The Issue Involved In The Said Appeal Relates To Theaddition Made By The Assessing Officer Under Section 68 Ofthe Act As Business Income. The Administrativecomm v. Commissioner Of Income Tax[35 Itr 416 (Sc)] And Found That It Is Not Unreasonable To

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 28TH DAY OF MARCH 2014/7TH CHAITHRA, 1936 ITA.No. 147 of 2012 () ----------------------- ITA. NO.486/COCH/2009 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH. ........ APPELLANT/APPELLANT: ------------------------------------- THE COMMISSIONER OF INCOME TAX, CALICUT. BY SRI.P.K.RAVINDRANATHA MENON, SENIOR SC, ADV. SRI.JOSE JOSEPH, SC. RESPONDENT/RESPONDENT: ------------------------------------------- SHRI P.D. ABRAHAM ALIAS APPACHAN, SWARGACHITRA, JAIL ROAD, CALICUT-673 002. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 28-03-2014, ALONG WITH ITA. NO.46 OF 2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs. ITA.No. 147 of 2012 APPENDIX PETITIONER'S ANNEXURES:- ANNEXURE ACOPY OF THE ASSESSMENT ORDER DATED 28/12/2007. ANNEXURE BCOPY OF THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS) DATED 06/07/2009. ANNEXURE CCOPY OF THE ORDER OF THE TRIBUNAL DATED 06/01/2012. RESPONDENT'S ANNEXURES:- NIL. //TRUE COPY// P.S. TO JUDGE rs. MANJULA CHELLUR, CJ & A.M.SHAFFIQUE, J. * * * * * * * * * * * * * I.T.A.Nos.147 of 2012 & 46 of 2014 ---------------------------------------- Dated this the 28[th] day of March 2014 J U D G M E N T SHAFFIQUE, J Since these appeals are with reference to a commonassessee they are decided together. The assessment yearinvolved is 2005-06. 2.In I.T.A.No.147/2012, Revenue challenges theorder passed by the Income Tax Appellate Tribunal, CochinBench in I.T.A.No.486/Coch/2009. The Tribunal hadconsidered the appeal filed by the assessee against theorder of the Administrative Commissioner under Section263 of Income Tax Act (hereinafter referred to as ‘the Act’). 3.The issue involved in the said appeal relates to theaddition made by the Assessing officer under Section 68 ofthe Act as business income. The AdministrativeCommissioner found that the addition made has to be I.T.A.No.147/2012 & 46/2014 assessed as income on stand alone basis under Section 69of the Act. The Tribunal, with reference to the judgment ofthe Gujarat High Court In Fakir Mohammed Haji Hassanv. Commissioner of Income tax[247 ITR 290 (Guj)], reliedupon by the Revenue, came to a finding that the saidjudgment has no application to the facts on hand. TheTribunal further found that the assessee received certainunsecured loan and since there was doubt, addition was tomade under Section 68 of the Income tax Act. 4.The issue involved was whether, in the absence ofany satisfactory explanation regarding the source of thecreditor, can it be said that the credit is not a businessincome. When the assessee is doing business and has noother source of income, it has to be treated as unaccountedincome in the course of its business activities. The Tribunalalso relied upon the judgment of th Apex court inLakmichand Baijnath v. Commissioner of Income Tax[35 ITR 416 (SC)] and found that it is not unreasonable to I.T.A.No.147/2012 & 46/2014 infer that the addition made under Section 68 is receipt fromthe business of the assessee. Further reference is also madeto the judgment of this court in Annamalai Reddiar v.Commissioner of Income Tax[53 ITR 601 (Ker)]. In thelight of the aforesaid law laid down by this Court as well asthe Supreme Court, the Tribunal formed an opinion that therespondent has no reason to revise the order by exercisingjurisdiction under Section 263 of the Act. Accordingly, thesaid appeal was allowed. I.T.A.No.147/2012 & 46/2014 infer that the addition made under Section 68 is receipt fromthe business of the assessee. Further reference is also madeto the judgment of this court in Annamalai Reddiar v.Commissioner of Income Tax[53 ITR 601 (Ker)]. In thelight of the aforesaid law laid down by this Court as well asthe Supreme Court, the Tribunal formed an opinion that therespondent has no reason to revise the order by exercisingjurisdiction under Section 263 of the Act. Accordingly, thesaid appeal was allowed. 5.On a perusal of the order under Section 263 of theAct, it is clear that the Commissioner of Income Taxproceeded on the basis that when the explanation offeredwith reference to such income is not satisfactory, it wasincome from other sources which should have been put inthe head meant for income from other sources and thereforethe finding of the Assessing Officer was not justified intreating the said income under Section 68 of the Act. Inorder to exercise jurisdiction under Section 263 of the Act, it I.T.A.No.147/2012 & 46/2014 has to be found that the order of the Assessing Officer iserroneous and prejudicial to the interest of the Revenue.The Assessing Officer has considered the entire issue andfound that the unexplained cash credit is to be treated asincome under Section 68. This is not a case where thedecision of the Assessing Officer can be treated aserroneous. If two views are possible, the Assessing Officer,having adopted one view, it cannot be said that such anapproach is erroneous. That apart, this aspect has beenconsidered by the Apex court in Lakmichand Baijnath(Supra) and it is held that even if the explanation given bythe assessee, as to how the amounts came to be received, isrejected as untenable, the credits were to be treated asbusiness receipts which are chargeable. When such a viewis possible, there was no reason for the Commissioner tohave invoked Section 263 of the Act to arrive at a differentfinding and therefore the said appeal is liable to bedismissed. I.T.A.No.147/2012 & 46/2014 6.In I.T.A.No.46/2014 the Revenue challenges theorder passed by the Income Tax Appellate Tribunal, CochinBench in I.T.A.No.349/Coch/2011. 7.In this case the assessee filed return of incomedeclaring Nil income after setting off the brought forwardbusiness loss of Rs.68,32,444/-. A revised return was as filedon 15/03/2006 showing total income as nil after setting offbrought forward business loss of Rs.2,07,16,442/-. 8.The Assessing Officer, after having taken up thematter for scrutiny, made an addition of Rs.1,57,04,000/-under Section 68 of the Income Tax Act as unexplained cashcredit. Assessing Officer also added Rs.9,19,000/- u/s 40(a)(ia) of the Act. The Assessing Officer allowed set off of theadditions made under under Sections 68 and 40(a)(ia)against the brought forward losses of earlier assessmentyears and determined the total income as nil. 9.Thereafter, the internal audit party raised certainobjections indicating that by virtue of provisions under I.T.A.No.147/2012 & 46/2014 Section 72 of the Act, the carried forward business loss ofRs.3,74,10,442/- could be set off only against the assessee'sprofits and gains from the business and the excess set offallowed for business loss carried forward against additionmade as “unexplained cash credit” under Section 68 to thetune of Rs.1,57,04,000/- is not in order. As alreadyindicated, the Commissioner of Income Tax passed an orderunder Section 263 of the Act, which is dealt with in I.T.A.No.147/2012. 9.Thereafter, the internal audit party raised certainobjections indicating that by virtue of provisions under I.T.A.No.147/2012 & 46/2014 Section 72 of the Act, the carried forward business loss ofRs.3,74,10,442/- could be set off only against the assessee'sprofits and gains from the business and the excess set offallowed for business loss carried forward against additionmade as “unexplained cash credit” under Section 68 to thetune of Rs.1,57,04,000/- is not in order. As alreadyindicated, the Commissioner of Income Tax passed an orderunder Section 263 of the Act, which is dealt with in I.T.A.No.147/2012. 10.In the meantime, the Assessing Officer passed anorder giving effect to order under Section 263 of the Act.Annexure E is the said order. The matter was carried inappeal by the assessee which came to be allowed. Since theappeal was pending against the order in I.T.A.No.486/2009,the revenue has preferred a further appeal before theTribunal which came to be dismissed, against which thisappeal is filed. Since we have already found that theAdministrative Commissioner could not have exercised I.T.A.No.147/2012 & 46/2014 jurisdiction to invoke Section 263 of the Act, the assessmentorder made pursuant to the said order is rightly rejected bythe appellate authorities and the Tribunal. Under thesecircumstances, this appeal also fails and is liable to bedismissed. In the result, both the appeals are dismissed. (sd/-)(MANJULA CHELLUR, CHIEF JUSTICE) (sd/-) (A.M.SHAFFIQUE, JUDGE) jsr