Gujarat High Court
Commissioner Of Income Tax Ahmedabad Iv vs Babulal K Daga....Opponent(S) on 19 July, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/859/2012 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 859 of 2012
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COMMISSIONER OF INCOME TAX AHMEDABAD IV....Appellant(s)
Versus
BABULAL K DAGA....Opponent(s)
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Appearance:
MR.VARUN K.PATEL, ADVOCATE for the Appellant(s) No. 1
MR SN DIVATIA, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 19/07/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against judgement of the Income Tax Appellate Tribunal dated 31.7.2012 raising following question for our consideration :
"Whether, in the facts and circumstances of the case, the learned ITAT has erred in law in setting aside the order u/s 263 of the Incometax Act passed by the Commissioner of Incometax on the ground that the said order u/s 263 is a change of opinion?"
2. As can be seen from the question, the issue arises in the background of power exercised by the Commissioner of revision under section 263 of the Act. For the assessment year 20062007, the respondent assessee who is engaged Page 1 of 6 HC-NIC Page 1 of 6 Created On Mon Jul 25 06:19:50 IST 2016 O/TAXAP/859/2012 ORDER in the business of transportation was subjected to survey proceedings during which he had admitted an expenditure of Rs.77.01 lacs out of undisclosed source. In the return filed by the assessee for the assessment year 20062007, the Assessing Officer though took note of such income, allowed set off against the business expenditure which order was taken in revision by the Commissioner. He was of the opinion that such expenditure would be covered under section 69C of the Act and by virtue of judgement in case of Fakir Mohmmed Haji Hasan v. CIT reported in 247 ITR 290(Guj), the business expenditure cannot be set off against such income. The Tribunal however, was of the view that the Assessing Officer had taken a particular view which could not have been taken in revision. The Tribunal observed as under :
"We have perused the orders of the authorities below and heard the arguments from both the sides. The survey disclosure has been considered by the Assessing Officer. He has considered unpaid freight and liability and no addition was made on account of outstanding liability from unaccounted income u/s 69C of the IT Act. The CIT has passed the order u/s 263 on the basis of liability of Rs.1,03,24,530/ has been shown as unpaid freight as on 31.3.2006 and liability paid Rs.77,01,958/ during the FY 0506 which has been considered by the Assessing Officer. The ld. CIT has framed different opinion on similar facts considered by the Assessing Officer in assessment order. Therefore, the CIT order u/s 263 is a change of opinion. Accordingly, we set aside the order of CIT dated 10.03.2011."
3. Having heard learned counsel for the parties and having perused the documents on record, it would emerge that the Page 2 of 6 HC-NIC Page 2 of 6 Created On Mon Jul 25 06:19:50 IST 2016 O/TAXAP/859/2012 ORDER Assessing Officer while making the addition as disclosed by the assessee essentially taxed the profit element where as the Revenue desired that it should be the entire amount which should be taxed. By now it is well settled that even in case of unaccounted receipts of a businessman, it is only the profit element embedded in the business which can be taxed and not the entire amount. In other words, if the assessee can point out that even on unaccounted receipts, expenditure was also incurred for the purpose of business, it would be only the reasonable profit on such receipts which should be taxed.
4. In view of this, we do not see any error in the view of the Tribunal particularly considering the fact that the commissioner was exercising limited power of revision under section 263 of the Act. Decision in case of Fakir Mohmmed Haji Hasan(supra) came to be considered and explained in a later decision in case of Deputy CIT v. Radhe Developers India Ltd. reported in (2010) 329 ITR 1 (Guj.). These decisions were noted by the Division Bench of this Court in Tax Appeal No.1474/2009 in judgement dated 9.8.2011 in which following observations were made :
"With respect to second question, we may notice that the assessee's stand is that its sole business was that of running a hospital. It had no other source of income and that therefore, treating such undisclosed income from other source was not justified.
In the case of Deputy CIT v. Radhe Developers India Ltd., (2010) 329 ITR 1(Guj.), this Court while distinguishing the Page 3 of 6 HC-NIC Page 3 of 6 Created On Mon Jul 25 06:19:50 IST 2016 O/TAXAP/859/2012 ORDER decision in the case of Fakir Mohmed Haji Hasan (supra), 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.Vs. 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."
In any case, we are convinced that the Tribunal was correct in holding that even if two views are possible, powers under section 263 of the Act could not and ought not to have been exercised. The Apex Court in the case of Malabar Industrial Co. Ltd. observed as under:
"The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Incometax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an Page 4 of 6 HC-NIC Page 4 of 6 Created On Mon Jul 25 06:19:50 IST 2016 O/TAXAP/859/2012 ORDER erroneous order prejudicial to the interests of the revenue unless the view taken by the Incometax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue. Rampyari Devi Saraogi v. Commissioner of Incometax, (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v.
Commissioner of Incometax, West Bengal, 88 ITR 323."
In the case of S.K.Srigiri and Bros. (supra), the Karnataka High Court held as under:
"We have perused the orders of the Tribunal. The Tribunal has carefully considered the questions put by the authority and the answer of the partners of the assessee's firm and based on the same, the Tribunal has come to the conclusion that the additional income received by the assessee in the instant case is from business and not from other sources. If the Tribunal has come to the conclusion that the additional income is from business, the remuneration paid to the partners has to be deducted while considering the profit and loss. In the circumstances, we are of the opinion that on facts the Revenue has no case on the merits. So far as the question of law is concerned, we have to answer the same in favour of the Revenue."
In view of the above discussion, we do not find any question of law arises. Tax Appeal is therefore, dismissed."
5. In the result, this tax appeal is dismissed.
(AKIL KURESHI, J.)
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O/TAXAP/859/2012 ORDER
(A.J. SHASTRI, J.)
raghu
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