2016 (5) TMI 486 - AT - Income Tax

Unexplained credit under section 68 - taxation under the hear income from other sources - whether the loss under the head business can be denied to be set off against the income assessable under the head income from other sources - Held that - Denial of such set off brought by section 115BBE was brought on the statute by Finance Act, 2012 w.e.f. 01.04.2013 i.e. for and from the A.Y. 2013-14. Therefore, when the specific denial of the set off was brought prospectively by the legislature in section 115BBE, the set off of loss under the head business against the income from other sources cannot be denied to the assessee. We may add here that both sides argued at great length and have given multiple decisions which have been considered by us and for the sake of brevity, we have not dealt them separately but we have considered the entire gamut of case laws referred by Ld. Counsel for the assessee and taken into account before the above mentioned decision was reached. In effect, we hold that the impugned amount received by the assessee is to be treated as income under section 68 of the Income Tax Act, assessable under the head Income from other sources and accordingly as per the provision of section 71, Business losses of the assessee are to be set off against the same. The separate addition is therefore deleted

Issues Involved:
1. Treatment of ?4,51,29,000 as unexplained credit under Section 68 of the Income Tax Act, 1961.
2. Invocation of Section 68 on income already offered for taxation.
3. Inclusion of deemed income in total income for tax purposes.
4. Legal fiction of deemed income under Section 68 versus specific provisions under Section 56(2)(vi)/(vii) and Section 2(24)(xiv)/(xv).
5. Disallowance of set-off of depreciation loss amounting to ?3,53,05,585.
6. Taxation of deemed income under the relevant head of income.
7. Rejection of provisions of the Income Tax Act, CBDT circulars, and judicial pronouncements.
8. Allegation of undisclosed income and concealment of income.
9. Charging of interest under Sections 234B and 234C, and initiation of penalty proceedings under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Treatment of ?4,51,29,000 as Unexplained Credit under Section 68:
The assessee received cash aggregating to ?4,51,29,000 on various dates and treated it as 'Miscellaneous Income' under 'income from other sources.' The Assessing Officer (A.O.) was not satisfied with the explanation regarding the nature and source of this income, invoking Section 68, which allows for such sums to be charged to income tax if satisfactorily explained. The Tribunal upheld the A.O.'s decision, noting the absence of specific details or evidence about the source of these receipts.

2. Invocation of Section 68 on Income Already Offered for Taxation:
The assessee argued that the income was already offered for taxation under 'income from other sources' and should not be treated as deemed income under Section 68. However, the Tribunal emphasized that the explanation provided by the assessee was unsatisfactory, justifying the invocation of Section 68.

3. Inclusion of Deemed Income in Total Income for Tax Purposes:
The Tribunal noted that any income, including deemed income under Section 68, must be included in the total income for tax purposes. The assessee's failure to provide satisfactory evidence for the cash receipts led to the conclusion that these amounts should be treated as income under Section 68.

4. Legal Fiction of Deemed Income under Section 68 versus Specific Provisions under Section 56(2)(vi)/(vii) and Section 2(24)(xiv)/(xv):
The Tribunal discussed the legal fiction created by Section 68 and compared it with specific provisions under Sections 56(2)(vi)/(vii) and 2(24)(xiv)/(xv), which treat certain receipts as income. The Tribunal concluded that the unexplained cash receipts fell under the purview of Section 68, as the assessee failed to provide a satisfactory explanation.

5. Disallowance of Set-off of Depreciation Loss Amounting to ?3,53,05,585:
The A.O. denied the set-off of the miscellaneous income against the business loss claimed by the assessee. The Tribunal upheld this decision, noting that the specific denial of such set-off was introduced by Section 115BBE, effective from A.Y. 2013-14. Therefore, for the relevant assessment year, the set-off of business losses against income from other sources was not permissible.

6. Taxation of Deemed Income under the Relevant Head of Income:
The Tribunal held that deemed income under Section 68 should be assessed under the head 'income from other sources.' This conclusion was based on the conjoint reading of Sections 14 and 56(1), which classify all incomes under specified heads, with Section 68 income falling under 'income from other sources.'

7. Rejection of Provisions of the Income Tax Act, CBDT Circulars, and Judicial Pronouncements:
The Tribunal considered the assessee's arguments and the case laws cited but found no merit in the contention that the A.O. had arbitrarily rejected the provisions of the Income Tax Act, CBDT circulars, and judicial pronouncements. The Tribunal upheld the A.O.'s interpretation of the law.

8. Allegation of Undisclosed Income and Concealment of Income:
The Tribunal agreed with the A.O.'s finding that the ?4,51,29,000 represented undisclosed income, as the assessee failed to provide satisfactory evidence regarding the source of these receipts. Consequently, the Tribunal upheld the A.O.'s decision to treat this amount as income under Section 68.

9. Charging of Interest under Sections 234B and 234C, and Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal noted that the charging of interest under Sections 234B and 234C and the initiation of penalty proceedings under Section 271(1)(c) were consequential to the quantum addition made. Since the addition was upheld, the interest and penalty provisions were also applicable.

Conclusion:
The Tribunal upheld the A.O.'s decision to treat the ?4,51,29,000 as income under Section 68, assessable under 'income from other sources.' The set-off of business losses against this income was denied, and the charging of interest and initiation of penalty proceedings were deemed consequential. The appeal of the assessee was dismissed, and the order pronounced in the open court.

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