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TMI Blog2021 (4) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... duction as relating to such deemed income, since the assessee has denied that income, but if he is able to prove any expenditure in relation to such admitted income, there is no reason for denying the same. Therefore, the deemed income will be assessable under the head income from other sources , however, the deduction available under the head income from other sources will be lost. As undisclosed source income of ₹ 1,10,00,000/- of the assessee cannot be assessed under the head 'business or profession', as the nature of receipts is not known, that is, the assessee has failed to explain the nature of said undisclosed source income. In Sreelekha Banerjee v. Commissioner of Income-tax [ 1963 (3) TMI 47 - SUPREME COURT] , the Hon`ble Supreme Court observed: The very words ' an undisclosed source' show that the disclosure must come from the assessee and not from the department. Therefore, in the absence of any plausible explanation form the ld Counsel, we are constrained to agree with the findings of the ld CIT(A). That being so, we decline to interfere in the order of ld CIT(A), his order on this issue is hereby accepted and grounds of appeal rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 4 raised by the assessee, as not pressed. 3. The effective grounds before us, to be adjudicated, are ground nos. 1 and 2. In ground No.1 the main grievance of the assessee is that undisclosed income of ₹ 1,10,00,000/- which was disclosed as per seized diary during survey action under section 133A of the Act should be treated under the head business income instead of under the head other sources . In ground no.2, the assessee states that if income of ₹ 1,10,00,000/- is treated under the head business income then set off of business loss of ₹ 77,15,133/- against such business income may be allowed. Since both the grounds are interlinked and mixed in nature, therefore we adjudicate them together. 4. The facts necessary for disposal of the appeal are stated in brief. During the assessment year 2008-09, a survey action u/s 133A was conducted in the business premises of the assessee wherein assessee has declared a sum of ₹ 1,10,00,000/- on account of 'On-money' (₹ 1,08,00,000/-) and other irregularities. (₹ 2,00,000/-). This disclosure was based on a diary (Anupam Dhanlaxmi Red diary) found in the premises of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 247 ITR 290)(Guj) and made the addition of ₹ 1,10,00,000/- under section 69 of the Act. 8. Since the assessee has not proved that the undisclosed income of ₹ 1,10,00,000/- was earned out of business activities, therefore assessing officer treated the income disclosed during the course of survey as an undisclosed Income under the head Income of Undisclosed Sources . Since the income of ₹ 1,10,00,000/- was assessed under the head other sources , therefore assessing officer denied any set off of loss against such income. 9. On appeal, the ld CIT(A) has confirmed the action of the assessing officer. Aggrieved by the order of the ld CIT(A), the assessee is in appeal before us. 10. Shri Ashwin K. Parekh, Learned Counsel for the assessee, submits before the Bench that the income tax officer in his assessment order, vide para 4 of assessment order, has stated that the income from undisclosed sources does not fall under any heads of income which is a wrong observation of the assessing officer and therefore the order passed by the assessing officer is not in accordance with law. Leaned Counsel also submits that the undisclosed income found in the survey actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e? 13. The Hon`ble Court has answered these questions as follows: 7. The scheme of Sections 69, 69A. 69B and 69C of the Income-tax Act, 1961, would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion, etc., owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income profits and gains of business or profession . 10. In our opinion, therefore, the Tribunal was perfectly right in holding that the value of the gold was liable to be included in the income of the assessee as the source of investment in the gold or of its acquisition was not explained and that the assessee was not entitled to claim that the value of the gold should he allowed as a deduction from his income. 11. Both the questions referred to us are, therefore, answered in the affirmative, against the assessee and in favour of the Revenue. The reference stands disposed of accordingly with no order as to costs. 14. From the above decision of Hon`ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan (supra) it is abundantly clear that where an income which is not admitted, but is inferred by the assessing officer and if it could not be brought under any particular head of incomes, deduction may be lost. Where such receipt cannot be brought under any particular head of income, it will have to be assessed under the head other sources but deductions under section 57 of the Act may not be admissible as it will not be possible for the assessee to claim de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to claim deduction and set off of loss, as the source of the said income is not known. Therefore, the plea of the ld Counsel that assessing officer has not assessed the income at ₹ 1,10,00,000/- under any heads of income, is not tenable. We note that assessing officer did assess the said income under the head Income from other sources stating that assessee cannot claim the benefit of set off of losses. That is, the assessee would not be able to get the deduction for the expenses which he has incurred because these are deemed income and the assessee has denied that income, sources are not known, and these incomes were not recorded in the books of accounts of the assessee. Thus, the conclusion of the judgment of Hon'ble Gujarat High Court (supra) is that these deemed incomes belong to the assessee and will enter in the computation of total income of the assessee and assessee is liable to pay taxes thereon, and deduction available under section 57 will be lost. 15. We note that assessee has not disclosed the source of income of ₹ 1,10,00,000/-, whether it relates to his business or other sources. We note that an affidavit has been filed by the assessee af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier building is not allowable, even otherwise, under u/s 37(1) of the Income Tax Act. Moreover, demolition charges of earlier building and the corresponding expenditure, if any does not pertain to assessment year 2008-09 at all. On major component of the said expenditure i.e. demolition charges paid to the Surat Municipal Corporation has been denied by the SMC authorities. Therefore, even the genuineness of the expenditure has not been established. Without prejudice to the same, the said expenditure even if incurred, is not allowable under the head income from business and / or profession'. Ever, otherwise, it does net pertain to assessment year 2008-09. Therefore, the ground no. Ill of the appeal is dismissed. 16. The next issue is whether the business loss can be set off of against the additional income declared at ₹ 1,10,00,000. Here again, explanation of the appellant and the facts of the case are very peculiar. If the amount of Rs. 1,10,00,000/-(received from April 2007 to February 2008) mentioned in the diary impounded pertains to on money in respect of the old building, whose demolition was ordered way back in February 1985, how the on money was recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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