY, WE CONFIRM THE ORDER OF LD. CI T(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. ITA NO.531/AHD/2008 ASST. YEAR 2004-05 8 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25/3/11. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 25/3/11. MAHATA/- ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- DCA B.S. AM JM COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.531/AHD/2008 ASST. YEAR 2004-05 9 1.DATE OF DICTATION 14/3/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 15/3/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..