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TMI Blog2019 (11) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... bear in mind that expenditure laid out for the purpose of business is to be allowed deduction either as expenditure or to be capitalized on which depreciation will be allowed. The assessee might have earned income from the business which has not been accounted and used for constructing the business asset, though specific details have not been discussed either in the impugned order about the nature of evidence found during the course of survey. We also need not to ponder on this aspect because the assessee has admitted this unexplained expenditure on construction of building. This admission has to be accepted as given by the assessee, wherein it was alleged that it is for the purpose of the business. Therefore, to the extent the expenditure incurred for construction of the building, out of unexplained source is concerned, it is to be construed as earned from the business and it will take character of the business income. Once this income is to be assessed under the business income , then all incidental benefits for set off from brought forward loss or any other expenditure is to be given to the assessee. In the judgments relied upon the ld.counsel for the assessee, similar treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee as under: Returned income ₹ 21,34,700 Less: Income disclosed during survey to be assessed separately as per parano.4.0 ₹ 40,00,000 Add: Addition as per para no.5.0 ₹ 368 Balance loss allowed to be c/f (-)₹ 18,64,932/- Deemed income u/s.69,69A,69B &69C as discussed above ₹ 40,00,000/- Total taxable income ₹ 40,00,000/- 4. Appeal to the CIT(A) did not bring any relief to the assessee. 5. Short question for our adjudication is, whether this total amount of ₹ 40 lakhs is to be assessed as deemed income against which no deduction/set off is available to the assessee. According to the ld.counsel for the assessee, this issue is covered by the decision of ITAT, Chandigarh Benches. He relied upon judgment of the ITAT in the case of Famina Knit Fab Vs.ACIT, reported in 104 taxmann.com 306 (Chandi- Trib). He further contended that thereafter, recently, the Tribunal has again decided this issue in the case of DCIT Vs.Khurana Rolling Mills P.Ltd., ITA No No.745 and 1134/Chd/2016. Copies of these decisions have been placed on record. On the strength of these decisions, he contended that as far as cash found during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, whether from disclosed or undisclosed sources, and the allowability of claim of set off of losses ,both current and brought forward, against the same. 13. The controversy arises on account of the scheme of the Act which mandates incomes to be categorized under specific heads depending on their nature/source, for computation purposes under chapter IV and thereafter provides for setting off of losses in a specific manner under chapter VI of the Act. If it is from any of the sources as specified in the heads for taxation under Chapter-IV of the Act, the income therefrom it is to be computed as per the provisions provided thereunder. Therefore, if the source/nature of the income is from business and profession, the income to be subjected to tax is to be assessed as provided u/ss. 28 to 44DB of the Act and the set off of current/brought forward losses is to be allowed as per the provisions of sections 70 to 80 of the Act, which allows set off of business losses against current year business losses subject to fulfilment of certain conditions. There is no dispute about the above position of law. 14. Further the Act also provides for treating certain credits, investments, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the [2021][Assessing Officer], satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.] SECTION 69C [2022][Unexplained expenditure, etc. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [2023][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:] [2024] [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.] SECTION 115BBE [3052] [Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. [3052] ["(1) Where the total income of an assessee,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as deemed incomes of the assessees. Thus, the amounts to be treated as deemed incomes are investments, moneys, or expenditure fulfilling the twin criteria of: (a) not being recorded in the books if any maintained and, (b) the source of which the assessee is unable to explain satisfactorily. 16. In other words, to put it simply, the unrecorded investments/assets/expenditures made out of unexplained sources are treated as deemed incomes of the assessee. The onus is on the assessee to establish the source of the surrendered income failing which it is to be categorized as deemed income u/s. 69/69A/B/C of the Act. And establishing the source of income is a factual matter. The Ld. DR, had drawn our attention to the decision of the Hon'ble jurisdictional High Court in the case of Pr.CIT v. Khushi Ram & Sons Foods (P) Ltd in [IT Appeal No.126 of 2015, dated 29-07-16], wherein the assessee had set off unabsorbed losses u/ss. 70 & 71 against income surrendered on account of building renovation, office equipment and sundry receivable, to which ,the Hon'ble High Court had held that it is for the assessee to establish that the source of the surrendered income was from bus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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