Chokshi Hiralal Maganlal, Ahmedabad v. The Dy.CIT.,Circle-12,, Ahmedabad

ITA 486/AHD/2008 | 2004-2005
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 48620514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 486/AHD/2008
Duration Of Justice 2 year(s) 11 month(s) 9 day(s)
Appellant Chokshi Hiralal Maganlal, Ahmedabad
Respondent The Dy.CIT.,Circle-12,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 21-01-2011
Date Of Final Hearing 11-01-2011
Next Hearing Date 11-01-2011
Assessment Year 2004-2005
Appeal Filed On 11-02-2008
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT JM AND D.C.AGRAWAL AM M/S CHOKSHI HIRALAL MAGANLAL 12 AMI GANGA COMPLEX NR. ROHIT MILLS KHOKHARA CIRCLE AHMEDABAD. VS. DY. CIT CIRCLE-12 AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. N. DIVETIA AR RESPONDENT BY:- SHRI K. MADHUSUDAN SR. DR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) THE ORDER PASSED BY THE CIT(A)-XX AHMEDABAD ON 12.10.2007 PARTLY UPHOLDING THE ORDER OF ASSESSMENT PASSED U/S 143(3) FOR ASST. YEAR 2004-05 ON 6.12.2006 BY THE D CIT CIR- 12 AHMEDABAD IS WHOLLY ILLEGAL UNLAWFUL AND AGAIN ST THE PRINCIPLES OF NATURAL JUSTICE. (2.1) THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN UPHOLDING THAT THE INCOME OF RS.37 70 518/- BY WAY OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WAS NOT ASSESSABL E UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION BUT AS DEEMED INCOME U/S 69A/B/C OF THE ACT. (2.2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) HAS ERRED IN UPHOLDING THAT THE INCOME BY ITA NO.486/AHD/2008 ASST. YEAR 2004-05 ITA NO.486/AHD/2008 ASST. YEAR 2004-05 2 WAY OF EXCESS STOCK WAS NOT ASSESSABLE UNDER THE HE AD PROFITS AND GAINS OF BUSINESS OR PROFESSION. (2.3) THE LD. CIT(A) HAS ERRED IN RELYING UPON THE DECISI ON OF FAKIR MOHD. HAJI HASAN (SUPRA) THOUGH IT WAS DISTINGUISH ABLE BOTH ON FACTS AND IN LAW. (3.1) THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN UPHOLDING THAT THE DEDUCTION U/S 40(B) OF THE ACT WAS NOT ADM ISSIBLE IN RESPECT OF INCOME DECLARED TOWARDS THE EXCESS STOCK . (3.2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW THE LD. CIT(A) OUGHT TO NOT TO HAVE UPHELD THE DISA LLOWANCE OF PARTNERS REMUNERATION IN RESPECT OF INCOME DECLARED TOWARDS EXCESS STOCK. (4.1) THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND/OR O N FACTS IN CONFIRMING THE ADDITION OF RS.1 05 000/- MADE BY AO AS UNEXPLAINED CASH CREDITS. (4.2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) OUGHT NOT TO HAVE UPHELD THAT CASH CREDIT OF RS.1 0 5 000/- WAS UNEXPLAINED. (4.3) THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE AP PELLANT HAS DISCHARGED THE BURDEN CAST UPON IT TO PROVE THE IMP UGNED CASH CREDITS AND THE APPELLANT WAS NOT CALLED UPON TO PRODUCE ANY OF THE CREDITORS. ON THE CONTRARY THE AO SHOUL D HAVE ISSUED SUMMONS U/S 131 TO THE DEPOSITORS SO AS TO S ATISFY HIMSELF ABOUT THE CREDIT-WORTHINESS OF THE DEPOSITO RS. 2. THE FACTS OF THE CASE ARE THAT A SURVEY UNDER SE CTION 133A WAS CARRIED OUT ON 20.1.2004 AT THE PREMISES OF THE ASS ESSEE. DURING THE COURSE OF SURVEY EXCESS STOCK OF GOLD AND SILVER OR NAMENTS TO THE EXTENT OF RS.35 70 518/- WAS FOUND. THE ASSESSEE AGREED TO DISCLOSE THIS EXCESS STOCK IN THE RETURN AND TO PAY THE TAXES THEREON. O N VERIFICATION OF THE ACCOUNTS FILED BY THE ASSESSEE AO FOUND THAT ASSES SEE HAS INCLUDED THE VALUE OF EXCESS STOCK OF RS.35 70 518/- IN THE INVE NTORY OF CLOSING STOCK AS ON 31.3.2004. THE AO CONSIDERED THAT SAID DISCLO SURE IS NOT CONSISTENT ITA NO.486/AHD/2008 ASST. YEAR 2004-05 3 WITH THE PROVISIONS OF SECTIONS 69 69A 69B & 69C OF THE ACT AND IS IN VIOLATION OF RATIO OF THE DECISION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN VS. CI T (2002) 247 ITR 290 (GUJ). THE AO FINALLY CONCLUDED AS UNDER :- IN THE LIGHT OF THE DISCUSSION MADE ABOVE IN THE PRECEDING PARAS THE PROVISIONS OF SECTION 14 AND SECTION 69B OF THE IT ACT AND THE DECISION OF THE GUJARAT HIGH COURT (SUPRA) WHICH HAS BEEN FOLLO WED BY VARIOUS BENCHES INCLUDING THE LAST ONE SMC BENCH AHMEDABAD ORDER ITA NO.100/AHD/2006 DATED 31.5.2006 IN THE CASE OF ALKA BARREL CO. THE VALUE OF THE ADMITTED EXCESS STOCK OF RS.35 70 518/ - IS TAXABLE AS DEEMED INCOME. SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE INITIATED. THE INCOME IS NOT COMPUTED UNDER ANY HEAD OF INCOME ENU MERATED IN SECTION 14 SO NO DEDUCTION IS PERMITTED FROM THIS INCOME BECAUSE THERE ARE NO PROVISIONS IN THIS REGARD UNDER THE ACT. ALSO THIS INCOME IS NOT ELIGIBLE FOR SET OFF AGAINST LOSS UNDER ANY HEAD OF INCOME I NCLUDING THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. MOREOVER THIS IS A DEEMED INCOME AND NO DEDUCTION CAN BE ALLOWED OUT OF THIS ON ACCOUNT OF PARTNERS REMUNERATION ETC. 3. TAKING ABOVE VIEW THE AO SEPARATELY ADDED RS.35 70 518/- AND AFTER REDUCING THE SAME FROM TOTAL INCOME DISCLOSED BY THE ASSESSEE HE WORKED OUT FINAL COMPUTATION OF INCOME WAS AS UNDE R :- TOTAL INCOME AS PER STATEMENT RS.27 98 970/- LESS: DISCLOSED INCOME OF EXCESS STOCK RS.35 70 518 /- (-) RS.7 71 548/- ADD: DISALLOWABLE OF REMUNERATION PAID TO PARTNERS RS.19 50 131/- RS.11 78 583/- ADD: UNEXPLAINED CASH CREDIT RS.1 05 000/- ADD: UNDER VALUATION ON ACCOUNT OF STOCK OF SILVER AS DISCUSSED ABOVE RS.1 53 252/- ADD: ON ACCOUNT OF TELEPHONE & PETROL EXPENSES & DEPRECIATION RS.35 223/- RS.14 72 058/- ITA NO.486/AHD/2008 ASST. YEAR 2004-05 4 ADD: ADDITION MADE U/S 69B BEING AMOUNT OF INVESTMENT NOT DISCLOSED IN THE BOOKS OF ACCOUNT AS MENTIONED ABOVE RS.35 70 518/- TOTAL INCOME RS.50 42 576/- ROUNDED OFF RS.50 42 580/- 4. THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO HOL DING THAT EXCESS STOCK SHOULD BE ADDED SEPARATELY AND THEREFORE RE MUNERATION PAYABLE TO THE PARTNERS SHOULD BE CONSEQUENTLY RESTRICTED IN A CCORDANCE WITH SECTION 40(B). 5. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT EXCESS STOCK SO FOUND AND DISCLOSED BY THE ASSESSEE IS BUSINESS INC OME AND SHOULD NOT BE ASSESSED SEPARATELY UNDER SECTION 69B. HE REFERRED TO THE DECISION OF THE TRIBUNAL AHMEDABAD BENCH B IN THE CASE OF M/S FA SHION WORLD VS. ACIT IN ITA NO.1634/AHD/2006 ASST. YEAR 2002-03 PR ONOUNCED ON 12.2.2010. IT IS HELD THEREIN THAT IF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY OR SEARCH AND DOES NOT HAVE ANY INDEPENDE NT IDENTITY AS AN ASSET BUT AS MIXED PART OF OVERALL STOCK FOUND IN T HE SEARCH/SURVEY THEN SUCH EXCESS STOCK WOULD REPRESENT BUSINESS INCOME O NLY. IT WAS FURTHER HELD IN THAT CASE THAT FOR APPLYING PROVISIONS OF S ECTION 69A OR 69B THE ASSET IN WHICH INVESTMENT IS MADE SHOULD BE CLEARLY AND SEPARATELY IDENTIFIABLE. THE LD. AR SUBMITTED THAT IN FACT THE RE IS NO CONFLICT WITH THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE FAKIR MOHMED HAJI HASAN (SUPRA) AND THE VIEW TAKEN THAT UNIDENTIFIABL E EXCESS STOCK WOULD REPRESENT BUSINESS INCOME. THE LD. AR THEN SUBMITTE D THAT THE DECISION OF HON. GUJARAT HIGH COURT IN FAKIR MOHMED HAJI HASAN HAS BEEN CONSIDERED THE HON. COURT IN DCIT VS. RADHE DEVELO PERS INDIA LTD. & ANOTHER (2010) 329 ITR1 (GUJ) AND HELD AS UNDER :- ITA NO.486/AHD/2008 ASST. YEAR 2004-05 5 THE DECISIONS OF THIS COURT IN THE CASE OF FAKIR M OHMED HAJI HASAN 26 I [2001] 247ITR 290 (GUJ) AND KRISHNA TEXTILES [2009] 310 IT R 227 (GUJ) ARE . NEITHER RELEVANT NOR GERMANE TO THE ISSUE CONSIDERING THE FACT THAT IN NONE OF THE DECISIONS THE LEGISLATIVE SCHEME EMANATING FROM THE CONJOINT READ-' ING OF TH E PROVISIONS OF SECTIONS 14 AND 56 OF THE ACT HAVE BEEN CONSIDERED. THE APEX COURT IN THE CASE OF D. P. SANDU BROS. CHEMBUR P. LTD. [2005] 273 ITR 1 HAS DEALT WITH THIS VERY I SSUE WHILE DECIDING THE TREATMENT TO BE GIVEN TO A TRANSACTION OF SURRENDER OF TENANCY RIGH T. THE EARLIER DECISIONS OF THE APEX COURT COMMENCING FROM THE CASE OF UNITED COMMERCIAL BANK LTD. V. CIT [1957] 32 ITR 688 (SC) HAVE BEEN CONSIDERED BY THE APEX COURT AND HENCE IT IS NOT NECESSARY TO REPEAT THE SAME. SUFFICE IT TO STATE THAT THE ACT DOES NOT ENVISAGE TAXING ANY INCOME UNDER ANY HEAD NOT SPECIFIED IN SECTION 14 OF THE ACT. IN THE CIRCUMSTANCES THERE IS NO QUESTION OF TRYING TO READ ANY CONFLICT IN THE TWO JUDGMENTS OF THIS COURT AS SUBMITTED BY THE LEARNED COUNSEL FOR THE REVENUE. RELYING ON THE ABOVE JUDGMENT THE LD. AR SUBMITTED THAT THE DECISION IN FAKIR MOHMED HAJI HASAN (SUPRA) WOULD NOT BE APPLIC ABLE TO THE FACTS OF THE PRESENT CASE. HE THEN SUBMITTED THAT INCOME HAS TO BE COMPUTED UNDER ANY ONE OF THE HEADS AS MENTIONED IN SECTION 14 AND ANY INCOME TO BE TAXED CANNOT BE KEPT HEAD-LESS. IN OTHER WORDS ALL TYPES OF INCOME LIABLE TO BE TAXED HAS TO BE INCLUDED IN ONE HEAD OR ANOTH ER AS ENUMERATED IN SECTION 14. HE REFERRED PARA 10 FROM THAT JUDGMENT AS UNDER :- IN RELATION TO THE ADDITION MADE AND SUSTAINED BY THE TRIBUNAL UNDER SECTION 69C OF THE ACT IT WAS CONTENDED THAT THE CASE OF THE REVENUE WAS ONLY UNDER THE PROVISIONS OF SECTION 69B OF THE ACT AND THERE WAS NO QUESTION OF ANY UNEXPLAINED EXPENDITURE HAVING BEEN INCURRED WHICH WAS TO BE ADDED BACK. THE TRIBU NAL HAD FAILED TO APPRECIATE THE BASIS OF THE ADDITION MADE BY THE ASSESSING OFFICER AND THUS HAD WRONGLY CONVERTED THE SAID BASIS BY INVOKING AND APPLYING THE PROVISIONS OF SECTION 69C OF THE ACT. IN SUPPORT OF THE SUBMISSION MADE RELIANCE WAS PLACED ON THE DECISION OF THIS I COURT AS REPORTED IN CASE OF FAKIR MOHMED HAJI HASAN V. C1T [2001] 247 I TR 290 TO SUBMIT THAT ANY ADDITION MADE UNDER THE PROVISIONS OF SECTIONS 69 69A 69B AND 69C OF THE ACT WOULD NOT PERMIT THE CORRESPONDING DEDUCTION UNDER ANY OTHER PROVISIONS OF THE ACT AS THE SAID GROUP OF SECTIONS DEALING WITH DEEMED INCOME D O NOT FALL UNDER ANY OF THE HEADS OF INCOME ENUMERATED IN SECTION 14 OF THE ACT. ACCORDI NG TO THE LEARNED COUNSEL THEREFORE THE TRIBUNAL HAD ERRED IN GRANTING CORRESPONDING DE DUCTION OF RS. 12 80 00 000.. 6. RELYING ON ABOVE SUBMISSIONS THE LD. AR SUBMITTE D THAT ADDITIONAL INCOME OFFERED BY THE ASSESSEE AND REPRESENTING EXC ESS STOCK SHOULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME AND THERE FORE HIGHER DEDUCTION UNDER SECTION 40(B) HAS TO BE ALLOWED TO THE ASSESSEE WHILE DETERMINING REMUNERATION PAID TO THE PARTNERS. ITA NO.486/AHD/2008 ASST. YEAR 2004-05 6 7. AGAINST THIS THE LD. DR SUBMITTED THAT SECTION 14 STARTS WITH SAVE AS OTHERWISE PROVIDED BY THIS ACT. IT MEANS THAT IF IT IS ELSEWHERE PROVIDED IN THE ACT THAT INCOME HAS TO BE CONSIDERED ACCORDING TO THOSE PROVISIONS THEN PROVISIONS OF SECTION 14 W OULD NOT BE APPLICABLE. IN OTHER WORDS DEEMED INCOME UNDER SECTION 69 69A 69B & 69C CAN BE TAXED SEPARATELY AND NEED NOT NECESSARILY BE BROUGH T UNDER ANY OTHER HEAD. ONCE HON. GUJARAT HIGH COURT IN FAKIR MOHMED HAJI HASAN (SUPRA) LAID DOWN THAT IF AN ASSET IS FOUND UNDISCL OSED THEN UNEXPLAINED INVESTMENT THEREIN HAS TO BE TAXED AS DEEMED INCOME UNDER SECTION 69A OR SECTION 69B AS THE CASE MAY BE. IT NEED NOT NECE SSARILY BE BROUGHT UNDER ANY HEAD. THEREFORE IN CASE EXCESS STOCK IS FOUND THEN IT HAS TO BE TAXED UNDER SECTION 69B AS HAS BEEN DONE BY THE AO. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ISSUE IN THE PRESENT CASE IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CAS E OF M/S FASHION WORLD (SUPRA). IN THIS CASE THE TRIBUNAL HAS OBSERVED AS UNDER :- 11. BUT THIS DOES NOT MEAN THAT LOSS COMPUTED UNDE R 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 ITA NO.486/AHD/2008 ASST. YEAR 2004-05 7 HELD AND DEALT UNIFORMLY BY THE ASSESSEE. THERE WAS NO PHYSICAL 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.486/AHD/2008 ASST. YEAR 2004-05 8 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. SO FAR AS THE DECISION OF HON. GUJARAT HIGH COURT I N DCIT VS. RADHE DEVELOPERS INDIA LTD. & ANR. (SUPRA) REFERRED TO BY THE LD. AR IS CONCERNED IT RELATES TO CLAIM OF DEDUCTION FOR EXPE NSES AGAINST UNEXPLAINED INVESTMENT. IT HAS NOT LAID DOWN THE LA W THAT UNEXPLAINED INVESTMENT IN AN ASSET FOUND DURING THE COURSE OF S EARCH/SURVEY CANNOT BE TAXED UNDER SECTION 69A 69B & 69C. IF THE ARGUMENT S OF THE LD. AR IS ACCEPTED THAT ANY UNEXPLAINED INCOME OF THE NATURE AS DESCRIBED IN SECTION 69 69A 69B & 69C AND SOUGHT TO BE TAXED H AS TO BE NECESSARILY BROUGHT UNDER ANY ONE HEAD AS ENUMERATED IN SECTION 14 THEN THE OPENING WORDS OF THAT SECTION SAVE AS OTHERWISE PROVIDED BY THIS ACT. WILL BECOME OTIOS AND MEANINGLESS. NO WORDS OF THE STATUTE CAN BE READ AS MEANINGLESS IRRELEVANT OR OTIOSE. THEREFORE TH IS INTERPRETATION SOUGHT TO BE ADVANCED BY THE LD. AR IS NOT ACCEPTABLE. HON . GUJARAT HIGH COURT ITA NO.486/AHD/2008 ASST. YEAR 2004-05 9 IN FAKIR MOHMED HAJI HASAN (SUPRA) HAS ONLY SAID TH AT IF ASSESSEE IS FOUND TO BE OWNER OF AN ASSET WHICH IS NOT DISCLOSE D AND IN WHICH UNACCOUNTED INVESTMENT HAS BEEN MADE THEN SUCH UNEX PLAINED INVESTMENT HAS TO BE TAXED AS DEEMED INCOME AND ANY OTHER EXPE NDITURE WHICH RELATES TO BUSINESS CANNOT BE ALLOWED AS DEDUCTION AGAINST SUCH DEEMED INCOME AS THE TWO HEADS ARE DIFFERENT ONE IS BUSIN ESS FOR ADJUSTING EXPENDITURE AND THE OTHER IS FOR DEEMED INCOME AS C OVERED U/S 69 69A 69B & 69C. IT IS ALSO NOT CORRECT TO SAY IF ANY INC OME IS NOT BROUGHT TO ANY OF THE HEADS AS MENTIONED IN SECTION 14 THEN SU CH INCOME WOULD BE HEADLESS AND THEREFORE WOULD GO BEYOND COMPUTATIO N MACHINERY AND HENCE WILL BECOME UNTAXABLE. THE PROVISIONS OF DEEM ED INCOME MENTIONED IN THE SEVERAL PROVISIONS OF THE ACT TAKE CARE OF SUCH INCOME WHICH MAY DIRECTLY NOT FALL IN ANY OF THE HEADS ME NTIONED IN SECTION 14. 9. SINCE IN THE PRESENT CASE EXCESS STOCK FOUND DUR ING THE SURVEY IS NOT SEPARATELY AND CLEARLY IDENTIFIABLE BUT IS PART OF MIXED LOTS OF STOCK FOUND AT THE PREMISES WHICH INCLUDED DECLARED STOCK AS PER BOOKS AND ALSO THE EXCESS STOCK AS COMPUTED BY THE SURVEY OFF ICERS THE PROVISIONS OF SECTION 69B CANNOT BE MADE APPLICABLE AS PRIMARY CONDITION FOR INVOKING THE PROVISIONS OF SECTION 69A 69B IS THAT THE ASSET SHOULD BE SEPARATELY IDENTIFIABLE AND IT SHOULD HAVE INDEPEND ENT PHYSICAL EXISTENCE OF ITS OWN. SINCE EXCESS STOCK IS A RESULT OF SUPPR ESSION OF PROFIT FROM BUSINESS OTHER THE YEARS AND HAS NOT BEEN KEPT IDEN TIFIABLE SEPARATELY BUT IS THE PART OF OVERALL PHYSICAL STOCK FOUND THE IN VESTMENT IN THE EXCESS STOCK HAS TO BE TREATED AS BUSINESS INCOME AS PER D ETAILED REASONS GIVEN IN THE CASE OF FASHION WORLD (SUPRA). ONCE EXCESS STOC K IS TREATED AS BUSINESS INCOME THEN ASSESSEE IS ENTITLED FOR HIGHE R REMUNERATION TO THE PARTNERS AS PER SECTION 40(B). AS A RESULT THIS GR OUND OF ASSESSEE IS ALLOWED. ITA NO.486/AHD/2008 ASST. YEAR 2004-05 10 10. THE NEXT ISSUE IS ABOUT CASH CREDIT OF RS.1 05 000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAS ADVANCED A SUM OF RS.1 65 000/- TO VARIOUS PERSONS. THE AO REQUIRED THE ASSESSEE TO SUBMIT THE DETAILS OF THE TRANSACTIONS AS UNDER :- I. WHAT IS THE MODE OF THE PAYMENT ? II. WHAT IS THE SOURCE OF ABOVE PAYMENT-PRODUCE NECESSA RY EVIDENCE? PLEASE STATE YOUR ANNUAL INCOME. III. IF BOOKS ARE MAINTAINED THE SAME MAY BE PRODUCED TOGETHER WITH BANK PASS BOOK. IV. IF ASSESSED TO TAX THE DESIGNATION OF THE AO AS WE LL STATE PAN NO. V. WHETHER THE ABOVE AMOUNT IS RECEIVED BACK STATE THE DATE AND MODE OF RECEIPT. THE AO HOWEVER FOUND THAT LETTERS WERE RECEIVED UN SERVED IN THE FOLLOWING CASES:- 1. PADMABEN BHARATKUMAR THAKKAR. 2. RADHESHYAM PANCHAL. 3. SHARDABEN VASUDEVBHAI. 4. NIRUBEN RADHESHYAM SONI. 5. YAMNAJI PUNJAJI SONI. 6. TULSIJI YAMNAJI SONI. 7. GOPALJI LALJI SONI. SINCE THE ASSESSEE WAS NOT ABLE TO FURTHER CLARIFY THE AO TREATED THE SUME IN RESPECT OF ABOVE PERSONS AS CASH CREDIT AND ADDE D THE SUM OF RS.1 05 000/- IN THE TOTAL INCOME. 11. THE LD. CIT(A) CONFIRMED THE ADDITION THROUGH A SHORT ORDER AS UNDER :- 3.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION MADE BY THE LD. COUNSEL FOR THE APPELLANT. IN THIS CASE THOUGH THE LETTERS HAD BEEN ISSUED BY THE AO FOR CALLING THE CREDITORS TO VERIFY THE VERACITY OF THE CONFIRM ATION FILED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE SAME HAD BEEN RETURNED BACK WITH REMARKS ITA NO.486/AHD/2008 ASST. YEAR 2004-05 11 UNSERVED. FURTHER THE AO HAD GIVEN ANOTHER OPPORTUN ITY TO THE APPELLANT TO EXPLAIN THE FACTS. HOWEVER HE DENIED THE SAME. MOREOVER A LL THESE CREDITORS ARE NOT ASSED TO TAX. IN VIEW OF THE ABOVE THE AO WAS JUSTIFIED IN TREATING THE CASH CREDIT OF RS.1 05 000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE IT ACT. THIS GROUND OF APPEAL IS HEREBY DISMISSED. 12. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. FIRSTLY IT WAS NOT CLARIFIED WHETHER ADVAN CES WERE GIVEN BY THE ASSESSEE TO VARIOUS PARTIES OR ASSESSEE HAS BORROWE D MONEY FROM SUCH PARTIES. IF IT IS FIRST SITUATION THEN THEY CANNOT BE ADDED AS CASH CREDIT UNDER SECTION 68. THEY CAN AT BEST BE CONSIDERED UN DER SECTION 69 OR SECTION 69C. HOWEVER THE ASSESSEE HAS RAISED THE G ROUND AS CASH CREDIT. THUS THERE IS APPARENTLY CONFUSION AS THE CORRECT F ACT WHICH HAS NOT BEEN CLARIFIED BEFORE US BY EITHER OF THE PARTIES. IT WA S ONLY SUBMITTED BY THE LD. AR THAT ASSESSEE HAS FURNISHED EVIDENCE FROM ALL TH OSE PERSONS WHO HAD CHANGED THEIR ADDRESSES AND THEREFORE LETTERS COU LD NOT BE SERVED ON THEM. IN ANY CASE THE CORRECT AND FACTUAL POSITION HAS NOT BEEN BROUGHT ON RECORD BY ANY PARTY AND THEREFORE WE RESTORE THE MATTER TO THE FILE OF AO FOR CORRECTLY EXAMINING THE ISSUE AND TAKING A FRES H DECISION AS PER LAW AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. THIS GROUND IS ALLOWED BUT FOR STATISTICAL PURPOSES . 13. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 21.1.11. SD/- SD/- (MUKUL KR. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 21.1.11 MAHATA/- ITA NO.486/AHD/2008 ASST. YEAR 2004-05 12 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 1.DATE OF DICTATION 12/1/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 19/1/ 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..