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2013 (9) TMI 768 - HC - Income TaxNature of additions made u/s 68 - whether income disclosed as commodity income would fall under the head Income from other source setting of losses from the income as disclosed - Held that - nature and source of income from derivative trading of Commodities remains bogus. Mensria of assessee is proved beyond doubt. - Just because the income is credited by assessee does not make the income genuine the nature and source remains unexplained. The expression income from other sources would come into play only where income is relatable to a known source. Where the income is not relatable to any known or any bona fide source, it would necessarily be brought to tax or considered as income of the assessee, under Section 68 of the Act. Section 68 of the Act clearly provides that where a sum is credited in the books of assessee and the assessee is unable to offer any explanation about the nature and source thereof, or the explanation offered is not satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year Decided against the Assessee.
Issues involved:
Interpretation of income under Section 14 vs. Section 68 of the Income Tax Act, 1961. Detailed Analysis: 1. Interpretation of Income under Section 14 vs. Section 68: - The appellant declared income as "commodity income" under Section 14 of the Income Tax Act, but the Assessing Officer and Income Tax Appellate Tribunal considered it as income under Section 68. - The appellant argued that the "commodity income" falls under "income from other sources" as defined in Section 14, whereas the revenue contended it was a sham transaction not related to any business activity. - The Tribunal held that if the source of income is not known or genuine, it cannot be linked to any known source/head of income, including "income from other sources," and should be assessed under Section 68. - The Tribunal emphasized that Chapter IV deals with income from known sources, while Chapter VI deals with income from unknown sources, and unexplained cash credits should be assessed under Section 68. - The Tribunal referred to a judgment from the Gujarat High Court to support the decision to restore the Assessing Officer's order, rejecting the appellant's claim of "commodity income" under Section 14. 2. Detailed Examination of Assessing Officer's Findings: - The Assessing Officer thoroughly examined the appellant's claim of "commodity income" and found it to be a sham transaction aimed at tax evasion. - The appellant failed to provide satisfactory explanations or evidence regarding the nature and source of the income from derivative trading of commodities. - The Tribunal upheld the Assessing Officer's decision, emphasizing the lack of credibility in the appellant's dealings with M/s Shivam Commodities Services Limited and the rejection of bills and documents presented. 3. Application of Legal Provisions: - Section 68 of the Income Tax Act mandates that unexplained sums credited to an assessee must be charged to income tax if the source is not satisfactorily explained. - Income under Chapter IV should be from a known source, and if the source of a particular receipt cannot be identified, it falls under Section 68 as unexplained cash receipts. - The Tribunal and the Assessing Officer correctly applied the legal provisions to determine that the appellant's "commodity income" did not have a genuine source and should be assessed under Section 68. 4. Final Decision: - The High Court dismissed the appeal, affirming the decisions of the Tribunal and the Assessing Officer. - The Court found no error in assessing the appellant's income under Section 68, as the nature and source of the claimed "commodity income" were not genuine or identifiable. - The judgment emphasized the importance of establishing a known source for income under Section 14 and the consequences of unexplained cash credits falling under Section 68. In conclusion, the High Court upheld the decision to treat the appellant's "commodity income" as unexplained cash receipts under Section 68 of the Income Tax Act, based on the lack of genuine sources and explanations provided by the appellant.
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