DCIT, Patiala V. M/s Standard Corporation India Ltd., Barnala

ITA 919/CHANDI/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5305 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 02-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANU MALIK
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 69C; 143(3); 69B; 250; 69A; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH , !'# $' % & , '( BEFORE: SH.SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, A M ./ ITA NO.919/CHD/2017 / ASSESSMENT YEAR : 2013-14 THE D.C.I.T., CENTRAL CIRCLE, PATIALA. M/S STANDARD CORPORATION INDIA LTD., HANDIAYA CHOWK, BARNALA. ./PAN NO: AAFCS4440L /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI MANU MALIK, CIT DR ! / REVENUE BY : SHRI RAJIV GUPTA, CA '# $ /DATE OF HEARING : 24.07.2018 %&'(# /DATE OF PRONOUNCEMENT : 22.10.2018 ') /ORDER PER ANNAPURNA GUPTA, A.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, LUDHIANA (IN SHORT CIT (APPEALS) DATED 16.3.2017 PASSED U/S 250 (6) OF THE INCOME TAX AT, 1961 (HEREINAFTER REFERRED TO AS ACT). 2. THE SOLE ISSUE IN THE PRESENT CASE RELATES TO TR EATING THE SURRENDERED INCOME OF RS.2.21 CRORES MADE BY TH E ASSESSEE AS BUSINESS INCOME AND THEREAFTER ALLOWING ADJUSTMENT OF BUSINESS LOSSES AGAINST THE SAME. 3. THE GROUND RAISED BY THE REVENUE READS AS UNDER: ITA NO.919/CHD/2017 A.Y. 2013-14 2 1. WHETHER THE LD. CIT(A) HAS ERRED IN ALLOWING TH E ADJUSTMENT OF BUSINESS LOSS AGAINST THE SURRENDERED AMOUNT OF RS.2,21,00,000/- ON ACCOUNT OF UNDISCLOSED GP ARISI NG OUT OF UNDISCLOSED SALE SURRENDERED DURING SEARCH. 4. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE IS LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URING OF TRACTORS, HARVESTERS COMBINES, HYDRAULIC MOBILE CRANES, ETC. DURING THE IMPUGNED YEAR, A SEARCH U/S 132 OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 30 .1.2013. DURING SEARCH PROCEEDINGS, THE SEARCH PARTY FOUND DISCREPANCIES IN THE STOCK AND HAS GIVEN BELOW IN T HE TABLE: 5. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO EXPLAIN THE DIFFERENCE IN STOCK AS GIVE N IN THE TABLE ABOVE I.E. STOCK SHORT BY RS.17,74,50,334/- A T THE ASSESSEES PREMISES AND STOCK EXCESS BY RS.82,94,22 0/- AT THE PREMISES OF M/S G.G. AGRICULTURE INDUSTRIES, A SISTER CONCERN. AFTER CONSIDERING SUBMISSIONS OF THE ASSES SEE, CONFIRMATIONS OF M/S G.G. AGRICULTURE INDUSTRIES, T HE ASSESSING OFFICER CONCLUDED NET STOCK SHORTAGE OF RS.16,91,56,114/- I.E. (RS.17,74,50,334/- MINUS RS.82,94,220/-). TREATING THE SAME AS SALE OUTSIDE THE BOOKS OF THE ASSESSEE AND APPLYING THEREON GP RATE OF 13. 05%, AS STOCK POSITION AS ON 30.01.2013 SR NO NAME OF COMPANY STOCK AS PER BOOKS AS ON 30-1-2013 (AFTER RECONCILIATION) (IN RUPEES) ACTUAL STOCK FOUND ON 30-01- 2013 (IN RUPEES) DISCREPANCY (IN RUPEES) 1 ALL THE DIVISIONS OF STANDARD GROUP OF COMPANIES 37,85,32,491 20,10,82,157 17,74,50,334 STOCK SHORT 2 M/S G.G AGRICULTURE INDUSTRIES, HANDIAYA CHOWK BARNALA BOOKS OF ACCOUNT ARE NOT MAINTAINED 82,94,220 82,94,220 STOCK EXCESS ITA NO.919/CHD/2017 A.Y. 2013-14 3 SHOWN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION I.E. ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER COMPUTED THE ADDITIONAL PROFITS ON THE STOCK FOUND SHORT AT RS.2,20,74,837/-, WHICH WHEN CONFRONTED TO THE ASSE SSEE, WAS SURRENDERED BY HIM TO BUY PEACE OF MIND AND TO AVOID LITIGATION AND SUBJECT TO NO PENALTY IMPOSED. THE A SSESSEE SURRENDERED THE SAID AMOUNT, ROUNDED OFF RS.2.21 CR ORES, AND INCLUDED THE SAME IN ITS RETURN OF INCOME BY FI LING THE REQUISITE COMPUTATION DURING THE ASSESSMENT PROCEED INGS GIVING EFFECT TO THE SURRENDERED INCOME. SUBSEQUENT LY THE CASE WAS ASSESSED U/S 143(3) OF THE ACT AT AN INCOM E OF RS.2.21 CRORES WITHOUT ADJUSTING BUSINESS LOSSES RE TURNED FOR THE YEAR OF RS.4,76,16,256/-. BY APPLYING THE D ECISION IN THE CASE OF KIM PHARMA PVT. LTD. VS. CIT IN ITA NO. 106 OF 2011 (O&M) . 6. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS) WHO DELETED THE ADDITION SO MADE HO LDING THAT ON THE FACTS OF THE CASE SINCE THE SURRENDER H AD BEEN MADE ON THE DISCREPANCY OF STOCK, THE SAME WAS TO B E ASSESSED AS BUSINESS INCOME AND AS PER LAW SET OFF OF BUSINESS LOSSES FOR THE YEAR AS PER THE PROVISIONS OF SECTIONS 70 AND 71 OF THE ACT, HAD TO BE ALLOWED. THE RELEVA NT FINDINGS OF THE LD.CIT(APPEALS) AT PAGE 17 OF THE O RDER ARE AS UNDER: THE FACTS OF THE CASE, THE BASIS OF ASSESSMENT MADE BY THE A.O. AND THE SUBMISSIONS/ARGUMENTS OF THE AR DURING T HE APPELLATE PROCEEDINGS HAVE BEEN CONSIDERED. IT IS A FACT THAT NO SURRENDER WAS MADE BY THE ASSESSEE, DURING THE C OURSE OF SEARCH, UNDER SECTION 132(4). AS PER THE ASSESSMENT OR DER THERE WAS A DISCREPANCY IN THE STOCK PHYSICALLY ITA NO.919/CHD/2017 A.Y. 2013-14 4 FOUND/INVENTORIED ON THE DATE OF SEARCH AND THE VALU E OF THE STOCK AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE O N THE DATE OF SEARCH. THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE AND IN RESPONSE, THE ASSESSEE FILED A REV ISED COMPUTATION OFFERING AN ADDITIONAL AMOUNT OF RS. 2,21,00,000/- AS INCOME FOR THE ASSESSMENT YEAR 2013-1 4 ON ACCOUNT OF DISCREPANCY IN THE STOCK. IT IS CLEAR THAT THE SURRENDER WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO AND THE BASIS OF THE SURRE NDER WAS THE DISCREPANCY IN THE STOCK. ON THESE FACTS, T HE SURRENDERED INCOME HAS TO BE ASSESSED AS BUSINESS I NCOME. THERE IS THUS MERIT IN THE ARGUMENT OF THE AR THAT T HE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF KI M PHARMA PVT. LTD. VS. CIT IS NOT APPLICABLE IN THE FAC TS AND CIRCUMSTANCES OF THE PRESENT CASE. ANY ADDITION DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO ON ACCOUNT OF DISCREPANCIES FOUND RELATING TO THE STOCK, HAS TO BE MA DE AS 'BUSINESS INCOME' AND AS PER LAW SUCH AN INCOME CAN BE ADJUSTED AND SET OFF AGAINST THE 'BUSINESS LOSS' OF T HE SAME YEAR AS PER SECTION 70 AND 71 OF THE I.T. ACT, 1961. TH E AR DURING THE COURSE OF APPELLATE PROCEEDINGS SUBMITTED THAT THE AO WHILE MAKING ASSESSMENT AND TREATING THE SURRENDE RED INCOME OF RS.2,21,00,000/- HAS ACCEPTED THE CURRENT YEAR BUSINESS LOSSES, BUT HAS NOT ALLOWED SET OFF OF THI S LOSS AGAINST INCOME DISCLOSED DURING ASSESSMENT PROCEEDIN G AS BUSINESS INCOME ON ACCOUNT STOCK FOUND SHORT DURING SEARCH PROCEEDINGS. AS PER AR, ONCE AN INCOME IS ASSESSED AS BUSINESS INCOME OR EVEN FROM OTHER SOURCES, IT BECOM ES AVAILABLE FOR SET OFF AGAINST CURRENT YEAR BUSINESS LOSS AS CURRENT YEAR BUSINESS LOSS IS ALLOWED TO BE SET OFF AGAINST CURRENT YEAR INCOME UNDER ANY OTHER HEAD AS PER SEC TION 71. THE ASSESSEE IS THEREFORE ELIGIBLE TO SET OFF CU RRENT YEAR BUSINESS LOSS WITH ADDITION MADE DURING ASSESSMENT. THE ARGUMENTS OF THE AR ARE FOUND ACCEPTABLE ON THIS PO INT AND THE ADDITIONAL INCOME OF RS. 2,21,00,000/- IS ALLOW ED TO BE SET OFF AGAINST THE RETURNED LOSS OF RS. 4,76,16,256 /- FOR THE YEAR CONSIDERATION. 7. AGGRIEVED BY THE SAME, THE REVENUE HAS COME UP I N APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS: 8. DURING THE COURSE OF HEARING BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER STAT ING THAT NO ADJUSTMENT OF LOSSES AGAINST THE SURRENDERED INCOME COULD BE MADE IN VIEW OF THE DECISION OF THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF KIM PHARMA PVT. LTD. (SUP RA). ITA NO.919/CHD/2017 A.Y. 2013-14 5 9. THE LD. COUNSEL FOR ASSESSEE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(APPEALS) AND FURTHER R ELIED UPON THE FOLLOWING DECISIONS TO SUPPORT THE ORDER O F THE CIT(A): 1) GAURISH STEELS P. LTD. VS. ACIT (2015) 127 DTR 266 2) MOHD. AKBAR VS. ITO (2016) 46 CCH 0555 (HYD.TRIB) 3) PRASHANTI SURYA CONSTRUCTION CO.P.LTD. DCIT (2017) 49 CCH 0303 (CHD.TRIB) 10. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE GONE T HROUGH THE ORDER OF THE LD.CIT(APPEALS). WE DO NOT FIND AN Y INFIRMITY IN THE SAME. THE FACTUAL FINDINGS OF THE CIT(APPEALS) THAT THE SURRENDER RELATED TO PROFITS ESTIMATED BY TREATING THE STOCK FOUND SHORT AT THE ASSESSEES PREMISES DURING SEARCH AS SALES MADE OUTSIDE THE BOOKS OF T HE ASSESSEE ,HAS NOT BEEN CONTROVERTED BY THE REVENUE. IT IS NOT DISPUTED ALSO THAT THE SURRENDER SO MADE WAS ACCE PTED BY THE REVENUE. THE SURRENDER BEING ACCEPTED AS ON ACC OUNT OF PROFITS EARNED ON SALES MADE OUTSIDE THE BOOKS,THER E IS NO IOTA OF DOUBT THAT THE SAME WAS IN THE NATURE OF B USINESS INCOME OF THE ASSESSEE. THE LD.CIT(APPEALS),WE HOLD , HAS RIGHTLY HELD THE IMPUGNED ADDITION MADE OF THE S URRENDER ON ACCOUNT OF DISCREPANCIES RELATING TO STOCK, AS B USINESS INCOME. FURTHER THE OBSERVATION OF THE CIT(A) THAT AGAINST BUSINESS INCOME ,SET OFF OF BUSINESS LOSSES OF THE CURRENT YEAR IS ALLOWED AS PER LAW ,HAS ALSO NOT BEEN CONT ROVERTED BY THE REVENUE. WE, THEREFORE, SEE NO REASON TO INT ERFERE IN THE ORDER OF THE CIT(APPEALS). ITA NO.919/CHD/2017 A.Y. 2013-14 6 11. THE DECISION RELIED UPON BY THE LD.DR IN THE CA SE OF KIM PHARMA(SUPRA) HAS BEEN DEALT WITH AND DISTINGUI SHED IN SUBSEQUENT DECISIONS, AS CITED BY THE LD.COUNSEL FO R THE ASSESSEE, WHEREIN IT HAS BEEN POINTED OUT THAT WHIL E IN THE CASE OF KIM PHARMA(SUPRA) THE SURRENDER WAS ON ACCO UNT OF CASH WHICH IN THE ABSENCE OF ANY EXPLANATION WAS HE LD TO BE UNEXPLAINED AND HENCE NOT CLASSIFIABLE UNDER ANY HE AD OF INCOME, THE SAID RATIO WAS NOT APPLICABLE TO CASES WHERE THE SURRENDER CLEARLY RELATED TO THE BUSINESS OF THE AS SESSEE. THE SAID DISTINCTION HAS BEEN CLEARLY BROUGHT OUT I N THE CASE OF GAURISH STEELS (SUPRA) AS UNDER: THE ONLY ISSUE TO BE CONSIDERED BY US IS WHETHER TH E INCOME OF RS.70 LACS SURRENDERED IS TO BE TAXABLE AS BUSINESS INCOME OR I NCOME FROM OTHER SOURCES OR AS DEEMED INCOME UNDER SECTIONS 69A, 69B A ND 69C OF THE ACT AS HELD BY THE ASSESSING OFFICER. A NUMBER OF JUDICIAL PRONOUNCEMENTS HAVE BEEN CITED DURING THE COURSE OF HEARING, HOWEVER, WE HAVE TO BOW DOWN TO THE PROPOSITION LAID DOWN BY THE JURISDICTION AL PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S KIM PHARMA PVT. LTD.(SUPR A) SINCE THIS IS THE ONLY JUDGMENT OF THE JURISDICTIONAL HIGH COURT WHICH WERE BROUGHT TO OUR NOTICE. 12. ON PERUSAL OF THE SAID JUDGMENT, WE FIND OURSELVE S IN AGREEMENT WITH THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSE E, THAT THE ONLY ISSUE IN THAT CASE WAS THE TAXABILITY OF CASH SURRENDERED DURING THE COURSE OF SURVEY, AS THE ASSESSEE HAD ALSO SURRENDERED INCOME O F RS.10 LACS IN ASSESSMENT YEAR 2005-06 ON ACCOUNT OF SUNDRY CREDITS, REPAIRS TO BUILDING AND ADVANCES TO STAFF, WHICH BEING RELATABLE TO BUSI NESS CARRIED ON BY THE ASSESSEE WAS ALREADY INCLUDED AS INCOME FROM BUSINESS. 13. IN THE PRESENT CASE, WE SEE THAT THE ASSESSING OF FICER HAS NOWHERE DISPUTED THE BUSINESS LOSSES INCURRED BY THE ASSESSE E. THE BOOKS HAVE NOT BEEN REJECTED. IT WAS STATED AT THE BAR THAT EVEN AT THE TIME OF SURVEY, IN THE TRADING ACCOUNT PREPARED BY THE SURVEY TEAM, THERE WERE LOSSES INCURRED BY THE ASSESSEE. ALL THESE FACTS HAVE NOT BEE N DISPUTED BY THE ASSESSING OFFICER. FURTHER, THE SURRENDER MADE BY THE ASSESSEE WAS ON ACCOUNT OF CASH FOUND DURING THE COURSE OF SURVEY, D ISCREPANCY IN THE COST OF CONSTRUCTION OF BUILDING, DISCREPANCY IN STOCK AND DISCREPANCY IN ADVANCES AND RECEIVABLES. BY NO STRETCH OF IMAGINATION, ANY OF THESE ITA NO.919/CHD/2017 A.Y. 2013-14 7 INCOMES APART FROM CASH CAN BE CONSIDERED AS INCOM E UNDER ANY HEAD OTHER THAT THE BUSINESS INCOME. 14.NOWHERE IN HIS ORDER THE ASSESSING OFFICER HAS BEEN ABLE TO BRING ON RECORD THE FACT THAT THE INCOME SURRENDERED DURING THE COURSE OF SURVEY WAS NOT OUT OF THE BUSINESS OF THE ASSESSEE. ALSO NOWHERE HE HAS OBJEC TED TO THE HEADS UNDER WHICH THE ASSESSEE HAD SURRENDERED THESE AMOUNTS, I.E. CA SH, CONSTRUCTION OF BUILDING, DISCREPANCY IN STOCK AND DISCREPANCY IN ADVANCES AN D RECEIVABLE. FURTHER, EVEN THE SURVEY TEAM HAS NOT FOUND ANY SOURCE OF INCOME EXCE PT THE BUSINESS INCOME. NOW, FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT , IN THE BACKGROUND OF THE FACTS OF THE PRESENT CASE, WE CAN SAFELY INFER THAT APART FR OM CASH ALL OTHER INCOME SURRENDERED MAY BE BROUGHT TO TAX UNDER THE HEAD B USINESS INCOME WHILE THE CASH HAS TO BE TAXED UNDER THE HEAD DEEMED INCOME UNDER SECTION 69A OF THE ACT. 14. 12. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF TH E CIT(A) TREATING THE SURRENDERED INCOME OF RS.2.21 CRORES A S BUSINESS INCOME AND ALLOWING SET OFF OF BUSINESS LO SSES THEREFROM. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS, THEREFORE, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $' % & (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER '( / ACCOUNTANT MEMBER *# /DATED: 22 ND OCTOBER, 2018 * ' * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - $ / CIT 4. - $ ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) $ / BY ORDER, 6 ! / ASSISTANT REGISTRAR