Case Law Details

Case Name : ACIT Vs A One Enclave (ITAT Indore)
Appeal Number : ITA No. 828/Ind/2018
Date of Judgement/Order : 26/07/2019
Related Assessment Year : 2012-13
Courts : All ITAT (7341) ITAT Indore (67)

ACIT Vs A One Enclave (ITAT Indore)

At any stage revenue has not disputed the fact that the alleged amount surrendered during the survey was unaccounted business income of the assessee and not from any other sources. Section 11 5BBE of the Act was inserted by Finance Act, 2012 w.e.f. 1.4.2013 which restricts the claim of deduction in respect of any expenditure or allowance or set off of any loss against the income shown by the assessee or assessed u/s 68, 69, 69A,69B, 69C & 69D of the Act. The instant appeal relates to Assessment Year 2012-13 and therefore the assessee’s case will not be hit by provisions of Section 115BBE(2) of the Act.

FULL TEXT OF THE ITAT JUDGEMENT

The above captioned appeal of revenue pertaining to Assessment Year 2012- 13 is directed against the orders of Ld. Commissioner of Income Tax (Appeals), Ujjain (in short ‘CIT(A)’), dated 04.07.2018, which is arising out of order u/s 143(3) r.w.s. 263 of the Income Tax Act (In short the ‘Act’) dated 28.12.17 framed by ACIT-1(1), Ujjain.

2. Brief facts of the case as culled out from the records are that the assessee is a partnership firm engaged in the business of letting out garden for various programs and running hotel and restaurant. Assessee filed its return declaring total income of Rs.33,78,890/- on 3 1.7.2012. Assessment u/s 143(3) was completed on 05.03.2015 assessing total income at Rs.39,78,890/-. Subsequently Ld. Pr. CIT exercised his powers u/s 263 of the Act for revision of orders prejudicial to the revenue and set aside the assessment order directing it to be framed afresh as per the directions given in the order u/s 263 of the Act. In compliance thereto Ld. A.O initiated the assessment proceedings afresh by serving u/s 143(2) and 142(1) of the Act to the assessee.

3. During the year under appeal on 12.7.2011 survey u/s 133A of the Act was conducted at the business premises of the assessee. During the survey proceedings it was found that unaccounted investment was made out of books in the construction of hotel. Assessee agreed to declare the unaccounted investment as income at Rs.1,25,01,135/- in the Income Tax return. In the Income Tax return filed by the assessee as per audited profit and loss account, net profit was shown at Rs.8 1,91,990/- which was arrived at after considering income declared during the income tax survey at Rs. 1,25,0 1, 135/-. Apart from showing the income from regular business operations, assessee also claimed the expenses towards interest, remuneration to partners and deprecation. The income declared during Income Tax survey was shown as business income and after claiming necessary expenses including the set off of brought forwarded depreciation and losses, balance income was offered for taxation. Ld. A.O was however not convinced with this claim and was of the view that the assessee is not eligible for any deduction from the income surrendered during the course of survey. He accordingly treated the unaccounted investment in hotel building at Rs. 1,25,0 1, 135/- as income from undisclosed sources. Ld. A.O also made disallowance for deduction of donation expenses of Rs.53,000/- and assessed income at Rs. 1,25,54,135/-. Ld. A.O also worked out the loss for the year at Rs.25,64,726/- on estimate basis taking the figures of gross profit and expenses shown by the assessee in the financial statements.

4. Aggrieved assessee preferred appeal before Ld. CIT(A) challenging the disallowances claimed on the expenses including the depreciation, interest and remuneration to partners totaling to Rs.9 1,75,248/-. Ld. CIT(A) allowed the assessee’s appeal thereby giving detailed finding of fact and placing reliance on various judgments and also taking note that the amendment in the statue by way of inserting Section 115BBE of the Act was brought into effect from 1.4.20 13 by the Finance Act 2012 which provides that no deduction in respect of any expenditure or allowance or set off of any loss is to be allowed against the income declared or assessed u/s 68, 69, 69A,69B, 69C & 69D. Ld. CIT(A) also held that before the amendment came into effect, the assessee is eligible for claiming the expenses against the income surrendered during the course of survey which was offered as business income.

5. Now the Revenue is in appeal raising following grounds of appeal;

1. Whether on the facts and in the circumstances of the case, the Ld. CIT (A) is justified in allowing claim of deduction of Rs. 91,75,248/- on account of depreciation, interest, remuneration to the partners, expenses and carry forward depreciation out of the additional income of Rs. 1,25,01,135/- surrendered as unexplained investment in hotel building during the course of survey u/s 133A.

2. Whether on the facts and in the circumstances of the case, the Ld. CIT (A) is justified in allowing claim of deductions on account of depreciation, interest, remuneration to the partners. expenses and carry forward depreciation out of additional unexplained income surrendered during the survey u/s. 133A as unexplained investment in hotel building, without considering the evidentiary value of the partner of the assesses firm during the course of survey u/s 133A.

The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date the appeal is finally heard for disposal.

6. Departmental Representative vehemently argued supporting the order of Ld. A.O.

7. Per contra Ld. Counsel for the assessee relied on the submissions made before the lower authorities and findings of Ld. CIT(A). Reliance was also placed on the recent decision of Co­ordinate Bench of ITAT, Jaipur Bench in the case of ACIT V/s Sanjay Bairathi Gems Ltd, Jaipur ITA No. 157/JP/ 17.

8. We have heard rival contentions and perused the records placed before us. Though the revenue has raised two grounds of appeal but the sole issue is against the finding of Ld. CIT(A) allowing the claim of deduction of Rs.9 1,75,248/- being the expenses on account of depreciation, interest, remuneration and other expenses claimed against the income of Rs. 1,25,01,135 / – surrendered by the assessee as unaccounted investment in hotel building during the course of survey u/s 133A of the Act conducted on 12.7.2011.

9. We observe that during the course of survey proceedings u/s 133A of the Act on 12.7.2011 assessee agreed to offer income of 1,25,0 1, 135/- towards unexplained investment in hotel building being business income earned from undisclosed source. However when the Income Tax return was filed along with the audited balance sheet the assessee included the alleged surrendered income as part of business income and after claiming necessary expenses including depreciation, interest, remuneration paid to partners and other incidental expenses offered net income of Rs.33,78,890/- for tax. Ld. A.O did not allow the claim of any expenditure against the surrendered income which in his view was taxable u/s 69 as unexplained investment and assessee was liable to tax on the amount of Rs.1,25,01,135/-.

10. We observe that when the issue came up before the Ld. CIT(A) the claim of expenses made by the assessee were allowed observing as follows:-

“4.2 Ground No. 2, 5 & 6:- Through these grounds of appeal the appellant has challenged for not allowing the remuneration, interest, depreciation and expenses out of the additional income declared by the appellant amounting to Rs.1,25,01,135/_. The appellant declared a sum of Rs. 1,25,01,135/- during the survey on account of difference in investment in the construction/interior of hotel premises as represented by undeclared business income. The same is undisclosed business income assessable under the head business.

The appellant also relied upon the following judgments;

– Hon’ble Calcutta High Court in the case of Md. Serajuddin & Brothers, Vs. CIT ‘(2012) 80 DTR 46.

– Kamataka’ High Court in the. case of Commissioner of IncomeTax Vs S.K. Srigiri & Bros. (2008)298 ITR 13KAR.

The Hon’ble Pune bench while delivering the judgment on 28/1 1/-014 in the case of Venktesh Textile Mills, Sangli Vs. Joint Commissioner of Income Tax Range – 2, Sangli, decided in the favour of assessee. The relevant portion is reproduced hereunder:-,

………….. At the outset, it is to be observed that whether or not additional income surrendered during the course of survey is feasible as income from business or not is essentially a question, which has to be decided having regard to the particular facts and circumstances of each case. Ostensibly, there cannot be an absolute proposition that any income surrendered during the survey is a business income or vice versa. Even before the Hon’ble Punjab & Haryana High court in the case of Kim Pharma (P) Ltd. (supra), assessee was found to have failed to explain the source of the cash found during the course of survey, which was offered as an additional income, and, therefore in the absence of the nature of source of cash being proved it was held not to be assessable as income from business. We may also refer to ajudgement of the Hon’ble Karnataka High Court in the case of CIT vs. S. K. Srigiri and Bros. (2008) 298 1 1R 13 (Kar), which has been rendered in the context of section 40(b )(iii) of the Act. In the case before the Hon’ble Karnataka High Court, the Tribunal had come to a factual finding that the additional income declared in the course of survey was from business and’ therefore the remuneration paid to the partners was held liable to be deducted.”..

Hon’ble Supreme Court has laid down a principle that “if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee: must be adopted”. This principle has been consistently followed by. the various authorities as also by the Hon’ble Supreme Court itself. In another Supreme Court judgment, Petron Engg. Construction (P) Ltd. & Anr. vs. CBDT & Ors, (1988) 75 CTR (SC) 20 (1989) 175 ITR 52-(SC)

The provision of taxing income of the nature referred to in the specified Sections at the normal rate / applicable rate of income-tax applicable on total income of the assessee has been changed w.e.f. 1.4.2013 by the Finance Act, 2(H2 as a result of introduction of section 11 5BBE dealing with a special rate of tax applicable to Income of the nature referred to in sections 68, 69, 69A, 69B, 69C & 69D.

It is also provided that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing. deemed income under the said sections. This amendment will take effect from lst April, 2013 and will, accordingly, apply in relation to the assessment year 2013 -14 and .subsequent assessment years.”

The section has since its introduction by the FA, 2012 w.e.f. AY, 2013-14 been amended twice – once vide -A, 2016 w. e.f. 1.4.17 when sub-section (2) was amended to prohibit setting off of any loss against income of the nature referred .to in specified sections and second time by the Taxation Laws (Second Amendment) Act, 2016 w.ef 1.4.2017;

The provision of section 1 15BBE reproduced’ as under.-

From AY 2013-14 up to AY 2016- 17 AY 2017-18 onwards
115BBE. (1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income tax payable shall be the aggregate of

(a) The amount of income tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or Section 69D at the rate of thirty percent; and

(b) the amount of income tax with which the assessee would have been chargeable and his total income been reduced by the amount of income referred to in clause(a)

(1) Where the total income of an assessee,-

(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 193; or

(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or Section 69D, if such income is not covered under clause a), the income tax payable shall be the aggregate of –

(i) the amount of income-tax calculated on the income referred to in clause(a) and clause (b), at the rate of sixty per cent; and

(ii) the amount of income tax with which the assessee would have been chargeable and his total income been reduced by the amount of income referred to in clause(i)

2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) f subsection (1). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 46a (or set off of any loss) shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1).

The sub-section (2) provides that notwithstanding anything contained in the Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provisions of the Act in computing his income referred to in clause (a) of sub-section(1). With effect from AY 2017-18, sub-section (2) prohibits setting off any loss against income of the nature referred to in specified sections. In this way, in respect of the income covered by clause(a) of sub­section (1) of the above section, basic exemption, deductions and set-off of losses are also not allowable.

All these provisions will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. It may further be observed that while calculating “Gross total income”, an assessee may, up to AY 2017-18, set-off current year’s losses under section 71 with income of the nature referred to in specified sections. However, w.e.f. AY 201 7-18, sub-section (2) of section 11 5BBE prohibits set off of any loss against the income of the nature referred to in specified sections. The investment is made in the property which is used for the purpose of business. The income arising from the said business has been shown as a business income. Against this business income depreciation for the assets used for the purpose of business is an allowable expenditure. The depreciation has been claimed on the enhanced value of the assets which is an allowable expenses under the business income. This will increase the loss from business which is an allowable deduction under the head business income. This business loss can be set off against the income from other sources under section 71 of the Income tax act.

The appellant is not having other source of income and the excess income declared during the course of survey is nothing but income arising from business of the appellant firm. There is no income then there could have not been investment and as the appellant firm has no other source of income, its additional investment could have been taken only out of business income of the appellant firm. This view has also been upheld by the Hon’ble ITAT, Indore Bench, Indore in the case of M/s Shahnai V/s ITO 1(1), Ujjain, vide ITA No.658/Ind/2014, dated 15.05.2015. The relevant portion of the Hon’ble ITAT’s order is reproduced as under;-

“I have heard both the side. The amount of Rs.4 lacs disclosed during the course of survey was on the basis of excess stock found and loose papers relating to business found during survey operation. Thus, both these aspects on the basis of which disclosure was made were relating to the business of the assessee. Whatever income was declared was related to the business of the assessee and it was assessee’s business income. The assessee shall be entitled to pay remuneration to its partners as per clauses of partnership deed. Therefore, we allow this ground of appeal of the assessee”.

In view of above, the claim of deduction on account of :-
1. Depreciation Rs. 47,73,363/-
2. Interest Rs. 9,16,419/-
3. Remuneration to the partners Rs. 9,00,000/-
4. Expenses Rs. 25,64,726/-
5. Carry forward depreciation Rs. 20,740/-
Total Rs. 91,75,248/-

is an allowable expenditure.

Therefore, the addition made by the AO amounting to Rs.33,25,887/- is confirmed. The appellant will get the relief of Rs. 91,75,248/-. Therefore the appeal on these grounds is partly Allowed.

11. We further find that the similar issue was dealt by the Coordinate Bench, Jaipur in the case of M/s. Sanjay Bairathi Gems Ltd, Jaipur vide ITA No. 157/JP/ 17(supra) wherein also the Tribunal after considering the various judgments of Hon’ble courts held that the assessee is eligible for set off of business loss against the income brought to tax u/s 69B r.w.s 115 BBE of the Act. The relevant portion of the judgment is reproduced below;

“6. Per contra, the ld AR drawn our reference to the decision of the Coordinate Bench in case of Satish Kumar Goyal vs JCIT (2016) 70 taxmann.com 382 (Agra) wherein it was held that business losses of the assessee could be set off under section 71 against the income assessable under section 68 under the head “income from other sources” taking into consideration the conflicting decisions of various High Courts on the subject and also the amendment made by the Finance Act 2012 to section 11 5BBE is prospective in nature. He also drawn our reference to the decision of Hon’ble Gujarat High Court in case of CIT vs Shilpa Dyeing & Printing Mills (P) ltd (2013)219 TAXMANN 279 (Gujarat) for the proposition that section 71 permits assessee to set off loss other than of capital gains against income from other head. It was further submitted that in the said decision, the Gujarat High Court has taken into consideration its earlier decisions rendered in case of Fakir Mohmed HajiHasan vs CIT (247 ITR 290), the decision of DCIT vs Radhe Developers India Ltd (329 ITR 1) and decision of Madras High Court in case of CIT vs Chensing Ventures (291 ITR 258). It was further submitted that the Hon’ble Punjab & Haryana High Court in case of Kim Pharma (P) ltd (258 CTR 454) has in fact relied on the decision of Gujarat High Court in case of Fakir Mohmed HajiHasan (supra) which has subsequently been explained in subsequent decision of Radhe Developers India Ltd (supra).

7. We have heard the rival contentions and perused the material available on record, the factual matrix and various decisions relied upon by both the The Assessing officer has brought to tax, undisclosed investment in excess stock of stones, gold & jewellery found and surrendered during the course of search proceedings which has not been recorded in the books of accounts of the assessee, under the provisions of section 69B read with section 11 5BBE of the Act. Further, the Assessing officer has not allowed the set off of business loss of Rs 86,96,733 against the said income of Rs 2,31,41,217 which has been brought to tax under section 69B read with section 11 5BBE of the Act. The Assessing officer has however allowed the carry forward of said business loss to be set off in the subsequent assessment years. The fact that the business loss has been incurred during the year is thus not in dispute. The limited dispute relates to set off of said business loss against the income which has been brought to tax under section 69B read with section 11 5BBE of the Act.

8. Firstly, regarding the contention of the ld CIT DR that the provisions of section 11 5BBE comes under Chapter-XII providing for determination of rate of tax in certain special cases and accordingly, it relates to quantification of the amount of tax and not to the computation of total income and therefore, the amendment brought in by the Finance Act 2016 would not affect the computation of total income. It was accordingly contended that the business losses in the instant case cannot therefore be allowed set off against the amount brought to tax under section 69B in terms of undisclosed investment in stock of stones, gold and jewellery.

9. It is noted that by the Finance Act, 2016, an amendment has been brought-in in section 11 5BBE(2)wherein it has been provided that “notwithstanding anything contained in this Act, no set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income as referred to clause (a) of subsection (1) of the Act. If we were to accept the contentions of the ld CIT(DR), the question that arises is would that interpretation render sub-section (2) otiose and what was the necessity for bringing in the subject amendment. The intent of the legislature has been provided in the memorandum explaining the said amendment which reads as under:

“Currently, there is uncertainty on the issue of set-off of losses against income referred in section 11 5BBE of the Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set-off against income referred to in section 1 15BBE. However, the current language of section 1 15BBE of the Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, it is proposed to amend the provisions of the sub- section (2) of section 11 5BBE to expressly provide that no set off of any loss shall be allowable in respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D.”

10. In light of above, given the fact that the AO has invoked the provisions of section 1 1BBE in the instant case, the provisions of sub-section (2) to section 1 1BBE are equally applicable. The amendment brought in by the Finance Act, 2016 whereby set off of losses against income referred to in section 69Bhas been denied is stated clearly to be effective from 1 April 2017 and will accordingly, apply to assessment year 2017-18 onwards. Accordingly, for the year under consideration, there is no restriction to set off of business losses against income brought to tax under section 69B of the Act.

11. Further, the matter could be looked at from another perspective. The provisions relating to set off of losses are contained in Chapter-VI relating to aggregation of income and set off of losses. Whenever legislature desires to restrict set-off of loss or allowance of loss, in a particular manner, usually, the provisions are made in Chapter-VI such as non-allowance of business loss against salary income as provided in section 71 (2A), and treatment of short- term or long-term capital losses. There is no specific provision which restrict set off of business losses against income brought to tax under section 69B. Interestingly, both section 69B and section 71 falls under the same chapter VI. In the absence of any provisions in section 71 falling under Chapter-VI which restrict such set off, in the instant case, set off of business losses against income brought to tax under section 69B cannot be denied.

12. Now, we refer to various judicial pronouncements quoted by both the We find that the decision of Hon’ble Gujarat High in case of Fakir Mohmed Haji Hasan (supra) and subsequent decision of the Hon’ble Madras High Court in case of Chensing Ventures (supra) are two earliest decisions on the subject where the Hon’ble Courts have taken a divergent view in the matter. As per the decision of Hon’ble Gujarat High Court, the addition on account of unexplained investment would be considered as total income of the previous year without allowing set-off of business loss. As per Madras High Court’s decision, the addition would be set-off against the business loss and the balance addition, if any, would form part of the total income and attract tax.

13. It is noticed that the Hon’ble Gujarat High Court in case of CIT vs Shilpa Dyeing & Printing Mills (P) ltd (supra) had an occasion to consider an identical issue where the said divergent view has been reconciled. In that decision, the Hon’ble High Court has considered its earlier decision rendered in case of Fakir Mohmed HajiHasan (supra) as explained in another decision in case of Radhe Developers India Ltd (supra) and also the decision of Madras High Court in case of Chensing Ventures (supra). It would therefore to relevant to refer to the facts and the legal proposition laid down by the Hon’ble Gujarat High Court decision in case of Shilpa Dyeing & Printing Mills (P) ltd.

Facts of the case Brief facts are that, the respondent-assessee is a company engaged in the business of dying and printing. During the course of scrutiny for the assessment year 2008-09, the Assessing Officer noticed that in a survey action conducted at the business premises of the assessee, it had declared a sum of Rs. 100.98 lacs (rounded off) on account of excess stock. In the return, the assessee had suggested current year’s loss against such income. Assessing Officer holding a belief that income from unlisted source would not fall under any of the heads of the income, the same has to be taxed separately, the current losses cannot be set off against such income.

Findings and legal proposition “8. We, however, find that Section 71 of the Act permits an assessee to set off loss other than that of capital gains against income from other head. This very issue came-up for consideration before the Madras High Court in case of Chensing Ventures (supra). The Division Bench of the Court considered the issue in following manner:

“6. Heard counsel. The Assessing Officer has not given any reason whatsoever to deny the set off of the business loss against the income declared under the head & “other sources”. Section 71 deals with set off of loss against income under any other head. After setting off losses against the income under the same head, if the net result is still a loss, the assessee can set off the said loss under Section 71 of the Act against income of the same year under any other head, except for losses which arise under the head “capital gains”. The income tax is only one tax and levied on the sum total of the income classified and chargeable under the various heads. Section 14 has classified the different heads of income and income under each head is separately computed. Income which is computed in accordance with law is one income and it is not a collection of distinct tax levied separately on each head of income and it is not an aggregate of various taxes computed with reference to each of the different sources separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee is subject to income-tax on his total income though his income under each head may be well below the taxable limit. Hence the loss sustained in any year under any heads of income will have to be set off against income under any other head. In this case, the Assessing Officer made addition of Rs.28,50,000/- as undisclosed income under Section 69 of the Act. Once the loss is determined, the same should be set off against the income determined under any other head of income. In the assessment, no reasons were given by the Assessing Officer to deny the benefit of Section 71 of the Act. The benefit provided under Section 71 of the Act cannot be denied and the learned Standing Counsel appearing for the Revenue is also unable to explain or give reasons why the assessee is not entitled to the benefit of Section 71 of the Act. The reasons given by the Tribunal are based on valid materials and evidence and the same is in accordance with the provisions of Section 71 of the Act. We find no error or legal infirmity in the impugned order.”

9. We may further notice that the decision in case of Fakir Mohmed Haji Hasan (supra) came-up for consideration in case of Radhe Developers Incia Ltd. (supra),it was observed as under:

“The decisions of this Court in the case of Fakir Mohmed Haji Hasan (supra) and Krishna Textiles (supra) are neither relevant nor germane to the issue considering the fact that in none of the decisions the Legislative Scheme emanating from conjoint reading of provisions of sections 14 & 56 of the Act have been considered. The Apex Court in the case of D.P. Sandu Bros.Chembur P. Ltd.,(supra) has dealt with this very issue while deciding the treatment to be given to a transaction of surrender of tenancy right. The earlier decisions of the Apex Court commencing from case of United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC) have been considered by the Apex Court and, hence, it is not necessary to repeat the same. Suffice it to state that the Act does not envisage taxing any income under any head not specified in section 14 of the Act. In the circumstances, there is no question of trying to read any conflict in the two judgments of this Court as submitted by the learned Counsel for the Revenue.”

10. In our opinion, the statutory provisions contained in Section 71 was applicable in the present case. By applying the decision in case of Fakir Mohmed Haji Hasan (supra) as explained in case of Radhe Developers Incia Ltd. (supra), the same cannot be declined. In the result, no question of law arises. Tax appeal is, therefore, dismissed.”

14. It is also noted that in latest decision of Hon’ble Gujarat High Court in case of Krishnamegh Yarn Industries (supra) which has been brought to our attention by the ld CIT DR to support his contentions regarding applicability of section 69B, the earlier decision in case of Shilpa Dyeing and Printing Mills has been followed for setting off of losses under section 71 against such income. The relevant findings of Hon’ble High Court are as under:

“8. We have learned advocates for the respective parties. Perused the orders of the CIT (Appeals) as well as the ITAT. It is an undisputed fact that during scrutiny, the assessee himself has disclosed the fact that in his books of account, he had shown less stock to the tune of Rs. 10,06,987/-. It is also an admitted fact that when the physical stock was examined by the authority, the value of the said stock was Rs. 13,33,485/-, however, as per the books of account, the value of stock was to the tune of Rs.3,26,498/- i.e. amount to the tune of Rs. 10,06,987/- was not recorded in the books of account. However, it is admitted by the assessee himself that he has not completely disclosed the stock in the books of account. Now, considering the proviso of Section 69(B) of the act, we are of the opinion that the assessee had not fully disclosed the stocks in the books of account and therefore, the Assessing Officer as well as the CIT (Appeals) have rightly observed that the case of the assessee would fall under the proviso of Section 69(b) of the act.

We are also of the opinion that the submissions made by the learned advocate is that the case would fall under the proviso of Section 69(c) of the act does not apply to the facts of the present case. It is not the case of the revenue that there is an unexplained expenditure, which would cover under the proviso of this Act and therefore, the assessee would not be entitled for the set off under the proviso of Section 71 of the act. As far as applicability of the case of Shilpa Dyeing & Printing Mills (P.) Ltd. (Supra) is concerned, the same would be applicable since the Court had held that the amount of excess stock would fall under the definition of income as per Section 14 of the Act and therefore, the assessee would be entitled for the set off under proviso of section 71 of the act. As far as the case of Attar Singh Gurmukh Singh (Supra) is concerned, the same would not be applicable in the present facts and circumstances of the case since it is not the case that there was unexplained expenditure made by the assessee.

9. Therefore, we are of the opinion that the CIT (Appeals) as well as the ITAT have committed error in refusing giving set off to the assessee under Section 71 of the act and accordingly, we allow these appeals by setting aside the order dated 28.02.2005 passed by the Income Tax Appellate Tribunal (the ITAT) and order dated 07.07.2014 passed by the Commissioner of Income Tax (Appeals) Ahmedabad [the CIT (Appeals)].”

15. In light of above, we are of the view that the assessee deserve to succeed in the subject appeal and will be eligible for set off business loss of Rs 86,96,733 against the income of Rs 2,31,41,217 which has been brought to tax under section 69B read with section 11 5BBE of the Act. In the result, grounds taken by Revenue are dismissed.

In the result, in the appeal of Revenue is dismissed”.

12. From going through the above decision of the Co-ordinate Bench, Jaipur we find that the issue before us is squarely covered by this decision. Ld. Departmental Representative failed to place any other material or judgment favouring the revenue in order to controvert the finding of Ld. CIT(A). At any stage revenue has not disputed the fact that the alleged amount surrendered during the survey was unaccounted business income of the assessee and not from any other sources. Section 11 5BBE of the Act was inserted by Finance Act, 2012 w.e.f. 1.4.2013 which restricts the claim of deduction in respect of any expenditure or allowance or set off of any loss against the income shown by the assessee or assessed u/s 68, 69, 69A,69B, 69C & 69D of the Act. The instant appeal relates to Assessment Year 2012-13 and therefore the assessee’s case will not be hit by provisions of Section 115BBE(2) of the Act. We therefore find no inconsistency in the finding of Ld. CIT(A) and the same requires no interference.

9. In the result the appeal of the revenue is dismissed.

The order pronounced in the open Court on 26.07.2019.

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