INCOME TAX OFFICER 9(1)-2, MUMBAI V. SHRI. JAGMOHAN SINGH, MUMBAI

ITA 5636/MUM/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8482 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 21-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 28-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Keywords: Business income; Depreciation; Salary income; Additional evidence
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER I T A NO: 5636/MUM/2007 (ASSESSMENT YEAR: 2004-05) INCOME TAX OFFICER 9(1)-2, MUMBAI APPELLANT VS SHRI JAGMOHAN SINGH, MUMBAI RESPONDENT (PAN: AKNPS4042H) APPELLANT BY: SHRI SUMEET KUMAR RESPONDENT BY: SHRI HARESH P SHAH O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE REVENUE AND IT RELATES TO THE ASSESSMENT YEAR 2004-05, FOR WHICH THE RELEVANT PRE VIOUS YEAR ENDED ON 31.03.2004. THE ASSESSEE IS AN INDIVIDUAL . HE WAS A DIRECTOR OF A COMPANY BY NAME M/S CONCEPT SIGNS IND IA PRIVATE LIMITED AND DERIVING SALARY FROM THE COMPANY. HE A LSO CARRIED ON BUSINESS AS A PROPRIETOR OF M/S BUDGET SIGNS, WHICH WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND INSTALLATION OF ILLUMINATED AND GLOW SIGN BOARDS, WITH AFTER SALES SERVICE. THE BU SINESS INVOLVES FABRICATION OF SIGN BOARDS AS PER THE REQUIREMENTS OF THE CUSTOMERS, FITTING THEM ON SITE WITH ELECTRICAL CONNECTIONS, E TC. THE COMPONENTS OF THE SIGN BOARDS WERE CLAIMED TO BE MA NUFACTURED IN THE ASSESSEES FACTORY. ITA NO: 5636/MUM/2007 2 2. THE ASSESSEE FILED A RETURN OF INCOME SHOWING TA XABLE INCOME OF ` 24,44,781/-. THIS CONSISTED OF SALARY INCOME OF ` 3,77,900/-, BUSINESS INCOME OF ` 20,66,813/- AND INCOME OF ` 11,619/- FROM OTHER SOURCES, WHICH WAS DEDUCTIBLE U NDER SECTION 80L OF THE INCOME TAX ACT, 1961. WHILE EXAMINING T HE RETURN OF INCOME, THE ASSESSING OFFICER NOTICED FROM THE TRAD ING AND PROFIT & LOSS ACCOUNT THAT THE ONLY SOURCE OF INCOME OF THE ASSESSEE WAS THE COMMISSION INCOME OF ` 38,00,000/-, WHICH WAS CREDITED TO THE PROFIT & LOSS ACCOUNT. ACCORDING TO HIM, THERE WAS NO BUSINESS ACTIVITY IN THE ASSESSEES PROPRIETARY BUSINESS. T HERE WERE NO SALES BUT ONLY PURCHASES. THERE WERE NO SUPPORTING DOCUMENTS TO SHOW THAT THE ASSESSEE WAS MANUFACTURING THE COMPON ENTS IN HIS FACTORY. THE ASSESSEE ALSO DID NOT FILE ANY BALANC E SHEET. THE COMMISSION INCOME OF ` 38,00,000/- WAS EARNED BY THE ASSESSEE FOR GETTING BUSINESS TO THE COMPANY, OF WHICH HE WA S A DIRECTOR, THROUGH HIS PERSONAL CONTACTS AND MANAGERIAL SKILLS . THE ASSESSING OFFICER THEREFORE CALLED UPON THE ASSESSEE TO EXPLA IN WHY THE COMMISSION EARNED BY HIM SHOULD NOT BE TREATED AS I NCOME FROM OTHER SOURCES AND ACCORDINGLY ALL THE EXPENSES DEBI TED TO THE PROFIT & LOSS ACCOUNT SHOULD NOT BE DISALLOWED. IT WOULD APPEAR THAT THE ASSESSEE DID NOT OFFER ANY EXPLANATION TILL THE COM PLETION OF THE ASSESSMENT. THEREFORE, THE ASSESSING OFFICER HELD THAT THERE WAS NO BUSINESS ACTIVITY AND THE COMMISSION INCOME EARN ED WAS ASSESSABLE ONLY AS INCOME FROM OTHER SOURCES. HE F URTHER HELD THAT THE EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT A RE NOT RELATABLE TO THE COMMISSION INCOME AND THEREFORE THEY HAVE TO BE ITA NO: 5636/MUM/2007 3 DISALLOWED. HE EVENTUALLY COMPUTED THE TOTAL INCOM E OF THE ASSESSEE AS UNDER: - RS. RS. I] INCOME FROM SALARY : AS PER COMPUTATION 3,77,900 II] INCOME FROM OTHER SOURCES : COMMISSION INCOME AS DISCUSSED 38,00,000 ABOVE INTEREST ON TERM DEPOSIT AS PER STATEMENT OF TOTAL INCOME 11,619 38,11,619 GROSS TOTAL INCOME 41,89,519 LESS: DEDUCTION U/S. 80L 11,6 19 TOTAL INCOME 41,77,900 3. THE ASSESSEE APPEALED TO THE CIT(A) AND CONTENDE D THAT THE EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT, AGGREGATING TO ` 17,33,187/- RELATED TO THE PROPRIETARY BUSINESS AND THAT THEY OUGHT TO HAVE BEEN COMPUTED AND TREATED AS LOSS UNDER THE HEAD BUSINESS, IN THE ABSENCE OF ANY INCOME FROM THE B USINESS. IN OTHER WORDS, THE ASSESSEES CASE WAS THAT THERE WAS BUSINESS ACTIVITY IN HIS PROPRIETARY BUSINESS DURING THE REL EVANT PREVIOUS YEAR AND SUCH ACTIVITY CONSISTED OF PRODUCTION OF SAMPLE S FOR THE APPROVAL OF THE CLIENTS, RECEIPT OF ADVANCE FROM TH E CUSTOMERS, ETC. HE ALSO POINTED OUT THAT IN THE NEXT YEAR THERE WER E SALES OF MORE THAN ` 50,00,000/-. IT WAS FURTHER SUBMITTED THAT THE ASS ESSING OFFICER SHOULD HAVE COMPUTED THE LOSS FROM THE ASSE SSEES PROPRIETARY BUSINESS AT ` 17,33,187/-, BEING THE AGGREGATE OF THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT AND A DJUSTED THE SAME AGAINST THE COMMISSION INCOME AND SALARY INCOM E, WHICH ITA NO: 5636/MUM/2007 4 WOULD HAVE RESULTED IN THE TOTAL INCOME, AFTER GIVI NG DEDUCTION UNDER SECTION 80L, BEING COMPUTED AT ` 24,44,713/- AS AGAINST THE TOTAL INCOME OF ` 41,77,900/- COMPUTED IN THE ASSESSMENT ORDER. 4. IN THE COURSE OF THE APPEAL PROCEEDINGS BEFORE T HE CIT(A), IT WAS POINTED OUT BY THE ASSESSEE THAT HE HAD FILED T HE FOLLOWING DOCUMENTS BEFORE THE ASSESSING OFFICER IN SUPPORT O F THE CLAIM THAT THERE WAS MANUFACTURING ACTIVITY IN THE PROPRIETARY BUSINESS WHICH WAS LOCATED IN BADDI, HIMACHAL PRADESH: - (A) ALLOTMENT LETTER OF PLOT IN EXPORT PROMOTION ZONE. (B) AGREEMENT OF LEASE WITH GOVERNMENT OF HIMACHAL PRADESH, DEPARTMENT OF INDUSTRY. (C) ADVANCES MADE FOR PURCHASE OF PLANT AND MACHINERY. (D) DETAILS OF PURCHASES AND LEDGER ACCOUNT. IT WAS FURTHER POINTED OUT BEFORE THE CIT(A) THAT T HE ASSESSEE RECEIVED AN ADVANCE OF ` 10,00,000/- FROM A CLIENT BY NAME EURONET SERVICES INDIA PRIVATE LIMITED, WHICH WAS BILLED IN THE NEXT YEAR. IT WAS THE ASSESSEES PLEA BEFORE THE CIT(A) THAT THE AFORESAID EVIDENCE / DOCUMENTS ADDUCED BEFORE THE ASSESSING O FFICER WERE NOT DULY CONSIDERED BY HIM. 5. THE CIT(A) REMANDED THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO HIM TO VERIFY THE EVIDENCE AND SUBMIT A REMAND REPORT. THE ASSESSING OFFICER OBJECTED TO THE ADMI SSION OF THE EVIDENCE AND REITERATED THAT NO MANUFACTURING ACTIV ITY WAS CARRIED OUT IN THE ASSESSEES PROPRIETARY CONCERN. HE ALSO POINTED OUT THAT MERE FILING OF THE ADDRESS OF THE FACTORY AND FURNI SHING THE BANK ITA NO: 5636/MUM/2007 5 DETAILS CANNOT ESTABLISH THE CARRYING ON OF THE MAN UFACTURING ACTIVITY. HE FURTHER CONTENDED IN THE REMAND REPOR T THAT THERE WAS NO DOCUMENTARY EVIDENCE TO SHOW THAT THE SETTING UP OF THE INDUSTRIAL UNIT IN THE PLOT WAS COMPLETED BY 31.03. 2003. THE INVOICES ISSUED BY THE SUPPLIERS OF PLANT AND MACHI NERY SHOWED THAT THEY WERE ISSUED IN MAY 2004 AND APRIL 2006, W HICH MEANT THAT NO PLANT AND MACHINERY HAD BEEN ACQUIRED AS ON 31.0 3.2004. THE ONLY ASSET OWNED BY THE ASSESSEE AS PER THE BALANCE SHEET WAS A COMPUTER WORTH ` 91,568/-, LAND AND STAFF QUARTERS. IT WAS ALSO POINTED OUT BY THE ASSESSING OFFICER THAT NO LABOUR CHARGES OR MANUFACTURING EXPENSES HAD BEEN DEBITED TO THE PROF IT & LOSS ACCOUNT. ACCORDINGLY THE ASSESSING OFFICER CONTEND ED THAT THE ASSESSMENT ORDER SHOULD BE UPHELD. 6. THE REMAND REPORT WAS PUT TO THE ASSESSEE FOR RE BUTTAL. THE ASSESSEE SUBMITTED THAT HE HAD OUTSOURCED THE MANUF ACTURE OF SIGN BOARDS TO M/S GLOBAL SIGNS INDIA FOR ` 1,93,150/-, WHICH WAS THE COST OF CONVERSION AND THAT RAW MATERIALS WERE PURC HASED FOR ` 5,53,513/- FROM M/S SANJEEV SALES CORPORATION AND I NSTALLATION COSTS OF ` 56,850/- HAD BEEN INCURRED BY HIM. IT WAS POINTED OUT THAT ALL THESE EXPENSES WERE DEBITED TO THE PURCHAS ES ACCOUNT WHICH STOOD AT ` 8,03,513/- AS PER THE TRADING ACCOUNT. IN REPLY TO THE ASSESSING OFFICERS POINT THAT NO MACHINERY HAD BEEN ACQUIRED BY THE ASSESSEE, THE ASSESSEE SUBMITTED THAT THE SI GN BOARD MANUFACTURING PROCESS INVOLVED FABRICATION JOB AND ASSEMBLING OF FABRICATED BOXES WITH TUBE-LIGHTS AT THE SITE OF IN STALLATION. IT WAS THE FIRST YEAR OF THE ASSESSEES BUSINESS AND THERE FORE THE PRODUCT ITA NO: 5636/MUM/2007 6 SAMPLES WERE DEVELOPED BY GETTING THE SIGN BOARDS F ABRICATED BY M/S GLOBAL SIGNS INDIA. IT WAS THUS POINTED OUT TH AT THE ASSESSEE MADE PROTOTYPE SAMPLES FOR THE PROSPECTIVE CLIENTS FOR WHICH PURCHASES OF RAW MATERIAL HAD BEEN MADE AND ONLY AF TER THE APPROVAL OF THE PROTOTYPE SAMPLES CAN THE ASSESSEE GET BUSINESS FROM THE CLIENTS. RELIANCE WAS ALSO PLACED ON THE FACT THAT THE PROFIT & LOSS ACCOUNT CONTAINED SEVERAL DEBITS FOR SALARIE S, BUSINESS PROMOTION EXPENSES, STAFF QUARTER RENT, CONVEYANCE, TRAVELLING EXPENSES, ETC., ALL OF WHICH SHOWED THAT THE BUSINE SS HAD BEEN SET UP BY THE ASSESSEE. IT WAS THUS CONTENDED THAT THE ASSESSING OFFICER OUGHT TO HAVE HELD THAT THE ASSESSEE HAD CO MMENCED THE MANUFACTURING ACTIVITY AND THEREFORE THE LOSS OUGHT TO HAVE BEEN COMPUTED UNDER THE HEAD BUSINESS, WHICH WOULD BE AVAILABLE FOR BEING ADJUSTED AGAINST THE INCOME ASSESSED UNDER TH E HEADS SALARY AND INCOME FROM OTHER SOURCES BY VIRTUE OF SECTION 71 OF THE INCOME TAX ACT, 1961. 7. THE CIT(A), ON EXAMINATION OF THE EVIDENCE, HELD AS UNDER: (A) THE COMMISSION INCOME WAS RIGHTLY ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. (B) HOWEVER, THE EXPENSES RELATING TO THE ASSESSEES PROPRIETARY BUSINESS AND DEBITED TO THE PROFIT & LOSS ACCOUNT OUGHT TO HAVE BEEN AGGREGATED AND ALLOWED UNDER SECTION 37(1) OF THE ACT, EVEN THOUGH THERE WERE NO PROFITS FROM THE SAID BUSINESS IN THE RELEVANT PREVIOUS YEAR. ITA NO: 5636/MUM/2007 7 (C) THE ASSESSEE RECEIVED AN ADVANCE OF ` 10,00,000/- WHICH WAS BILLED IN THE NEXT YEAR AND HAD ALSO OUTSOURCED THE MANUFACTURE OF SIGN BOARDS FOR PROTOTYPE PURPOSES. MANUFACTURING EXPENSES INCLUDING RAW MATERIAL COST, CONVERSION COST, INSTALLATION COST, ELECTRICITY AND WATER EXPENSES WERE ALL INCURRED AS ALSO EXPENSES ON SALARY, BUSINESS PROMOTION, TRAVELLING, ETC. ALL OF WHICH HAVE NOT BEEN HELD TO BE BOGUS. THUS THERE WAS BUSINESS ACTIVITY IN THE ASSESSEES PROPRIETARY BUSINESS DURING THE RELEVANT PREVIOUS YEAR. ON THE BASIS OF THE ABOVE FINDINGS THE CIT(A) HELD THAT ALL THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT ARE A LLOWABLE EXPENSES EVEN IF THERE ARE NO SALES AND THE LOSS SH OULD BE COMPUTED UNDER THE HEAD BUSINESS AND THE SAME SHO ULD BE SET OFF AGAINST THE INCOME ASSESSED UNDER THE HEADS SA LARY AND INCOME FROM OTHER SOURCES BY VIRTUE OF SECTION 71 OF THE ACT. HE DIRECTED THE ASSESSING OFFICER ACCORDINGLY AND ALLO WED THE ASSESSEES APPEAL. 8. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. WE HAVE CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. AT OUR INSTANCE THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED THE COMP UTATION OF THE INCOME, THE TRADING AND PROFIT & LOSS ACCOUNT FOR T HE YEAR ENDED 31.03.2004 AND THE BALANCE SHEET AS ON THAT DATE. THE QUESTION IS WHETHER THE BUSINESS OF THE ASSESSEE, NAMELY, M/S B UDGET SIGNS, WAS SET UP IN THE RELEVANT PREVIOUS YEAR. THE FACT UAL FINDINGS OF THE ITA NO: 5636/MUM/2007 8 CIT(A), WHICH WE HAVE SUMMARIZED IN THE PRECEDING P ARAGRAPH, HAVE NOT BEEN CONTROVERTED BEFORE US ON BEHALF OF T HE REVENUE. THEY COULD NOT BE CONTROVERTED BECAUSE THEY ARE BAS ED ON THE EVIDENCE BROUGHT ON RECORD. THE FAINT OBJECTION OF THE DEPARTMENT BEFORE US THAT THE ADDITIONAL EVIDENCE OUGHT NOT TO HAVE BEEN ADMITTED BY THE CIT(A) CANNOT BE UPHELD BECAUSE THE TRADING AND PROFIT & LOSS ACCOUNT OF THE PROPRIETARY BUSINESS W AS ADMITTEDLY BEFORE THE ASSESSING OFFICER AND IT WAS ONLY FROM T HE SAID ACCOUNT THAT HE HAD COLLECTED THE FIGURES MENTIONED BY HIM IN PARAGRAPHS 5 AND 6 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS PO INTED OUT BEFORE THE CIT(A) THAT THE DETAILS OF PURCHASES IN THE LEDGER AND THE ADVANCES MADE FOR PURCHASE OF PLANT AND MACHINERY, LEASE AGREEMENT WITH THE GOVERNMENT OF HIMACHAL PRADESH A ND THE LETTER OF ALLOTMENT OF PLOT WERE ALL FILED BEFORE THE ASSE SSING OFFICER AND THE SAME HAS NOT BEEN DISPUTED BEFORE US. NO QUEST ION HAS BEEN RAISED BY THE ASSESSING OFFICER DOUBTING THE ASSESS EES CLAIM IN THE PROFIT & LOSS ACCOUNT THAT SEVERAL EXPENSES WER E INCURRED BY HIM DURING THE RELEVANT ACCOUNTING YEAR. THE ASSES SING OFFICER COULD HAVE VERY WELL CALLED FOR THE DETAILS OF THE EXPENSES IN AN ATTEMPT TO FIND OUT THE TRUTH ABOUT THE ASSESSEES CLAIM THAT HE HAD OUTSOURCED THE MANUFACTURE OF PROTOTYPE SAMPLES TO M/S GLOBAL SIGNS INDIA. WE THEREFORE DO NOT FIND MERIT IN THE OBJECTION OF THE REVENUE THAT THE CIT(A) SHOULD NOT HAVE ADMITTED TH E ADDITIONAL EVIDENCE. 9. THE REAL QUESTION IN THE PRESENT CASE IS WHETHER THE ASSESSEE HAD SET UP THE BUSINESS OF MANUFACTURE OF GLOW SIGN ITA NO: 5636/MUM/2007 9 BOARDS. THE ASSESSEE HAS EFFECTED PURCHASES OF ` 8,03,513/- WHICH CONSISTED OF RAW MATERIALS OF ` 5,53,513/- PURCHASED FROM M/S SANJEEV SALES CORPORATION, CONVERSION COST OF ` 1,93,150/- PAID TO M/S GLOBAL SIGNS INDIA AND INSTALLATION COS T OF ` 56,850/-. NO DOUBT THE ASSESSEE COULD NOT SELL THE SIGN BOARD S IN THE RELEVANT ACCOUNTING YEAR. HOWEVER, THE QUESTION IS NOT WHET HER THERE WERE SALES IN THE RELEVANT PREVIOUS YEAR. THE QUESTION IS WHETHER THE BUSINESS WAS SET UP AND FOR THIS PURPOSE IT IS NOT A RELEVANT ENQUIRY AS TO WHETHER THERE WERE ANY SALES. A BUSINESS IS SAID TO BE SET UP WHEN IT IS READY TO COMMENCE ITS BUSINESS. THE ACT UAL COMMENCEMENT OF THE BUSINESS IS A LATER STAGE AND F OR THE PURPOSE OF SECTION 3 OF THE INCOME TAX ACT, 1961, WHAT IS R ELEVANT IS THE DATE OF SETTING UP OF THE BUSINESS AND NOT THE DATE OF COMMENCEMENT OF THE BUSINESS, NOR EVEN WHETHER THE ASSESSEE HAD STARTED ANY MANUFACTURE OR NOT. THE ACCOUNTS F ILED BY THE ASSESSEE SHOW PURCHASES, ELECTRICITY AND WATER CHAR GES, SALARY OF ` 2,22,000/- PAID TO STAFF, BUSINESS PROMOTION EXPENS ES OF ` 2,75,500/-, CONVEYANCE EXPENSES OF ` 28,350/-, PETROL EXPENSES OF ` 17,050/-, PRINTING AND STATIONERY , STAFF QUARTER R ENT OF ` 1,38,000/-, REPAIRS AND MAINTENANCE OF ` 58,200/-, STAFF WELFARE EXPENSES OF ` 26,640/-, TRAVELLING EXPENSES OF ` 1,35,475/-, TELEPHONE EXPENSES, DEPRECIATION OF ` 54,941/-, ETC. ALL THESE EXPENSES SHOW THAT THE BUSINESS WAS SET UP IN THE RELEVANT PREVIOUS YEAR A ND THE ASSESSEE WAS READY TO COMMENCE THE BUSINESS. IN FACT IN THE VERY NEXT YEAR THE ASSESSEE HAS CLAIMED TO HAVE SOLD ITS PRODUCTS FOR MORE THAN ` 50,00,000/-. THE BALANCE SHEET AS ON 31.03.2004 SH OWS ITA NO: 5636/MUM/2007 10 ADVANCES MADE TO SEVERAL PARTIES AND ALSO AN ADVANC E OF ` 10,00,000/- RECEIVED FROM A CLIENT BY NAME EURONET SERVICES INDIA PRIVATE LIMITED. THE ASSETS SIDE OF THE BALANCE SH EET SHOWS DEPOSITS WITH POLLUTION CONTROL BOARD, FOR WATER CO NNECTION, FOR ELECTRICITY AND TELECOM DEPARTMENT, SALES TAX DEPAR TMENT, ETC. THE ASSESSEE HAD ALSO OPENED A BANK ACCOUNT AND BAN K CHARGES OF ` 1,911/- ARE ALSO SEEN DEBITED TO THE PROFIT & LOSS ACCOUNT. THE CIT(A) HAS ALSO RECORDED THAT THE PURCHASE OF RAW M ATERIAL AND OTHER EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT HAVE NOT BEEN DOUBTED BY THE ASSESSING OFFICER, WHO HAS DISALLOWE D THEM ON THE MERE GROUND THAT THERE WAS NO MANUFACTURING ACTIVIT Y. APART FROM AGREEING WITH THE CIT(A), WE WOULD ALSO HOLD THAT T HERE IS NO REQUIREMENT IN SECTION 3 THAT THE ASSESSEE SHOULD H AVE COMMENCED THE MANUFACTURING ACTIVITY; ALL THAT IS R EQUIRED IS THAT THE ASSESSEE SHOULD HAVE SET UP ITS BUSINESS. HAVI NG REGARD TO THE FINDINGS RECORDED BY THE CIT(A), WHICH ARE SUPPORTE D BY THE ACCOUNTS FILED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE BUSINESS OF THE ASSESSEE, NAMELY, M/S BUDGET SIGNS HAD BEEN SET UP IN THE RELEVANT PREVIOUS YEAR. ONCE IT IS SET UP, THE RES ULT OF THE BUSINESS HAS TO BE COMPUTED UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS OR PROFESSION NOTWITHSTANDING THAT THERE WERE NO S ALES. THE COMPUTATION OF THE BUSINESS RESULTS IN THE PRESENT CASE WOULD SHOW A LOSS OF ` 17,33,187/- BEING THE AGGREGATE OF THE EXPENSES DEB ITED TO THE PROFIT & LOSS ACCOUNT. THE CIT(A) IS RIGHT IN HOLDING THAT THE AFORESAID LOSS SHOULD BE ASSESSED UNDER THE HEAD B USINESS AND THE SAME SHOULD BE SET OFF UNDER SECTION 71 OF THE ACT AGAINST THE ITA NO: 5636/MUM/2007 11 INCOME FROM SALARY AND INCOME FROM OTHER SOURCES. WE AGREE WITH THE VIEW TAKEN BY THE CIT(A) AND HIS DECISION AND C ONFIRM HIS ORDER. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY 2011. SD/- SD/- (B RAMAKOTAIAH) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DATED 24 TH FEBRUARY 2011 SALDANHA COPY TO: 1. SHRI JAGMOHAN SINGH 10-C WEST VIEW AVENUE, I C COLONY HOLY CROSS ROAD, BORIVALI (WEST), MUMBAI 400 103 2. ITO 9(1)-2, MUMBAI 3. CIT-IX, MUMBAI 4. CIT(A)-IX, MUMBAI 5. DR J BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI