As assessee had neither filed her return of income declaring loss nor had shown such loss in her books of account, this clearly indicated that assessee deliberately withhold the bank account and transactions recorded therein. Further, as she had not furnished any explanation about non-disclosure of bank account in the return filed for current year and in earlier years, Tribunal was justified in not allowing set-off of share trading business loss against cash credit addition made by AO.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. Assessee has filed this appeal challenging the judgement of the Income Tax Appellate Tribunal dated 04.10.2016 raising the following question for our consideration:
“(i) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in confirming the action of Commissioner of Income Tax (Appeals) in passing an exparte order dismissing the appeal of the appellant in limine without discussing the issues on merits which is in gross violation of provisions of Section 250(6) of the Act which mandate the Commissioner to pass a reasoned order.
(ii) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in confirming the addition of Rs.20,04,571/- under Section 68 of the Act as unexplained cash credits without there being any discussion or findings in the order under challenge.
(iii) Alternatively and without prejudice, whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in not allowing set off of share trading business loss of Rs.30,36,815/- against cash credit addition of Rs.20,04,571/- under Section 71 of the Act?
(iv) Whether in the facts and circumstances of the case, the order passed by the Income Tax Appellate Tribunal is perverse inasmuch as it confirms the summary dismissal order passed by the CIT(A) which is contrary to the provisions of Section 250(6), it does not adjudicate the grounds relating to cash credit additions and it records a finding that “factum of loss is not proved before the AO” which is factually incorrect and contrary to the documents placed on record?”
2. Brief facts are as under:
2.1 For the assessment year 2009-10, the appellant-assessee had filed return of income on 31.12.2009 declaring total income of Rs.1.73 lakhs (rounded off) from business and profession and income from other sources, the assessee’s principal business being that of trading in shares and stocks. During scrutiny assessment, the Assessing Officer learnt through internal information system that the assessee had deposited cash amount of Rs.19,96,500/- in her bank account in ICICI Bank, Surat maintained by her which she had not reflected in her return for the present year and also in the earlier assessment years. The Assessing Officer, therefore, issued a show cause notice to the assessee calling upon her to show cause why the credits should not be treated as unaccounted investments. The assessee responded to such notice by pointing out that through the said bank account, the assessee had traded in shares and in course of which she had suffered a loss of Rs.30.36 lakhs (rounded off). She, therefore, requested that such loss be considered while calculating her total income for the year under consideration. She produced the copy of Profit & Loss account and Balance Sheet for the said business along with other supporting documents.
2.2 In the order of assessment, the Assessing Officer noted that in the return filed, the assessee had not shown the details of the bank account of ICICI bank. It was thus clear that she had maintained an undisclosed bank account and deposited unaccounted income in such account. She had failed to explain the source of amounts credited by cheques. As regards the cash deposit of Rs.19,96,500/-, the Assessing Officer observed that the assessee had failed to disclose the same. The Assessing Officer, however, accepted that a sum of Rs.2,52,200/- was deposited by her through available cash balance and Rs.48,000/- by withdrawal of cash from her bank account. For the balance amount of Rs.16,96,300/-, the assessee had claimed that she had received cash gifts of Rs.17,03,000/- from four different persons. However, she could not give confirmation of each donor along with the name, address, PAN and copies of ledger accounts as appearing in her books of accounts. In that view of the matter, the Assessing Officer disbelieved such cash gifts and held that the said sum of Rs.17,03,000/- represented the assessee’s unaccounted investments. He also added another sum of Rs.3 lakhs for which the assessee could offer no explanation and thus found that an amount of Rs.20,04,571/-needed to be added under section 68 of the Act. He did not accept the assessee’s request for a set off of such additional income against the so called loss through the share trading
2.3 The assessee carried the matter in appeal. Before the CIT(Appeals), the assessee remained ex-parte and the appeal was therefore dismissed with a brief discussion regarding the assessee’s claim of set off. The Commissioner(Appeals) justified it by recording that the Assessing Officer rightly did not allow the set off of share trading loss claimed by the assessee and she had not disclosed the entire affair of her bank account and share trading in her return of income.
2.4 The Tribunal confirmed the view of the Revenue authorities and dismissed the assessee’s appeal making following observations:
“6. I have considered rival contentions and gone through the record carefully. Sub-section 1 of Section 71 contemplates that where the net result of computation made for any assessment year in respect of any head of income, is a loss, the same can be set off against the income from other heads. Similarly, in the case of K.R. Automobiles (supra), the Tribunal has allowed set off income against the loss. The Tribunal has placed reliance upon the decision of the Hon’ble jurisdictional High Court in the case of CIT vs. Shilpa Dyeing & Printing Mills P. Ltd., (2013) 39 taxmann.com 3 (Guj). As far as proposition of law is concerned, there is no dispute with regard to them. But in the present case, the assessee has not filed any return declaring loss. She has not shown loss in her books of accounts. She has just claimed loss by way of submission. Factum of loss was not proved before the AO. The ld. AO did not take cognizance of her bald submissions. Loss has nowhere been assessed. In such situation, how an assessee can claim set off against of this alleged income under any other head against such unverified unclaimed off such loss to the assessee. I do not find any merit in this appeal of the assessee. It is dismissed. “
3. Learned counsel Shri Hemani for the appellant vehemently contended that the Tribunal committed a serious error in ignoring the fact that the assessee had suffered loss from the share trading business. If the unaccounted investment was to be added as an income, the same should be set off against the loss of the business. He relied on the decision of this court in cases of Commissioner of Income-Tax – II vs. Shilpa Dyeing & Printing Mills (P.) Ltd. reported in  39 taxmann.com 3 (Gujarat) and Commissioner of Income-Tax vs. Mitesh Impex reported in  46 taxmann.com 30 (Gujarat).
4. The facts of the case are somewhat peculiar. As noted, neither in the return filed for the relevant assessment year 2009-10 nor in the earlier assessments, the assessee had disclosed a bank account in which there were multiple transactions. In fact, the assesssee had made cash deposits of more than Rs.20 lakhs and also claimed to have traded in shares by sale and purchase of shares through such account despite which no mention was made in the return filed for the current year and in the earlier years. There was thus clear attempt on the part of the assessee to withhold her bank account and the transactions recorded therein. The assessee had offered no explanation about non disclosure of the bank account in the return filed for the current year and in the earlier years. In this very account, the Assessing Officer noted that the assessee had made cash deposits of more than Rs.20 lakhs and the explanation offered by the assessee was found to be unacceptable. The cash gifts of Rs.17 lakhs and odd was not backed by any supporting documents of the donors. The Assessing Officer and the higher authorities thus committed no error in holding that the assessee had made unexplained cash credit of Rs.20,04,571/- in the said undisclosed bank account.
5. The request of the assessee, however, was that in any case such income should be set off against loss suffered by her in the share trading business. The assessee had not filed any return claiming such loss with supporting documents of her trading into shares, her receipts and outgoings and the resultant loss. Without filing revised return the assessee could not have claimed assessment of such business activity. This is not a case like the case in Shilpa Dyeing (supra) where the business loss was assessed by the Assessing Officer which was to be set off against the undisclosed income later on unearthed during the course of assessment. It is also not a case where the assessee in appellate proceedings unlike in the case of Mitesh Impex (supra) where the assessee on the basis of materials already on record was raising a question of law at the appellate stage.
6. In the result, tax appeal is dismissed.