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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश / ORDER
PER SHRI D. KARUNAKARA RAO
The appeal is filed by the Revenue against the order of Commissioner of Income Tax (Appeals) – 2, Kolhapur, dated 07.06.2019 for the assessment year 2009-10.
Briefly stated the relevant facts include that assessee is a firm who filed its return of income for A.Y 2009-10 on 29.09.2009 declaring total income of Rs.16,91,540/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 02.05.2011 determining the total income at Rs.30,27,780/-. Subsequently, the CIT-II, Kolhapur invoked the provisions of Sec.263 of the Act and passed a revision order dt.17.09.2013 and CIT directed the AO to determine the income afresh, as the original assessment made was erroneous in so far as prejudicial to the interest of the revenue. Giving effect to the same, the AO passed order u/s 143(3) r.w.s. 263 of the Act on 26.03.2015 determining the total income of the assessee at Rs.30,27,780/-.
Aggrieved by the order of AO, assessee carried the matter before CIT(A), who granted relief to the assessee on the merits. Therefore, the Revenue is in appeal before me. The tax effect is below Rs.50,00,000/-.
Before me, at the outset, Shri Pramod Shingte, learned counsel for the assessee submitted that this is a low tax effect appeal and covered by the Circular No.17 of 2019 dated 08.08.2019. Therefore, the appeal should be dismissed. Bringing my attention to the fresh assessment order made by the AO u/s 143(3) r.w.s. 263 of the Act, learned counsel for the assessee submitted that the assessed tax in this order is only Rs.30,27,780/-. Tracing the background of the fresh assessment and the revision order by the CIT u/s 263 of the Act, learned counsel for the assessee brought my attention to Paper Book and submitted that an audit objection was raised by the revenue and the same is the is the starting point for the above said order of the CIT as well as the AO. Taking the audit objections into consideration, which is of-course deleted by the CIT(A), the tax effect will never increase to the set limit of Rs.50 lakhs.
Therefore, the Circular No.17 of 2019 will bars the Revenue from filing such appeals. On merits also, the case is covered in favour of the assessee and the order of CIT(A) is fair and reasonable.
On the other hand, Shri Prashant Gadkare, learned counsel for the Revenue heavily relied on the said circular and submitted that this is not the case of appeal to dismiss. It is a case of appeal where the facts are limited. The tax effect circular applies to the case of this appeal.
On merits, I also find the CIT(A) has rightly deleted the addition made by the AO after considering the objections. In this regard, I peruse the contents of Para 6.2 on Page 7 of the order of CIT(A) and find it relevant to extract the same which are as under :
“6.2 I am inclined with the submission of the appellant as above. In view of the contention of the appellant that Pune ITAT in the case of Silver Palace in order dated 29/06/2018 has discussed about the applicability of the decision of Hon'ble Chattisghad High Court in the case of Dhanush General Stores (Supra) and held that in the absence of decision on the issue by the jurisdictional High Court the decision of Karnataka High Court in the case of CIT Vs. S. K. Shrigiri and Bros. (2008) 298 ITR 13 (Kar) which was in favour of the assessee is to he applied following the decision of the Hon'ble Supreme Court in the case of Vegetable Products, reported in 88 ITR 192 (SC), the appellant was entitled to get the deduction of remuneration paid to partners since the additional income declared was to be treated as business income. The appellant also quoted para 13 of the order of the Pune ITAT in the written submission as below: -
"13. Thus in case where source of investment/expenditure is dearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of sum investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of accounts and its nature and source is net identifiable. Once such excess investment is taxed as undeclared business receipts then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/ expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipts under that particular head. It is only where no nexus is established with any head then It should be considered as deemed income under section 69, 69A, 69B & 69Cas the case may be. It is because when assessee fails to explain satisfactorily the source of the such investment then It should be taxed under section 69, 69A, 698 & 69C as the case may be. It should not be done at the first instant without giving opportunity to the assessee to establish nexus. Therefore there is no conflict with the decision of Hon. Gujarat High Court in the case of Fakir Mohmed Haji Hasan (Supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, we hold that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. "
Considering the above said nature of the issue, I find Commissioner of Income Tax (Appeals) grant relief to the assessee after duly relying on the various judgments of the Hon’ble Apex Court, High Courts and the Tribunals which are mentioned in Para 6.2 extracted above. In my view, the order of the CIT(A) is fair and reasonable. Accordingly, the grounds raised by the Revenue needs to be dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on 24th day of June, 2020.