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TMI Blog2008 (2) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... on November 6, 2002. During the course of survey some discrepancies were found in the stock with regard to the valuation. Due to discrepancy, the assessee offered an additional income of Rs. 1.15 crores representing the value of such undisclosed stock. The assessee agreed to offer the said sum of Rs. 1.15 crores in two assessment years, i.e., Rs. 55 lakhs for the assessment year 2002-03 under the head "Income from other sources" and balance of Rs. 60 lakhs as "business income" in the assessment year 2003-04. Thereafter, the assessee filed a revised return for the assessment year 2002-03 offering the said additional income of Rs. 55 lakhs under the head "Income from other sources". This was done by crediting the profit and loss account with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals), the Revenue has filed the present appeal before the Tribunal. At the time of hearing, the learned Departmental representative argued that as per the inventory taken at the time of survey under section 133A of the Act, the excess stock found was Rs. 1.15 crores which was actually to be brought to tax for the assessment year 2003-04. Further he argued that there was underestimation of closing stock and the assessment was thus prejudicial to the interests of the Revenue. He further argued that it is open to the appellate authority to correct the Assessing Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Assessing Officer and determined in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." This proviso was inserted by the Finance (No.2) Act, 1998, with effect from April 1, 1999, thereby it prohibits any deduction towards unexplained expenditure which is offered as deemed income under section 69C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment as per the provisions of the Act. However, these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under section 14 of the Act. It would not be possible to classify such deemed income under any of these heads including income from "other sources" which have to be sources known or explained. When the income cannot be so classified under anyone of the heads of income under section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under anyone of those heads by virtue of a satisfactory explanation being given, then these provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd source of such investment, or such investment was not recorded in the books of account nor the nature and source of its acquisition explained, there could arise no question of treating the value of such investments, which was deemed to be the income of the assessee, as deductible purchases in the financial year, such deemed income did not fall under the head "Profits and gains of business or profession." In our opinion, the Commissioner of Income-tax (Appeals) was not justified in holding that the value of such unexplained stock was liable to be included as purchases in the final account of the assessee as explained source of purchases and the assessee was not entitled to claim that the value of stock should be allowed as deduction from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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