PAUL KURIAN,ERNAKULAM V. .INCOME TAX OFFICER, CORPORATE WARD 2(3), ERNAKULAM

ITA 708/COCH/2023

AI Insights

The case involves Paul Kurian, who was the director of PKM Fine Foods Pvt. Ltd. and also ran a proprietary business. For the Assessment Year 2015-16, he declared a total income of Rs. 3,68,300. The return was selected for scrutiny due to substantial cash deposits in his bank accounts, which were found to be unexplained by the Assessing Officer (AO) and treated as income under section 68 of the Income Tax Act, 1961. The AO also denied the set off of this income with brought forward business losses, citing a judgment from the Kerala High Court. The assessee's appeal to the CIT (A) was dismissed for non-prosecution, leading to the current appeal before the Income Tax Appellate Tribunal (ITAT). The ITAT found that the CIT (A) had not adjudicated the issue on merits and restored the matter for fresh consideration.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470399 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Other Referred Cases: M/s. Kerala Sponge Iron limited vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL; SNR
• Assessee Lawyers: AMALJITH
• Keywords: Business income; Opportunity of being heard; Unexplained cash credit; Depreciation
• Section: 143(3); 142(1); 143(2); 250; 68

Judgement Text

"ITANo. 708/Coch/2023 Paul Kurian, Ernakulam IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH: COCHIN BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 708/Coch/2023 Assessment Year: 2015-16 Paul Kurian Murimattathil House Kolenchery P.O. Ernakulam 682311 Kerala PAN NO : AHNPK3214E Vs. ITO, Corporate Ward 2(3) C. R. Building, I.S. Press Road Ernakulam 682018 Kerala APPELLANT RESPONDENT Appellant by : Shri. Amaljith, CA Respondent by : Smt. Leena Lal, Snr AR Date of Hearing : 04.12.2024 Date of Pronouncement : 26.12.2024 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: This appeal at the instance of the assessee is directed against the order of ld. CIT(A)/NFAC dated 13.04.2023 vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1052077947(1) for the AY 2015- 16 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”). 2. The assessee has raised the following grounds of appeal: 1. There is no specific provision which restricts set off business losses against income brought to tax under section 68. Both section 68 and section 71 fall under the same Chapter VI. In the absence of any specific provisions in section 71 falling under Chapter VI which restrict such set off, in the instant case, set off business losses against income brought to tax under section 68 cannot be denied. ITANo. 708/Coch/2023 Paul Kurian, Ernakulam Page 2 of 5 3. Brief facts of the case are that the assessee was the director of PKM Fine Foods Pvt. Ltd. and also carrying on his proprietary business during the F.Y. 2014-15. The assessee filed return of income for the A.Y. 2015-16 on 10.03.2016 declaring a total income of Rs. 3,68,300/-. The return was thereafter selected for limited scrutiny under CASS by issuing statutory notices u/s. 143(2) as well as 142(1) of the Act. The reason for selection of the limited scrutiny was “Cash deposits in Saving Bank account(s) is more than the turnover”. The assessee vide letter dated 28.06.2017 filed the detailed as called for. Further, on verification of the details filed, the AO found that the assessee has deposited total of Rs. 8,04,600/- into various bank accounts maintained by the assessee, the source of which explained by the assessee is from the sale of jewellery amounting to Rs. 6,74,600 and from sale of old machinery amounting to Rs. 1,30,000/-. The AO was of the view that the assessee had a proprietary business and the machinery was there in the fixed asset schedule as on 31.03.2014. Further, AO observed that as the assessee could not produce any sale agreement or receipts or confirmation from the parties to whom it was sold and accordingly treated the entire cash deposit into bank account amounting to Rs. 8,04,600/- as income of the assessee u/s. 68 of the Act. 3.1 Further, during the course of assessment proceeding, the assessee requested to set off the income determined u/s. 68 of the Act with brought forward business loss / depreciation loss from the proprietary concern was also not allowed by the AO by relying upon the judgment of Hon’ble Kerala High Court in the case of M/s. Kerala Sponge Iron limited vs. CIT which held that once the income has been assessed u/s. 68 of the Act as unexplained cash credit, it cannot be treated as business income because it is not an income classifiable under any heads of income as per section 14 of the Act. ITANo. 708/Coch/2023 Paul Kurian, Ernakulam Page 3 of 5 4. Aggrieved by the assessment order passed by the AO u/s 143(3) of the Act dated 21.12.2017, the assessee preferred an appeal before the ld. CIT (A) / NFAC. 5. During the course of appellate proceeding, the assessee was granted several opportunities to make submissions, however, there has been no response from the assessee. Therefore the ld. CIT (A) / NFAC held that the assessee has no submission / documents to submit in support of this case. Further, ld. CIT (A) / NFAC observed that from the history of the issue of notices, the assessee has been avoiding filing submission and even not sought for adjournment and accordingly, appeal filed by the assessee was dismissed for non-prosecution. 6. Aggrieved by the order of the ld. CIT (A)/NFAC, the assessee has filed the present appeal before this Tribunal. 7. Before us, ld. A.R. of the assessee at the outset vehemently submitted that ld. CIT (A) / NFAC passed the order for non prosecution without considering the points for determination which is illegal and bad in law. Further, the ld. AR of the assessee also submitted that there is no specific provision which restricts set off business losses against income brought to tax under section 68 of the Act. Since, the section 68 and section 71 falls under the same Chapter VI and in the absence of any specific provisions in section 71 falling under Chapter VI which restrict such set off, in the instant case, set off business losses against income brought to tax under section 68 cannot be denied. ITANo. 708/Coch/2023 Paul Kurian, Ernakulam Page 4 of 5 8. The ld. D.R. on the other hand supported the orders of the authorities below. 9. We have heard the rival submissions. A perusal of the fact of the present case shows that the assessee could not represent his case before the ld. CIT (A) / NFAC as a result of which, the ld. CIT (A) / NFAC has dismissed the appeal of the assessee on account of non-prosecution. We are of the opinion that as per the provisions of section 250(6) of the Act, the order of ld. CIT (A) / NFAC shall state the points for determination, the decision thereon and the reason for the decision. On perusal of the order of ld. CIT (A) / NFAC, we found that the ld. CIT (A) / NFAC has also not adjudicated the issue on merits. During the course of hearing, ld. AR of the assessee also requested that the assessee may be provided one more opportunity to represent his case before the ld. CIT (A) / NFAC. In view of the above and considering the prayer of the ld. AR of the assessee, the issue involved in the present appeal is restored to the file of the ld. CIT (A) / NFAC for fresh adjudication in accordance with the law. Needless to say, the reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to co-operate with the appellate proceedings and file necessary documents / records / submissions / information to substantiate his claim. We make it clear that in case of further default, the assessee shall not be entitled for any leniency. In the result, appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 26th Dec, 2024 Sd/- (Prashant Maharishi) Vice President Sd/- (Keshav Dubey) Judicial Member Bangalore, Dated: 26th Dec, 2024. VG/SPS ITANo. 708/Coch/2023 Paul Kurian, Ernakulam Page 5 of 5 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Cochin. "