The Commissioner Of Income-Tax,Tamil Nadu-Vii, Chennai v. M/S.chensing Ventures

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 09.04.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.356 of 2007 The Commissioner of Income-tax,Tamil Nadu-VII, Chennai...Appellant Vs M/s.Chensing Ventures,11/1, Ellayamudali Street,Chennai-600 081. ..Respondent Appeal under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Bench 'A', Chennai in I.T.A.No.1999/Mds/2003 dated 10.07.2006 for the assessment year 2002-03 and Lr.dated 25/8/2003in IT/Appeal No.73/2003-2004 from the Commissioner ofIncome tax (Appeals) IX Chennai -34 and the assessment order of theIncome Tax Officer, dated 4.4.2003 in AACPC 4889R Ward VI (3) Chennai. For Appellant :Mr.J.Narayanaswamy JUDGMENT(Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) This appeal is filed under Section 260A of the Income Tax Act, 1961by the Revenue, against the order of the Income Tax Appellate Tribunal,Bench 'A', Chennai in I.T.A. No.1999/Mds/2003 dated 10.07.2006, raisingthe following substantial question of law:- "Whether on the facts and in the circumstances of thecase, the Income-tax Appellate Tribunal was right inlaw in holding that, and direct the assessing officerto compute the income, business loss has to be set offagainst the other income, even though the assesseesurrendered the income at the time of survey undersection 133A of the Income-tax Act, 1961?" 2.The brief facts leading to the above substantial question of laware as under: https://hcservices.ecourts.gov.in/hcservices/ The assessee is a firm consisting of two partners. The firm iscarrying on business of purchase and sale of steel scraps both locally andin the Mid Sea. The relevant assessment year is 2002-2003 and thecorresponding accounting year ended on 31.03.2002. A survey under Section133A of the Income-tax Act ("Act" in short) was conducted by theDepartment on 18.03.2002 in the presence of one P.Chandrasekar of thefirm. During the course of survey, it was noticed that the assessee hasmade cash payments to the bank to the tune of Rs.30,00,000/-. When it waspointed out to the assessee, he was only able to explain the source forcash payment to the bank to the extent of Rs.1.50 lakhs and for thebalance amount of Rs.28.50 lakhs, the assessee was not able to offer anysatisfactory explanation. However, the assessee had agreed to offer thesum of Rs.28.50 lakhs as income from undisclosed source for the assessmentyear 2002-2003. The assessee filed Return of income for the saidassessment year on 31.10.2002 admitting a business loss of Rs.11,95,384/-and admitting an income of Rs.28,50,000/- under the head "income fromundisclosed sources". The assessment was taken up for scrutiny and noticeunder Section 143(2) was issued on 31.10.2002. The assessment wascompleted by the Assessing Officer as under:- While completing the assessment, the Assessing Officer restricted thebusiness loss to Rs.8,20,384/- and failed to set off the same against theincome from other sources disclosed by the assessee-firm. There was noreason given by the Assessing Officer to deny the set off of the businessloss against the income declared under the head "other sources".Aggrieved by the order, the assessee filed an appeal to the Commissionerof Income-tax (Appeals). The C.I.T.(A) allowed the appeal and directedthe Assessing Officer to set off the business loss against the income fromother sources and allowed the appeal. Aggrieved, the Revenue filed anappeal to the Income-tax Appellate Tribunal ("Tribunal" in short). TheTribunal also confirmed the order of the C.I.T.(A) and dismissed theappeal. While completing the assessment, the Assessing Officer restricted thebusiness loss to Rs.8,20,384/- and failed to set off the same against theincome from other sources disclosed by the assessee-firm. There was noreason given by the Assessing Officer to deny the set off of the businessloss against the income declared under the head "other sources".Aggrieved by the order, the assessee filed an appeal to the Commissionerof Income-tax (Appeals). The C.I.T.(A) allowed the appeal and directedthe Assessing Officer to set off the business loss against the income fromother sources and allowed the appeal. Aggrieved, the Revenue filed anappeal to the Income-tax Appellate Tribunal ("Tribunal" in short). TheTribunal also confirmed the order of the C.I.T.(A) and dismissed theappeal. 3.Learned Standing Counsel appearing for the Revenue submittedthat during the course of survey under Section 133A of the Act, it wasnoticed that the assessee made certain cash payment to the bank out ofwhich Rs.28.50 lakhs could not be explained. The same was surrenderedvoluntarily for taxation. Hence the Assessing Officer was right indenying the setting off of the loss. Later, the assessee filed Return ofincome declaring a business loss of Rs.11.95 lakhs. The Assessing Officerdetermined the business loss at Rs.8,20,384/- and did not allow the setoff of the loss against the undisclosed income of Rs.28.50 lakhs. Hencethe order of the Assessing Officer is in confirmity with law. 4.Heard the counsel. The Assessing Officer has not given anyreason whatsoever to deny the set off of the business loss against theincome declared under the head "other sources". Section 71 deals with setoff loss against income under any other head. After setting off lossesagainst 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 againstincome of the same year under any other head, except for losses whicharise under the head "capital gains". The income tax is only one tax andlevied on the sum total on the income classified and chargeable under thevarious heads. Section 14 has classified different heads of income andincome under each head is separately computed. Income which is computedin accordance with law is one income and it is not a collection ofdistinct tax levied separately on each heads of income and it is not anaggregate of various taxes computed with reference to each of thedifferent sources separately. There is only one assessment and the sameis made after the total income has been ascertained. The assessee issubject to income-tax on his total income though his income under eachhead may be well below the taxable limit. Hence the loss sustained in anyyear under any heads of income will have to be set off against incomeunder any other head. In this case, the Assessing Officer made additionof Rs.28,50,000/- as undisclosed income under Section 69 of the Act. Oncethe loss is determined, the same should be set off against the incomedetermined under any other head of income. In the assessment, no reasonswere given by the Assessing Officer to deny the benefit of Section 71 ofthe Act. The benefit provided under Section 71 of the Act cannot be deniedand the learned Standing Counsel appearing for the Revenue is also unableto explain or give reasons why the assessee is not entitled to the benefitof Section 71 of the Act. The reasons given by the Tribunal are based onvalid materials and evidence and the same is in accordance with theprovisions of Section 71 of the Act. We find no error or legal infirmityin the impugned order. 5.Under these circumstances, we are of the view that nosubstantial question of law arises for consideration in this tax case andhence the tax case is dismissed. No costs. km Sd/Asst. Registrar /true copy/ Sub Asst.Registrar To 1. THE ASSISTANT REGISTRAR,INCOME TAX APPELLATE TRIBUNAL, II FLOOR, RAJAJI BHAVAN, BESANT NAGAR,CHENNAI. 5.Under these circumstances, we are of the view that nosubstantial question of law arises for consideration in this tax case andhence the tax case is dismissed. No costs. km Sd/Asst. Registrar /true copy/ Sub Asst.Registrar To 1. THE ASSISTANT REGISTRAR,INCOME TAX APPELLATE TRIBUNAL, II FLOOR, RAJAJI BHAVAN, BESANT NAGAR,CHENNAI. 2. THE COMMISSIONER OF INCOME TAX APPEALS IX, 121 M.G. ROAD, CHENNAI-34. 3. THE INCOME TAX OFFICER,WARD VI (3) CHENNAI -034. + One cc to M/s Pusya Sitataman, SR. Standing Counsel Income Tax SR 22511SSV (co)sg 22/5/07 T.C.(A) No.356 of 2007 09.04.2007