DCIT, JAIPUR vs. RAM BABU GUPTA, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh dqy Hkkjr] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 198/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2007-08 cuke DCIT Central Circle-1, Shri Ram Babu Gupta, Vs. Jaipur 12-13, Patel Colony, Sardar Patel Marg, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACPPG7427A vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@Revenue by : Shri R.A.Verma (Addl.CIT) fu/kZkfjrh dh vksj ls@Assessee by : Shri S.L. Poddar (Advocate) lquokbZ dh rkjh[k@ Date of Hearing : 14/02/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement: 28/03/2017 vkns'k@ ORDER

PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the Revenue against the order of ld. CIT(A), Alwar dated 18.12.2012 for A.Y. 2007-08 wherein Revenue has taken the following grounds of appeal. “(i) On the facts and in the circumstances of the case, the Ld. CIT(A), Alwar has erred in directing “to allow set off of Rs. 2,51,60,000/- instead of Rs. 1,28,00,000/- notwithstanding the fact that assessed income would fall to Rs. 7,37,94,94,065/- i.e. below the returned income of Rs. 8,27,40,410/-“, which directions are against the

2 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

findings of CIT(A) and ITAT in original appellate orders reproduced by the AO in the set-aside assessment order. (ii) On the facts and in the circumstances of the case, the Ld. CIT(A), Alwar has erred in directing to compute the income below the income declared by the assessee himself in his return of income. (iii) On the facts and in the circumstances of the case, the Ld. CIT(A) has exceeded his powers in directing to allow the set off over and above the amount determined by the appellate authorities in the original appellate proceedings.

matter has reached the Tribunal. The genesis of this appeal lies in the

the additional ground of appeal which was taken by the appellant in the

first round of appeal before the Tribunal. Here it would be relevant to

refer to the findings of the ld CIT(A) in the first round of appeal which

was the subject matter of appeal before the Coordinate Bench and

which formed the basis of filing the additional ground of appeal before

the Tribinal:

“As regards to addition of undisclosed profit from the sale of

Mahala property amounting to Rs. 12800000/- it is submitted that the

sale of property under question was made on 3.7.2006 which is beyond

the AY under appeal i.e. the same relates to AY 2007-08. Thus no

addition can be made in the year relevant assessment year the

3 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

undisclosed profit from the sale of Mahala Property amounting to Rs.

12800000/-. More over the ld A/R submits that since the property is

owned by the company no addition can be made in the case of assessee

individual. This argument of the A/R is found unacceptable as above on

the ground that the assessee himself taken the responsibility to pay the

additional tax on the income arising out of undisclosed transactions of

the individuals or companies of assessee group in his statements u/s

132(4) of the IT Act. Since the undisclosed transactions are carried out

by the assessee individual capacity on behalf of other individual or

company the undisclosed income arising out of undisclosed transactions

is correctly assessed in the hands of the assessee individual on his own

expressed taking of responsibility. The total sale of property under

question is found by the AO Rs. 37660000 on the basis of seized papers

as against Rs. 12500000/- as per sale deed in the name of company as

against purchase by the company for a sum of Rs. 24805000 on the

basis of seized materials. Therefore, there was undisclosed transactions

of purchase and sale of this property other than the sale deeds in the

name of company. Thus the profit arising out of the undisclosed

transactions Rs. 12800000 can be assessed in the hands of the assessee

individual. However the property stands sold on 3.7.2006 as per date of

sale deed. Therefore the undisclosed profit is to be considered in the

4 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

year of its sale i.e. in AY 2007-08 and the addition of undisclosed profit

Rs. 12800000 during this year is deleted. However a due set off should

be allowed if similar profit arise in AY 2007-08 from the purchase and

sale of this property with the surrendered amount of undisclosed

investments from properties by the assessee group in AY 2007-08.”

2.1 In the above background, the additional ground of appeal was

filed by the appellant and we now refer the observations and the finding

of the Coordinate Bench in respect of the said additional ground of

appeal filed by the appellant which reads as under:-

“49. After going through the written submission and taking into

consideration the arguments of the parties, we find that facts are not

clear in respect of the issue raised through additional grounds. Addition

directed to be made for AY 2007-08 has not been challenged by the

assessee. However assessee is asking to allow set off of undisclosed

profit of Rs. 1.28 crores against the amount surrender by the assessee.

Since the facts are not clear, therefore, we are of view that this matter

should go back to the file of AO to consider the submission of the

assessee. There is no dispute that set off is allowable against

surrendered amount. However, onus is on the assessee to prove that

the surrendered amount was available with the assessee for allowing set

5 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

off against the income added by the AO or by the ld. CIT(A). If the set

off is not allowed, then it will tantamount to double taxation. Therefore,

the set off has to be allowed.

set off for the reason that if set off is allowed, then the assessed income

will be reduced or not. The question is to allow set off. The AO has

added the amount for AY 2006-07. However the ld CIT(A) has directed

to add this amount for AY 2007-08. Therefore, for this reason if the

assessed income of the AY 2006-07 becomes less than the disclosed

income, then effect has to be given as per direction of ld CIT(A) as

assessee has not filed any appeal against such findings of ld CIT(A).

to the file of AO to examine the additional grounds in the light of our

observation as above and after taking into consideration the written

submission filed on behalf of the assessee here before the Tribunal. The

assessee may be allowed reasonable opportunity of being heard. We

order accordingly.”

2.2 In view of the above directions of the Coordinate Bench in respect

of the additional ground of appeal, the matter was again taken up for

fresh consideration by the Assessing officer and the relevant finding of

6 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

the Assessing officer are contained at para No. 17 to 20 of its order

which is reproduced as under:-

“17. Above submissions are carefully considered and the same are found

to be not acceptable being beyond the directions of the higher

authorities. There is no directions of set off of entire sale proceeds of

Mahala property either by the CIT(A) or by the ITAT. Where the

directions of the CIT(A) are clear that set off be allowed of profit earned,

if the same profit is part of surrender in AY 2007-08. The directions of

the ITAT are that set off of profit be allowed to the assessee subject to

proof by the assessee that surrendered amount was available with the

assessee for allowing set off against the income added by the AO.

Assessee has never claimed set off of entire sale proceeds before the

CIT(A) or the ITAT. So there is no question of allowing of set off of

profit of Rs. 1.28 crores against the investment in AY 2007-08. Now the

A/R wants to travel beyond the directions of the higher authorities which

cannot be done in set aside/restored proceedings. In such proceedings

the AO is restricted to act strictly in accordance with the directions of the

higher authorities.

profit part could only be allowed if the same profit arises in AY 2007-08

7 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

from sale and purchase of this property with the surrendered amount of

undisclosed investment from properties in AY 2007-08. The assessee

has not been able to provide any details in this respect. Undisputedly

the profit was earned in AY 2007-08 instead of AY 2006-07 and

therefore the same amount was excluded from the assessed income of

AY 2006-07 and it was required to be added separately in AY 2007-08

subject to specific observation of the CIT(A) that a due set off should be

allowed if similar profit arises in AY 2007-08 from purchase and sale of

this property with the surrendered amount of investment. The assessee

has not been able to provide any details as to how he has computed the

revised income before the AO at the time of giving effect to the order of

CIT(A). It may be seen that the assessee has declared following

undisclosed income in AY 2007-08 as referred in para 5.1 of the asstt

order:-

S. No. Details of income surrender Amount

8 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

1 to 40 and other seized Annexures

5 Undisclosed investment made in the excess stock found during the Rs. 28000000 course of search in the business concern

Rs. 48336340

where prescribes the profit earned on sale of Mahala property as

directed by the ld CIT(A) and therefore question of giving set off has no

relevance. From the order of the ld CIT(A) it may further be seen that

the disclosed investment in the said property was only of Rs. 10936055

whereas the AO found undisclosed investment in the said property of Rs.

1.50 crores in this property which stands considered in AY 2006-07 and

also partly confirmed by the CIT(A). Now the only question remained is

of set off of profit of Rs. 1.28 crores on the date of sale of the property if

the same is part of surrender in AY 2007-08 as per the directions of the

ld CIT(A) but it is not so as is evident from the chart of unaccounted

income surrendered in the return, details of which are reproduced

9 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

above. As such the assessee does not deserve any set off, if the

directions of the ld CIT(A) are considered.

directing to set off of this amount of profit as available for undisclosed

investments surrendered by the assessee in AY 2007-08 because if it

was not done it would amount to double taxation once in the form of

earning of profit and then in the form of undisclosed investment.

Accordingly, following the directions of the ITAT set off of profit earned

from this property is allowable, if it is used for investment in other

properties which have been surrendered in AY 2007-08 are made after

the sale of the Mahala property i.e. 3.6.2007 or before this date, the

assessee was specifically asked to provide the date wise details of

undisclosed investment in AY 2007-08. But the assessee has not

furnished date wise details of investment in AY 2007-08 but has claimed

that such set off is allowable against surrender of stock of Rs.2.80

crores. Since search was carried out on 1.11.2006 whereas the property

was sold on 3.7.2006, set off of profit can be allowed against this

disclosure of stock on 1.11.2006. Accordingly set off of profit of Rs.1.28

crores is allowed against undisclosed/excess stock surrendered.

10 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

With these remarks income of the assessee is computed as under

giving effect to the order of the ITAT and present proceedings.

Income as per order u/s/154/143(3)/153A dated 28.1.2009 Rs.89551227 (LTCG Rs9519089+Rs.80032138) Less relief allowed by the ld CIT(A) (i) On account of un-named property (-) Rs.2000000 (ii) On account of MI Road property (-) Rs.3075000 (-)Rs.5075000 Less:- LTCG on MI Road property to be Considered based on DVO report Rs.2270079 Add:- Capital gain on MI Report as per DVO reports as discussed Rs.1002862 Add:-Part Investment in Mahala property pertaining to This year as per order of the CIT(A) Rs.4504000 Add:- Profit on sale of Mahala property Rs.12800000 Less:- Set off for investment in undisclosed Stock surrendered as discussed Rs.12800000 Rs. NIL Total Income Rs.87713010

2.3 Being aggrieved with the above order of AO, the assessee carried

the matter in appeal before the ld. CIT(A) and his findings are contained

at para 4.3 of its order which is reproduced below:-

“4.3 I have considered the assessment order of the AO u/s

254/250/154/143(3) dated 28.12.2011 and the submissions made by the

AR of the appellant.

(i) I am inclined to agree with the observation of the AO that the AO

has to act strictly in accordance with the findings and directions of

the higher authorities in set aside proceedings and while giving

effect to appellate orders. The findings and directions by the ld.

11 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta CIT(A) with respect to Mahla property in order dated 19.05.2009

are as under:-

(a) Para 1,2 & 3 page 31:

• The undisclosed investment in the form of cash payment for

purchase of Mahla property at Rs. 95,15,000/- is confirmed.

Balance Rs. 328,390/- is deleted.

• Outstanding liability for payment for purchase Rs.

45,04,000/- is to be considered in next year as investment

on actual payment basis. Similarly sale proceeds of this

purchase may be set off with the available surrender of the

investment in next assessment year if co-related.

• Thus the profit arising out of the undisclosed transactions

Rs. 128,000,000/- can be assessed in the hands of the

assessee individual. However, the property stands sold on

03.07.2006 as per the date of sale deed. Therefore, the

undisclosed profit is to be considered in the year of its sale

i.e. in AY 2007-08 and the addition of the undisclosed profit

of Rs. 128,00,000/- during the relevant assessment year is

deleted. However, a due set off should be allowed if similar

12 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

profit arises in assessment year 2007-08 from the purchase

and sale of this property with the surrendered amount of

undisclosed investment for properties by the assessee group

in AY 2007-08.

Thus, there is a clear finding of ld. CIT(A) that undisclosed

investment of Rs. 45,04,000/- in Mahla property and similar profit

arising on its sale is to be assessed to tax in AY 2007-08 as against

addition of Rs. 1.28 crores made by the AO in AY 2006-07. Further,

there is a direction to give set off of sale proceeds of this purchase

and of profits arising on its sale in AY 2007-08.

The AO has accordingly added Rs. 45,04,000/- and Rs. 1.28 crores

in AY 2007-08 and has observed that the assessee does not deserve

any set off, if the directions of the ld. CIT(A) are considered since

assessee has not correlated the sale proceeds of Mahla property

(which was sold on 03.07.2006) with the surrender of income of Rs.

4.83 crores by way of undisclosed investment in various properties

and in excess stock (of Rs. 2.8 crores) of business found on the date

of search i.e. 01.11.2006.

However, the AO has been gracious enough to allow set off of Rs.

1.28 crores being profit on sale of the said property by following the

13 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

directions of the Hon’ble ITAT, otherwise it would amount to double

taxation. Further, the AO has simply ignored/excluded the set off of

Rs. 26723945/- allowed by AO in order dated 29.06.2009.

(ii) The appellant had taken following additional ground before the

ITAT for AY 2007-08 in ITA No. 646/JP/09.

“The learned CIT(A) has erred in not given direction to the

Assessing Officer to give effect to the following findings given by him in

the order for AY 2006-07-

Undisclosed profit of Rs. 1,28,00,000/- on sale of Mahla property

required to be considered in AY 2007-08. Set off of this profit required

to be allowed with the surrendered amount of undisclosed investments

for properties by the assessee group in AY 2007-08”.

The Hon’ble ITAT set aside this issue to the file of AO to consider the

issue of set off of undisclosed profit of Rs. 1.28 crores against the

amount surrender by the assessee since facts in that regard were not

clear

(iii) The AR has submitted that the said Mahla property was sold on

3.7.2006 as per date of sale deed and the ld. CIT(A) directed the

AO to give set off of sale consideration and profit in the year of sale

14 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

which is available for other investment made by the assessee in the

AY 2007-08.

It has been submitted by the AR that the said property was

sold for Rs. 3,76,60,000/- as per sale deed and the purchase cost

as per registered deed is Rs. 109,36,055/-. So set off of Rs.

267,23,945/- should be allowed since the sale consideration was

received out of books on 3.07.2006 and was found as investment in

stock of Rs. 2.80 crore on the date of search on 01.11.2006. It has

been further submitted that profit from the sale of said property of

Rs. 15,63,945/- was recorded/disclosed in the regular books of

accounts of the company M/s Mahla Real Estate Pvt. Ltd. and

therefore unaccounted profit which requires to be added in the

hands of assessee at Rs. 112,36,055/- (Rs. 128,00,000-15,63,945).

(iv) I find from orders and submissions that as per seized

documents, the value of sales recorded is Rs. 3,76,60,000/- as

against the sales recorded in registered sale deed at Rs.

125,00,000/-. Therefore, unrecorded sales proceeds work out to

Rs. 251,60,000/-. Cost of the land as per seized documents has

been worked out at Rs. 248,55,000/-. Further, cost of property as

recorded in registered deeds is Rs. 109,36,055/-. Thus profit of Rs.

15 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

15,63,945/- has been recorded/booked in the case of Mahla Real

Estate Pvt. Ltd. Therefore, undisclosed profit from sale of said

property would work out to (Rs. 128,05,000-Rs. 15,63,945)=

112,41,055/-.

(v) Ld. CIT(A) in order dated 19.05.09 had directed that undisclosed

profit is to be considered in the year of its sale and quantum of

this profit was required to be worked out by the AO for AY 2007-

undisclosed profit from this property at Rs. 112,41,055/- for AY

2007-08 instead of Rs. 128,00,000/- in order dated 28.12.2011.

The addition of Rs. 45,04,000/- is found to be in order as it is

as per directions of the ld. CIT(A). Therefore, ground No. 2 in this

regard is dismissed.

(vi) However, the set off would be available against the

undisclosed stock surrender of Rs. 2.8 crores found at the time of

search out of sale proceeds realized out of books of

Rs.251,60,000/- (Rs. 376,60,000- Rs. 125,00,000) on 03.07.06

since there is no material/evidence on record that this amount was

invested elsewhere and in view of the clear directions of the ld.

CIT(A) in his order dated 19.05.09.

16 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

Further, the Hon’ble ITAT has also observed in this regard in

their order dated 26.11.2010 (para 49) that effect of set off has to

be given as per direction of ld. CIT(A) since the AO has added the

amount for AY 2006-07, whereas the ld. CIT(A) has directed to

add this amount for AY 2007-08. Thus, in this case there is

shifting of income from AY 2006-07 to AY 2007-08 and the ratio of

the Hon’ble Supreme Court decision of CIT Vs Shelly Products 261

ITR 367 is not applicable.

In view of above discussion, the AO is directed to allow set off

of Rs.251,60,000/- instead of Rs. 128,00,000/- in the order dated

28.12.11, notwithstanding the fact that the assessed income

would fall to Rs. 737,94,065/- i.e. below the returned income of

Rs. 827,40,410/-. In fact, it is also seen that the although the

assessed income would fall below the returned income in AY 2007-

08 by Rs. 89,46,345/- but at the same time, the assessed income

has gone up by Rs. 94,15,000/- in AY 2006-07 on account of

additions relating to the Mahla property. The AO is directed to

work out the revised income and relief as directed above.

17 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

In view of the above, the ground No. 1,4 & 5 are partly

allowed on above terms, ground No. 3 is allowed and ground No.

2 is dismissed. “

2.4 Now the Revenue is in appeal before us. Ld. DR has vehemently

argued the matter, took us through the orders of Coordinate Bench in

the first round of appeal and the order of the ld CIT(A) in the first round

of appeal and the latest CIT(A) order under challenge. He supported the

order of the Assessing Officer and submitted that the AO has correctly

given effect to the directions of the ITAT in the first round of appeal and

there is no infirmity in such order.

2.5 The Ld. AR relied on and supported the order of the ld CIT(A) and

submitted that broadly two issues are involved in this case. First issue is

regarding set off against surrendered income and secondly shifting of

income from assessment year 2006-07 to 2007-08 and also whether

assessed income can be below the return income. On each of this

matter, Ld. AR has submitted as under:-

It was submitted that the issue involved revolves around the immovable

property titled as Mahla Property. Although this property has been

18 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

purchased in the hands of the M/s Mahla Real Estate Pvt. Ltd. but the

unaccounted investment/profit in respect of this property has been

considered in the hands of the assessee. The assessee being a director

in this company had offered the unaccounted investment and the

income pertaining to the purchase and sale of this property in his

individual hands. The facts of purchase and sale of this property as per

registered deed and as per seized papers found during search are as

under:-

Particulars of purchase and sale of Mahla Property:

Mahla Property Purchase Sale amount Profit amount As per registered deed 10936055 12500000 1563945 As per seized documents 24855000 37660000 12805000

The admitted facts are that whereas the property was purchased in

Assessment Year 2006-07 it was sold in Assessment Year 2007-08. The

assessee had claimed that on the sale of this property funds over and

above and in addition to that accounted for on sale of this property

amounted to Rs. 2,51,60,000/- (37660000-125000000) were received.

The property actually was sold as per seized documents for a sum of Rs.

19 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

3,76,60,000/- whereas as per sale deed the sale was shown only for a

sum of Rs. 1,25,00,000/-. Thus actually assessee was in receipt of on

money funds of Rs. 2,51,60,000/- (37660000-125000000). The set off

of this amount was sought against surrendered investments in other

properties in Assessment Year 2007-08. The Learned CIT(A) has

allowed the same as per para (vi) on page 19 of the appellate order.

The Learned CIT(A) has correctly held that the set off of this amount of

Rs. 2,51,00,000/- would be available against the undisclosed stock

surrendered by the assessee at the time of search of Rs. 2.8 Crores.

The Learned CIT(A) has further observed that there is nothing on record

which may show that this amount of Rs. 2,51,60,000/- was invested

elsewhere. The finding of the Learned CIT(A) is perfectly in order. This

finding of the Learned CIT(A) is in tune with the earlier order dated

19.05.2009 wherein the Learned CIT(A) had directed that the sale

proceeds of the purchase of this property require to be set off with the

available surrender of the investment.

It was submitted that the Learned CIT(A) has further correctly held that

as per the earlier order dated 19.05.2009 the profit on sale of this

property was required to be considered in Assessment Year 2007-08

20 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

instead of in Assessment Year 2006-07. Thus the income on sale of this

property of Rs. 1,28,05,000/- was wrongly taken in Assessment Year

2006-07 was shifted/transferred to Assessment Year 2007-08. The

profit on sale of this property was further corrected. It was held that the

assessee as per registered sale deed declared profit of Rs. 15,63,945/- in

the books of accounts as is clear from the table above. Whereas the

profit as per seized documents worked out to Rs. 1,28,05,000/-. Thus

only the difference between the two which comes to Rs. 1,12,41,055/-

(12805000-1563945) was assessable as income in Assessment Year

2007-08 as income to the extent of Rs. 15,63,945/- already stood

declared by the assessee in the books of accounts. The directions of the

Learned CIT(A) are perfectly lawful, legal and justified. There is no case

for the Revenue for agitating the matter.

It was submitted that the Revenue has also agitated the matter on the

ground that the direction of the Learned CIT(A) would result in

determination of income lesser than shown in the return by the

assessee. This issue had cropped up in the first round of appeal before

the Hon’ble ITAT and the same was decided in cross-objection no.

127/JP/2009 and ITA no. 645, 646/JP/2009 order dated 26.12.2010.

21 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

The relevant directions of the Hon’ble ITAT are in the context of this

very property the same appear in para no. 49 & 50 of page 37 of the

order dated 26.11.2010 of the ITAT. The same are quoted below:-

“There is no dispute that set off is allowable against the surrendered

amount …………..(Para 49) ………. One of the contention of the assessee

that the Assessing Officer is not allowing set off for the reason that if the

set off is allowed then the assessed income will be less than the

disclosed income. This is not a question whether returned income will

be reduced or not. The question is to allow the set off.”(Para 50)

In view of the aforesaid finding and observation of the Hon’ble ITAT the

matter stands settled. The direction of the Learned CIT(A) are in tune

with the observations of the Hon’ble ITAT. The Revenue’s appeal on this

point does not hold good and fails. The decision of the Learned CIT(A)

deserves to be confirmed. It is further submitted that it is also the

established position of law that the income of the assessee has to be

determined as per provisions of law and the same can be assessed

lesser than shown in the return. The following decisions are quoted in

support:-

(i) SUSHIL KUMAR DAS vs. INCOME TAX OFFICER (2011) 11 ITR

0017

22 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

The moot question arising out of this appeal is whether the income

determined by the AO on the basis of the return filed by the assessee

can be a figure lower than the income returned by the assessee. It is a

well settled that the principle for determining the taxable income of the

assessee under the IT Act should be within the purview of the law in

force. If the taxable income determined by the AO is not in accordance

with such principle it is open to the assessee to contend the same before

the higher authorities to follow the correct application of law to

determined the actual taxable income of the assessee. In our considered

view, the lower authorities, not expected, to say that merely because the

assessee has returned income which is higher than the income

determined in accordance with legal principles such returned income can

be treated as lawfully assessed. An assessee is liable to pay tax only

upon the taxable income. The law imposed by the AO to assess the

income according to law and determined the tax payable thereon. In

doing so, the AO cannot assess the income of the assessee an amount

which is not taxable as per law though shown by the assessee in the

return. It is always open to the assessee to take a plea that the taxable

income though shown as income is not taxable under law before the

higher authorities.

23 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

(ii) UNITED PHOSPHOROUS LTD. vs. DEPUTY COMMISSIONER OF

INCOME TAX (2012)67 DTR -395

In view of the provisions of the IT Act, there can be determination of

income under the provisions of the Act less than the returned income

due to various factors. There is no bar in determining the total

income/undisclosed income less than the returned income if facts so

warrant.

(iii) NIRMALA L.MEHTA vs. BALASUBRAMANIAM, COMMISSIONER OF

INCOME TAX & ORS. (2004) 269 ITR 0001

It may be held that merely because the petitioner offered the prize

money won in the lottery of the Sikkim Government, to tax under the IT

Act, 1961, that shall not take away her right in contending that the said

prize money was not chargeable and assessable to tax under the IT Act

in the revisional jurisdiction.

In view of the aforesaid facts it was submitted that the order of the

learned CIT(A) is perfectly lawful and deserves to be confirmed. The

directions given by him are in accordance with the law and facts of the

case. The appeal of the Revenue deserves to be dismissed.

24 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

2.6 We have heard the rival submissions and pursued the material

available on record including the order of the ld CIT(A) and the

Coordinate Bench in the first round of appeal as well as the latest order

of ld CIT(A) under challenge before us and the ld AR’s contentions as

reproduced above. The limited issue under consideration is the nature

of directions issued by the Coordinate Bench in the first round of appeal

and whether the same has been given duly effect to by the AO. The

directions of the Coordinate Bench are clear that “the assessee is asking

to allow set off of undisclosed profit of Rs 1.28 Crores against the

amount surrendered by the assessee and since the facts are not clear,

therefore, we are of the view that matter should go back to the file of

the AO to consider the submissions of the assessee.” And “we set aside

this issue to the file of the AO to examine the additional ground of

appeal in the light of our observations as above and after taking into

considerations the written submissions filed on behalf of the assessee.”

2.7 Undisputedly, the impunged proceedings are set-aside

proceedings with directions to consider the additional ground as

submitted before the Co-ordinate Bench in terms of examining the set

off of undisclosed profit of Rs 1.28 Crores against the amount

surrendered by the assessee. And in light of these directions, the AO

25 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta

has considered the submissions of the assessee and has stated that

since the sale of Mahala property has happened on 3.7.2006, the profit

arising from such sale of Mahala property amounting to Rs 1.28 Crores

(after considering the sale consideration of Rs 3.76 Crores and cost of

purchase of Rs 2.48 Crores as per seized documents) has been worked

out and the same was allowed set off against the surrender of stock of

Rs 2.8 Crores. In our view, the AO has rightly given effect to the

directions of the Coordinate Bench and we see no infirmity in the same.

2.8 At the same time, we are not in agreement with the findings of

the ld CIT(A) where he states at para 4.3 (vi) of his order that set off OF

sale proceeds would be available against the undisclosed stock surrender

of Rs 2.8 crores found at the time of search of sale proceeds realized out

of books of Rs 2.51 crores since there is no material/evidence on record

that this amount was invested elsewhere and in view of the clear

directions of the ld CIT(A) in his order dated 19.5.09.” The reason for

the same is that there is no such directions by the ld CIT(A) in the first

round and that’s precisely the reason why the assessee took the

additional ground before the Coordinate Bench and which has been

rightly given effect to by the AO.

26 ITA No. 198/JP/2013 DCIT Vs. Shri Ram Babu Gupta In light of above discussions, we set aside the order of the ld CIT(A) and restore the order passed by AO. In the result, the appeal filed by the Revenue is allowed.

Order pronounced in the open court on 28/03/2017.

Sd/- Sd/- ¼dqy Hkkjr ½ ¼foØe flag ;kno½ (Kul Bharat) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 28/03/2017. *Ganesh*. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- DCIT, Central Circle-1, Jaipur 2. izR;FkhZ@ The Respondent- Shri Ram Babu Gupta, 12-13, Patel Colony, Sardar Patel Marg, Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 198/JP/2013}.

vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत