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TMI Blog2018 (8) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has not proved the source of unexplained credit, the identity, capacity, genuineness and credit worthiness of the transactions in question and further, it has also not shown the amount in its duly audited accounts as its business income. This leads to the inference that once the assessee has not shown the receipt as its business income, there is no reason as to how the accounting treatment given by the assessee can be overruled by the authorities. Therefore, in our opinion, the aforesaid case law is not applicable in the assessee's case. We are unable to hold that unexplained cash credits assessed under section 68 are to be assessed as income from other sources under section 56. Decided against the assessee. - I.T.A. No.208/Coch/2018 - - - Dated:- 20-8-2018 - S/Shri Chandra Poojari, AM And George George K., JM Revenue by : Shri Dhanaraj A. Sr. DR Assessee by : Shri R. Krishnan, CA ORDER Per Chandra Poojari, AM This appeal filed by the assessee is directed against the order passed u/s. 263 of the Act by the Pr. CIT, Kozhikode dated 30/03/2014 and pertains to the assessment year 2013-14. 2. The facts of the case are that the assessment was com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categorical finding in the order u/s. 263 that the order passed by the Assessing Officer is both erroneous and prejudicial to the interest of the revenue. The Ld. AR submitted that the assessee had offered the additional income of ₹ 1.86 crores under the head business in the return of income. It was submitted that accounting requires that the capital account should be credited, where the income is directly taken into capital and not the revenue account. According to the Ld. AR the additional offer was to cover the negative result in the business and the credit in capital account was to give effect to the offer in the form of journal entry. The Ld. AR submitted that the decision of the Kerala High Court in the case of Kerala Sponge Iron Ltd. (379 ITR 330) is totally on a different context. In the case of Kerala Sponge Iron Ltd. (supra), the assessee claimed certain amounts as having received as commodity trading profit but in the present case, the assessee is involved only in business of trading in gold and therefore, the income can be offered only under business. According to the Ld. AR section 115BBE was amended by Finance Act, 2016 to explicitly state that the income asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner is well within his powers to treat an order as erroneous on the ground that the Assessing Officer should have made further enquiries before accepting the wrong claims made by the assessee. The Assessing Officer cannot remain passive in the face of a claim, which calls for further enquiry to know the genuineness of it. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The Assessing Officer was statutorily required to make the assessment u/s. 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143(3). The AO is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receipt of profit from commodity trading was a sham or bogus one and the Assessing Officer rightly assessed the sum as credit under section 68 of the Income-tax Act, 1961. Thereafter, the Tribunal examined the illegality of the rejection of the claim of the assessee to set off of business loss and carry forward business loss and depreciation holding that the assessee was entitled to claim set off of the current year s loss and also brought forward loss and unabsorbed depreciation against the unexplained income in accordance with the relevant provisions of the Act. On appeal: Held, allowing the appeal, that the income had been treated as unexplained cash credit under section 68. Once it was so done for the purpose of set off or any other purpose, the unexplained income could not be treated as business income under any one of the heads provided under section 14 in which case the question of set off did not arise. Therefore, the order of the Tribunal to the extent it had set aside the order of the Commissioner (Appeals) directing the Assessing Officer to allow the set off of the current year s business loss as well as brought forward business loss and unabsorbed depreciation ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt of assessee's main business activity. After perusing the said case law, we notice that therein the concerned assessee had duly filed confirmations from the creditors in question. It was in the said circumstances that the Hon'ble Calcutta High Court had rightly upheld the claim of assessee. Again we reiterate that the facts of the instant case as cited above are different from those involved in the above said case. Therefore, both the above judgments do not help the assessee's case. 6.5 In the case law of Fakir Mohmed Haji Hasan Vs. CIT ( [2001] 247 ITR 290 (Guj.) wherein the addition was under the Chapter VI of the Act (under section 69A). The scheme of the Act makes it clear that Sections 68, 69, 69A to 69D deal with cash credits, unexplained investments, unexplained money, amount of investments not fully disclosed in the books of account, unexplained expenditure and amount borrowed or repaid at hundi. A perusal of the above provisions make it clear that same language, although in different spheres of additions, has been used by the legislature. In this backdrop, we proceed to deal with the case law of Hon'ble Gujarat High Court (supra) regarding addition had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 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 lo 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. 6.2. The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income1 of the nature covered under the scheme of sections 69, 69A and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee under section 68, can be considered for set-off against losses under heads of income as enumerated in section!4. The answer to the aforesaid question lies in the fact as to whether unexplained cash credits taxed under section 68 are assessable under a known source or head of income as enumerated under section 14. If they are so assessable under a head of income specified in section 14, they would then and then only need to be set off against the loss from other heads of income in terms of section 71. Chapter IV of the Income tax Act deals with 'COMPUTATION OF TOTAL INCOME under various heads of income. Section 14, which enumerates head of income, falls under Chapter IV and reads as under: Heads of income. Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income :-- A-Salaries, B -[omitted by the Finance Act 1989] C-Income from house property. D-Profits and gains of business or profession. E,-Capital gains. F-Income from other sources. 11. Some of the salient features of section 14 insofar as they have m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come as defined in section 2(45)/5 and is therefore chargeable to tax under section 4. In terms of Chapter VI it is aggregated with the income computed under Chapter IV. Aggregation of income under Chapter VI is not the same thing as computation of income under various heads of income in terms of Chapter VI of the IT Act. (ii) Computation of income under each head of income in terms of Chapter IV requires determination of excess of gross receipts over expenses legally permissible in that behalf under the relevant head of income. Aggregation of income under Chapter VI does not provide for any deduction towards any expenditure. It brings the entire sum to the charge of income-tax and thus there is no element of 'computation' of income under Chapter VI as in the case of income falling under specific heads in terms of Chapter IV. It could be for this reason that the sums taxed under Chapter VI have been kept outside the computational provisions of Chapter IV. (iii) Amounts are taxed under the provisions of Chapter VI for the reason that their nature and sources are not known. Once their nature and source are known, they have to be pegged to that source/head of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter IV contemplates computation of income arising from known sources/heads of income whereas Chapter VI, on the other hand, contemplates aggregation of the entire sum the nature and sources of which are not known. The aforesaid two Chapters are completely different in their nature, scope and effect. Though the income assessable under them are part of total income as defined in sections 2(45)/4/5 of the l.T. Act yet that does not mean that income assessable under section 68 has to be assessed under section 56. In the case before us, source of unexplained cash credits is not known and hence they cannot be linked to any known source/head of income including income from other sources. In order to constitute 'income from 'other sources', the source, namely, the other sources , has to be identified. Income from unexplained or unknown sources cannot therefore be considered or taxed as income from other sources. The aforesaid view is fortified by the judgement of the Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan V. CIT [2001] 247 ITR 290/[2002] 120 Taxman 11 in which the Hon'ble High Court has held as under:- The scheme of sections 69,69A, 69B and 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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