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TMI Blog2016 (4) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... idual and filed his return of income on 04-12-2008 declaring total income at ₹ 1,21,750/-. During the course of assessment proceedings the AO on verification of the bank account extract of the assessee maintained with Kolhapur Mahila Sahakari Bank Limited noticed that the assessee had made transactions totaling to ₹ 58,34,629/-. The AO asked the assessee to explain the source of the deposits made with the bank. However, no reply was received from the assessee. Thereafter the AO issued summon u/s.131 of the I.T. Act and the statement of the assessee was recorded in the presence of his authorized representative. The assessee in his reply to Question No.7 explained about the total transactions as under : Sr.No. Particulars Amount (Rs.) 1 Total transaction with the bank 58,36,420 2 Less : Amount received from Joindre Capital Services Ltd for sale of shares by cheque 20,51,839 Balance 37,84,458 3 Less hand loan taken from Vandana Sarees by cheque 2,80,000 Total cash deposited 35,04,581 4 Less : Amount withdrawn in cash (Self) utilised for depositing in the account 6,10,000 5 Net cash deposited in Bank 28,94,581 2.1 The assessee explained that he utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had suffered loss of ₹ 13,86,925/- in share trading in the trading of Futures. Thus, there is business loss suffered by the assessee. Relying on the decision of the Delhi Bench of the Tribunal in the case of G.K. Anand Builders Pvt. Ltd. Vs. ITO where it has been held that loss emanating from Futures Option transactions in a recognized stock exchange is to be treated as business loss and not as a loss from speculative transactions, it was argued that the loss suffered by the assessee ought to have been set off against the income assessed on account of unexplained money as the business loss can be set off against the other income. Various decisions were also brought to the notice of the CIT(A). 5. However, the CIT(A) was also not convinced with the explanation given by the assessee and upheld the action of the AO by observing as under : "7. I have considered the submission of the appellant with reference to the facts on record. From the copy of statement issued by Joindre Capital Services Ltd., it is seen that the appellant had suffered share trading (of futures options transaction) loss of ₹ 13,86,925/-. The appellant had funded these transactions throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome referred to in the principal charging section. Section 14 classifies the heads of income while sections 15 to 59 provide for its quantification. Chapter VI of the Income-tax Act provides for aggregation of income and set off or carry forward of loss. Thus Chapter VI is in two parts; first part deals with aggregation of income while the second part deals with set off or carry forward of losses. Chapter VI has been placed after Chapter IV and V. It comes into play only after the computation of total income under various heads of income in terms of Chapter IV has been done. Income falling under Chapter VI is taxed by aggregating the same with the income quantified in terms of Chapter IV. Chapter VI is not subservient to Chapter IV. Besides, section 14 allows the taxability of income under specific provisions of the I.T. Act outside Chapter IV. For the reasons aforestated, the income assessable u/s.68 cannot be assessed as income from other sources u/s.56. 15. Thus what is taxed under Chapter IV is income from a known source including income from other sources. A source of income means a specific source from which a particular income springs or arises. Once a source giving rise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, when 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 any one 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 any one of those heads by virtue of a satisfactory explanation being given, then these provisions of sections 69, 69A, 69B and 69C will not apply, in which event, the provisions regarding deductions, etc., applicable to the relevant head of income under which such income falls will automatically be attracted. The opening words of section 14 "save as otherwise provided by this Act" clearly leave scope for "deemed income" of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the sum total on the income classified and chargeable under the various heads. Sec. 14 has classified different heads of income and income under each head is separately computed. Income which is computed in accordance with law is one income and it is not a collection of distinct tax levied separately on each heads of income and it is not an aggregate of various taxes computed with reference to each of the different sources separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee is subject to income-tax on his total income though his income under each head may be well below the taxable limit. Hence the loss sustained in any year under any head of income will have to be set off against income under any other head. The A.O. made addition of ₹ 28,50,000/- as undisclosed income under s.69. Once the loss is determined, the same should be set off against the income determined under any other head of income. In the assessment, no reasons were given by the A.O. to deny the benefit of s.71. The benefit provided under s. 71 cannot be denied. The reasons given by the Tribunal are based on valid materials and evidence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tax payer in every reasonable way, particularly in the matter of claiming Gild securing reliefs and in this regard the Officers should take the initiative in guiding a tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him .... " I am unable to figure out as to how this circular comes out in favour of the appellant while deciding the issue of whether incomes described under Chapter VI are available for set off u/s.71 of the I.T. Act. 17. In view of the above discussion, I hold that the appellant is not entitled to have set off of so-called business loss against the deemed income brought to tax u/s.69A of the Act. In the result, the grounds of appeal stands dismissed." 6. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds : "1. On the facts and in the circumstances of the case and in law the Ld.CIT(A) is not justified in rejecting the claim of set off of business loss against the income determined. 2. On the facts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate that once loss is determined the same should be set off against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of Hon'ble Gujarat High Court in the case of DCIT Vs. Radhe Developers India Ltd. reported in 329 ITR 1. He accordingly submitted that the loss to the tune of ₹ 13,86,925/- be set off from the income of ₹ 28,94,581/- added by the AO u/s.69A of the Income Tax Act, 1961. 10. The Ld. Departmental Representative on the other hand heavily relied on the order of the AO and the CIT(A). He submitted that the assessee has not disclosed the loss from share trading of Futures in the return of income. The only income shown was from interest income and income from Divya Garments. He submitted that no such transaction in share trading of Futures was there in the preceding year or succeeding year. Therefore, the claim of loss from share trading of Futures is a bogus claim and should not be accepted. Even otherwise also, in view of the decision of Hon'ble Chattisgrah High Court in the case of Dhanush General Stores Vs. CIT reported in 339 ITR 651 the assessee is not entitled to get the benefit of set off since the same was not declared in the return of income. He also relied on the decisions relied on by the CIT(A). 11. The Ld. Counsel for the assessee in his rejoinder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company was engaged in the business of Dyeing and Printing. During the course of scrutiny the AO noted that the assessee had declared a sum of ₹ 100.98 lakhs on account of excess stock during the course of survey. However, in the return of income, the assessee had set off the said income from the loss of current year. The AO held that income from undisclosed source would not fall under any of the heads of the income and the same has to be taxed separately. He therefore rejected the claim of set off of such income from the loss of current year. The CIT(A) allowed the claim of the assessee by directing the AO to set off current year's business loss against such additional income declared during the course of survey. The Tribunal dismissed the appeal filed by the revenue. On further appeal by the Revenue, the Hon'ble High Court dismissed the appeal filed by the Revenue by observing as under: "7. Before us, learned counsel for the revenue placed strong reliance on the decision in case of Fakir Mohmed Haji Hasan Vs. Commissioner of Income Tax (supra) and submitted that when the income from undisclosed source does not fall in any of the heads specified in Section 14 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to deny the benefit of Section 71 of the Act. The benefit provided under Section 71 of the Act cannot be denied and the learned Standing Counsel appearing for the Revenue is also unable to explain or give reasons why the assessee is not entitled to the benefit of Section 71 of the Act. The reasons given by the Tribunal are based on valid materials and evidence and the same is in accordance with the provisions of Section 71 of the Act. We find no error or legal infirmity in the impugned order. 9. We may further notice that the decision in case of Fakir Mohmed Haji Hasan Vs. Commissioner of Income Tax (supra) cameup for consideration in case of Deputy Commissioner of Income Tax Vs. Radhe Developers India Ltd. and anr (supra),it was observed as under: "The decisions of this Court in the case of Fakir Mohmed Haji Hasan (supra) and Krishna Textiles (supra) are neither relevant nor germane to the issue considering the fact that in none of the decisions the Legislative Scheme emanating from conjoint reading of provisions of sections 14 &56 of the Act have been considered. The Apex Court in the case of D.P.Sandu Bros.Chembur P. Ltd.,(supra) has dealt with this very is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings, which remained to be claimed in the return of income filed. 2. That That on the facts and in the circumstances of the case, the Ld.CIT(A), Kolhapur had erred in directing the Assessing Officer to treat the loss emanating from future option transactions in a recognized stock exchange as business loss and not loss from speculative transactions when findings were given by him that the assessee was not entitled to set-off such business loss against the deemed income brought to tax u/s.69A of the Act. 3. That That on the facts and in the circumstances of the case, the Ld.CIT(A), Kolhapur had erred in directing the Assessing Officer to allow the business loss to the assessee when such business loss was not at all claimed in the return of income filed but claimed during the course of assessment proceedings. 4. That any other ground(s) the department intends to take for the above during the course of appellate proceedings." 16. The Ld. Counsel for the assessee at the outset raised his objection regarding the maintainability of the cross objection filed by the Department. He submitted that the assessee has filed the appeal on 13-08-2012. The hearing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been filed which has been signed by the CIT-I, Kolhapur and which reads as under : "No.KOP/CIT-I/ITO (HQ-I)/ITAT/2014-15/350 Date: 05-05-2015 To The Income Tax Appellate Tribunal, Pune Bench A, Pune Sir, Sub : Request to ITAT, Pune for condonation of delay in filing cross Objections in the case of Shri Anil Nandiram Ahuja, Prop. Divya Garments, Main Road, Gandhinagar, Tal : Panhala, Dist : Sangli - A.Y. 2008-09 - Reg. Kindly refer to the above, 1. The present appeal was initially directed against the order u/s.143(3) passed by the AO before the CIT(A), Kolhapur. The CIT(A), Kolhapur had dismissed the appeal of the assessee vide order dated 13-08-2012 received in the CIT-I, Kolhapur's office on 05-09-2012. 2. Since the appeal was prima facie in favour of the Revenue, the Department was not required to prefer an appeal before ITAT. However, the Assessee being aggrieved by the order of the CIT(A), Kolhapur preferred an appeal before ITAT, Pune. 3. However, later on the AO observed that the CIT(A), Kolhapur in the Para 11 of the order has accepted the Assessee's contention in respect of treating the loss emanating from the future options transactions in a recogn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affirmed by a Division Bench of the High Court by order dated September 11, 2009. The Postal Department preferred appeals to the Supreme Court by way of special leave with a delay of 427 days with applications for condonation of delay in filing the petitions for special leave : Held, dismissing the applications, the Department had itself mentioned in its affidavit and was aware of the date of the judgment of the Division Bench of the High Court as September 11, 2009. Even, according to the deponent, its counsel had applied for the certified copy of the judgment only on January 8, 2010, and the copy was received by the Department on the very same day. There was no explanation for not applying for certified copy of the judgment on September 11, 2009, or at least within a reasonable time. The fact remains that the certified copy was applied for only on January 8, 2010, i.e. after a period of nearly four months. Neither the Department nor the person in-charge had filed an explanation for not applying for the certified copy within the prescribed period. The other dates mentioned in the affidavit clearly showed that there was delay at every stage and there was no explanation as to why ..... X X X X Extracts X X X X X X X X Extracts X X X X
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