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TMI Blog2017 (8) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. We are in agreement with the learned counsel for the assessee that by raising this issue before us the learned Departmental representative is only attempting to enlarge the scope of assessment by raising an issue not dealt with by the Assessing Officer which is not permissible at the stage. Thus we reject the above contention of the learned Departmental representative. Thus we hold that the surrendered income of the assessee amounting to 1.75 crores is assessable under the head "income from business and profession" and the set off of business losses and depreciation is accordingly allowed against the same. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the learned Commissioner of Income-tax (Appeals) at pages 6 and 7 of its order are as follows : "I find that the Assessing Officer has categorically noted that the nature and source of the surrendered income was not satisfactorily explained by the assessee. Needless to add, as such claim would dilute the surrender, it was imperative upon the assessee to substantiate with evidence that the surrendered income pertained solely to his business. The assessee has vehemently tried to distinguish the cases relied upon by the Assessing Officer, including the jurisdictional High Court decision in the case of Kim Pharma (P.) Ltd. (supra). However, I find that the case of the assessee is squarely covered by the decision of Kim Pharma (P.) Ltd. (supra). In the case at hand, Shri Vijay Kumar Sood after the search on October 8, 2010, submitted a surrender letter to the Joint Director of Income-tax (Inv) dated October 9, 2010 wherein he had voluntarily offered a sum of ₹ 2 crores as additional income for the financial year 2010-11 in addition to the regular income in his hand and his business concerns. ₹ 1,75,00,000 was surrendered in the hands of the assessee company. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,278 incurred by the company wrongly treating the total amount ₹ 1,75,00,000 as carried forward loss against the amount of business income surrendered." 5. Ground No. 1 raised by the assessee is general in nature and needs no adjudication. Ground No. 2 was not pressed before us and is, therefore treated as dismissed. 6. Ground No. 3 raised by the assessee is against the action of the learned Commissioner of Income-tax (Appeals) in treating the surrendered income as not assessable under any of the specified heads of income and further not allowing set off of business loss and depreciation against the same. 7. Before us, the arguments of the learned counsel for the assessee were two fold ; (i) that the surrendered income was business income and hence assessable as such ; (ii) that against its surrendered income set off of losses on account of depreciation and business loss was allowable. 8. The learned Departmental representative, on the other hand, vehemently argued that the assessee's contention of the surrendered income being assessable under the head "business income" was not sustainable since neither the nature, nor the source of income was sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al year 2010-11 in addition to my regular income subject to no penalty or prosecution under Income-tax and other laws. I promise to pay tax on this additional income as per the provisions of the Income-tax Act, 1961. The detailed break-up of the surrender amount shall be submitted within a couple of days." 13. Further the learned Departmental representative also pointed to the observations of the learned Commissioner of Income-tax (Appeals) stating so and reproduced in the earlier part of our order. The learned Departmental representative contended that it is evident that no nature and source of the surrendered income was explained by the assessee or even substantiated. Further the learned Departmental representative pointed out that the director's report of the assessee company appended to the audited accounts for the impugned year placed at paper book page No. 37 showed that the surrender was on account of investment in the build-operate- transfer project by the promoters. The learned Departmental representative contended that in the first place despite ample opportunities given to the assessee no source or nature of the surrendered income was explained by it and by mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the specified heads or otherwise, we find that one of the disclosures in that case pertained to and was on account of cost of construction of building. The Income-tax Appellate Tribunal in that case held that the surrender was nothing but business income of the assessee since the Assessing Officer had not objected to the head under which it was surrendered and further no other source of income had been found by the Assessing Officer except business income. Further Income-tax Appellate Tribunal distinguished the case of Kim Pharma (P.) Ltd. (supra) of the jurisdictional High Court on this issue stating that in that case while the surrender made on account of debtors, stock and construction in building was accepted as relating to business and assessable under the head "Income from business and profession", it was the surrender made on account of excess cash found which was in dispute and which the hon'ble High Court had held was not assessable under any of the specified heads since no satisfactory explanation of the nature or source was given by the assessee. The Income-tax Appellate Tribunal held that since the said decision related only to the surrender made on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee of ₹ 1.75 crores is assessable under the head "Income from business and profession". 18. Having held so, we now come up to the second limb of the ground of appeal raised before us regarding the set off of brought forward losses and depreciation to the tune of ₹ 1,53,96,722. 19. Since we have held the surrendered income to be assessed under the head "Income from business and profession" it goes without saying that set off of unabsorbed and current business losses and depreciation is allowable against the same as per the provisions of sections 70 and 71 of the Act. The learned Departmental representative raised a contention before us to the effect that the depreciation loss was not in the nature of depreciation and that the assessee had shown business losses by debiting interest which was not allowable to it. The learned Departmental representative contended that business losses and depreciation losses were all arranged by the assessee in a manner so as to claim set off of the same against its surrendered income and thus reduce its Income-tax liability. The learned counsel for the assessee at this juncture countered by stating that the losses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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