ACIT, HARIDWAR vs. M/S SANT STEEL & ALLOYS (P) LTD., KOTDWAR

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘G’: NEW DELHI BEFORE SH. I.C. SUDHIR, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER ITA Nos. 2808 & 2809/Del/2013 Assessment Years: 2003-04 & 2008-09 Asstt. Commissioner of Income Vs. M/s. Sant Steel & Alloys (P) Ltd., Tax, Circle, Haridwar Plot No. 1, Jasodharpur Industrial Area, Kotdwar GIR/PAN : AACCS8808F (Appellant) (Respondent) Appellant by Smt. Anima Barnwal, Sr. DR Respondent by Sh. Anil Jain, Adv. Date of hearing 04.04.2016 Date of pronouncement 02.06.2016 ORDER PER O.P. KANT, A.M.: These appeals of the Revenue are directed against two separate orders, both dated 21/02/2013 of learned Commissioner of Income-tax (Appeals), Dehradun, for assessment years 2003-04 and 2008-09. The grounds of appeal raised in the both the appeals are common and, therefore, the appeals are heard together and disposed of by this consolidated order. ITA No. 2808/Del/2013 for AY : 2003-04 2. Now we take up the appeal in ITA No. 2808/Del/2013. The grounds raised in the appeal are reproduced as under: 1. The learned Commissioner of Income Tax(Appeals) has erred in law and on facts in allowing the business loss amounting to Rs. 1,62,35,194/- to be set off against the income amounting to Rs. 1,68,29,316/- determined under the deemed provisions of section 68. 2. The learned Commissioner of Income Tax(Appeals) has erred in law and on facts by upholding the submission of the assessee ignoring the provisions of section 14, 68, 70 and 71 of IT Act.

2 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 3. The order of the learned Commissioner of Income Tax(Appeals) be set aside and that of the Assessing Officer be restored. 3. The facts in brief are that the assessee, a private limited company, filed its return on 23/10/2003 declaring total income as nil. This return was processed under section 143(1) of the Income-tax Act, 1961 (for short “the Act”) of the Act on 19/12/2003. Thereafter, on receipt of information from the Additional DIT (Investigation), New Delhi that the assessee company received accommodation entries of Rs. 94 lacs from M/s S.J. Capital Private Limited during the year under consideration, proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued on 25/03/2010. In profit and loss account, the assessee had shown total receipt of Rs. 9,60,41,837/- which included profit from share amounting to Rs. 1,68,29,316/-. The net profit as worked out by the assessee was of Rs. 9,88,127/-. After making adjustment for brought forward losses the income shown in the return was nil. During the re-assessment proceedings, the AO observed that M/s S.J. Capital was not in existence at the given address and the documents submitted by the assessee in connection with the share trading business were not as they should be and were found doubtful by the Assessing Officer based on the comment of the experts and thus it was held that the assessee did not have any share trading business. As the assessee could not prove the genuineness of the receipt from sale trading business of Rs. 1,68,29,316/- , the reassessment proceedings under section 147 of the Income-tax Act, 1961 (in short “the Act”), were completed in the case of the assessee on 31/12/2010 making additions of Rs. 1,68,29,316/- under section 68 of the Act and simultaneously not allowed to set off the business loss of the current year or earlier years on the ground that unexplained income under section 68 cannot be set off against business loss . On appeal by the assessee, the learned Commissioner of Income-tax(Appeals) upheld the addition under section 68 of the Act, however, held the unexplained income under section 68 of the Act is to be computed under the head “income from other sources” and directed the AO to allow setoff of business loss against the

3 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 income under the head “income from other sources” as per the provisions of the Act. Aggrieved, with the action of the learned Commissioner of Income- tax(Appeals) in allowing set off of the business loss against the undisclosed income added by the Assessing Officer under section 68 of the Act, the Revenue is in appeal before the Tribunal. 4. In all the three grounds raised, the Revenue has challenged including the income under the deeming provisions of section 68 under the head “income from other sources” and consequent allowing of set off of business loss against the income under the head “income from other sources”. 5. The Assessing Officer held the share trading receipt of Rs. 1,68,29,316/- as unexplained credit as per the provisions of section 68 of the Act and she reduced the sum of Rs. 1,68,29,316/- out of the income under the head profit and gains of the business, which resulted into a loss of Rs. 1,62,35,194/- under the head ‘profit and gains of business’. She observed that loss under the head ‘profit and gains of business’ could be set off against income under any other had subject to the provisions of section 71 of the Act, however, the sum of Rs. 1,68,29,316/-was assessed under deeming provisions of the Act falling under the chapter “aggregation of income and set off for carry forward of loss”, which being not falling under any of the head ‘A’ to ‘F’ of heads of income and, therefore, the business loss was not allowed to set off against the such headless income. The learned Commissioner of Income-tax(Appeals), however, was of the view that the income from undisclosed/unexplained sources was to be classified under the residuary head of ‘income from other sources’ and, therefore, business loss was eligible for set off as per provisions of section 71 of the Act. 6. Before us, the learned Departmental Representative relying on the order of the Assessing Officer submitted that in the scheme of Income Tax Act, wherever source of income are known, the income is classified under heads like salary, income from house property, capital gains and profit and gains of business and profession and income from other sources. He further submitted

4 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 that when sources of the income are known and if it cannot be classified under the first four heads of salary, income from house property, capital gains and profit and gains of business and profession, then the income is classified/assessed under the head ‘income from other sources’ being a residuary head. The incomes in the nature, of which sources are not known or where the assessee failed to explain the source of income, cannot be classified under any of the heads of the income and then those incomes are assessed by the Assessing Officer under the deeming provisions under section 68 to 69D of the Act under the chapter aggregation of income. He further submitted that as the income of Rs. 1,68,29,316/- as unexplained credit under section 68 of the Act cannot be included under the head ‘income from other sources’ and, therefore, same cannot be adjusted against the loss under the head profit and gains of business as per section 71 of the Act. In support thereof, she relied on the judgment of the Hon’ble Gujarat High Court in the case of the Fakir Mohamad Haji Hasan reported in 247 ITR 290 (Guj). 7. On the other hand, the learned Authorized Representative (AR) of the assessee relying on the order of the learned Commissioner of Income- tax(Appeals) submitted that even the income from undisclosed sources would fall within the scope of the total income and belongs to the category of income from other sources and eligible for setoff against business loss. In support of his contention, the learned AR also relied on the judgment of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. DP Sandu Brothers Chamber (P) Ltd. reported in (2005) 273 ITR 1 (SC), decision of the Tribunal, Ahmedabad Bench in ITA No. 256/AHD/2011 dated 12/09/2014 in the case of ACIT, circle 4, Surat Vs. M/s Shree Raghupati Fibers Private Limited , judgement of the Hon’ble Gujarat High Court in the case of DCIT versus Radhe developers India Ltd (2010) 329 ITR 01 (Guj) and judgment of the Hon’ble Gujarat High Court in the case of CIT Vs. Shilpa dying and printing mills private limited reported in (2013) taxmann.com 3 (Gujarat).

5 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 8. We have heard the rival submissions and perused the material on record. The issue involved is whether the receipt of Rs. 1,68,29,316/- assessed by the AO as unexplained cash credit under section 68 of the Act falls under the head “income from other sources” or not and if it falls under the ‘income from other sources’ than business loss can be adjusted against the said income as per the provisions of section 71 of the Act. The Revenue is contesting that income under section 68 of the Act is under the deeming provisions and sources of which are not known, therefore, it cannot be classified under the head ‘income from other sources’ and consequently business loss cannot be adjusted against such income in accordance to section 71 of the Act , whereas, according to the assessee the unexplained income under section 68/69 are to be classified under the head “income from other sources” and the business losses are to be allowed to be set off against such income. 9. We find that for the purpose of charge of income tax and computation of total income, under chapter IV of the Act, the section 14 has classified all the income under six heads of income out of which one head of “interest on securities” has been omitted w.e.f. 01/04/1989, but the section 14, starts with the saving clause as under: “14. Save as otherwise provided by this Act, all incomes shall for the purposes of charge of income tax and computation of total income, be classified under the following heads of income: A. –Salaries B- ----------------- C. - Income from house property D.- Profit and gains of business or profession E.-Capital gains F.-Income from other sources.” ( Emphasis supplied) 9.1 Then subsequent chapters V of the Act has specified the income of other persons which are to be clubbed with the total income of the assessee.

6 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 9.2 Then chapter VI has specified certain deemed incomes under section 68, 69, 69A , 69B, 69C and 69D of the Act , which are to be aggregated with the income computed under the chapter IV and chapter V of the Act . These deemed incomes are where the source of income is not explained by the assessee or the explanations offered is in the opinion of Assessing Officer is not satisfactory as against the source of income known in case of income classified under various heads in chapter IV of the Act. 10. The learned AR in support of his contention that the deemed income under section 68 / 69 etc. are to be classified under the head “income from other sources”, relied on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. DP Sandu Bros. Chambur (P) Ltd (supra). The fact of the said case are that the assessee entered into a lease agreement with the lessor in 1959 for 50 years, under which rent was paid by the assessee to the lessor. During the relevant assessment year, the assessee surrendered the tenancy rights premeasured and in consideration for such premature termination of lease, the assessee was paid Rs. 35 Lacs. In the return of income filed, the assessee credited the sum of Rs. 35 lakh under the ‘reserve and surplus account’ of the Balance sheet. The Assessing Officer held this amount was taxable under the head “income from other sources” under section 10(3)/ r.w.s 56 as casual and non-recurring receipt. The CIT-A, however held that the sum received was liable to tax as capital gain after deducting an amount of Rs. 7 lakhs as the cost of acquisition. The CIT-A decided the cost of acquisition on the basis of market value as on 1-4-1974. The Tribunal, however held that the assessee did not incur any cost for acquisition of the leasehold rights and that if at all the cost has been acquired it was incapable of being ascertained and therefore held that since the capital gain could not be computed as envisaged in section 48 of the Act, the capital gain earned by the assessee if any was not exigible to tax. The Hon’ble High Court affirmed the view of the Tribunal and the matter was challenged by the Revenue before the Hon’ble Supreme Court. Thus in this context, whether the income from sale of tenancy rights, falls under the head capital gain or under

7 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 the head income from other sources, the Hon’ble Supreme Court referred to Section 14 of the Act and held as under:

“11. Sec. 14 of the IT Act, 1961, as it stood at the relevant time similarly provided that "all income shall for the purposes of charge of income-tax and computation of total income be classified under six heads of income," namely : (A) Salaries; (B) Interest on securities; (C) Income from house property; (D) Profits and gains and business or profession; (E) Capital gains; (F) Income from other sources unless otherwise, provided in the Act. 12. Sec. 56 provides for the chargeability of income of every kind which has not to be excluded from the total income under the Act, only if it is not chargeable to income-tax under any of the heads specified in s. 14 items A to E. Therefore, if the income is included under any one of the heads, it cannot be brought to tax under the residuary provisions of s. 56. 13. There is no dispute that a tenancy right is a capital asset the surrender of which would attract s. 45 so that the value received would be a capital receipt and assessable if at all only under item E of s. 14. That being so, it cannot be treated as a casual or non-recurring receipt under s. 10(3) and be subjected to tax under s. 56. The argument of the appellant that even if the income cannot be chargeable under s. 45, because of the inapplicability of the computation provided under s. 48, it could still impose tax under the residuary head is thus unacceptable. If the income cannot be taxed under s. 45, it cannot be taxed at all. [See : S.G. Mercantile Corporation (P) Ltd. vs. CIT 1972 CTR (SC) 8 : (1972) 83 ITR 700 (SC)].” 10.1 We find that in the above judgment, the source of income received was not in dispute and, therefore, mention of section 14 of the Act and the heads of income was with reference to known sources of the income and there was no reference of the incomes in the nature of section 68/69 of the Act. 11. Further, the ld AR also relied on the decision of Tribunal, Ahmedabad Bench on 12/09/2014 in the case of M/s Shree Raghupati Fibres Private Limited (supra) , wherein the Tribunal has relied on the judgment of the Hon’ble Supreme Court in the case of ITO versus Sandhu Brotrhers(supra).

8 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 12. As regard to above decision of the ITAT relying on the decision of the Hon’ble Supreme Court in ITO Vs. Sandhu Brothers (supra), with due respect, we find that that the observation of the Hon’ble Supreme Court Court in the said decision were in different context. In the said decision the primary question was whether the amount received on surrender of tenancy right was liable to be taxed as capital gain or income from other sources. In that contexts the Hon’ble Supreme Court held that section 56 prescribed for chargeability of income of every kind which is not to be excluded from the total income under the Act, only if it is not chargeable to income tax under any of the heads specified in section 14, items A to E. Thus, in the said decision the source of income was known as surrender of tenancy rights whereas in the case under consideration source of income of the addition of cash credit under section 68 of the Act has not been explained by the assessee and therefore sources are not known and, therefore, the ratio of the said decision cannot be applied over the facts of the case under consideration. 13. The Revenue on the other hand relied on the judgment of the Hon’ble Gujarat High Court in the case of Fakir Mohammed Haji Hasan V/s CIT (supra), wherein the issue of setoff of income under the section 69 against loss under other heads has been decided as under:

“6. Under s. 4 of the IT Act, income-tax is to be charged in accordance with the provisions of the Act in respect of the total income of the previous year of every person. As provided by s. 5, total income of any previous year of a person would, inter alia, include all income from whatever source derived which is received or is deemed to be received by such person, subject to the provisions of the Act. It will be seen from s. 69A of the Act that where the bullion, jewellery or other valuable article is not recorded in the books of accounts and there is no explanation about the nature and source of its acquisition, or the explanation is not satisfactory, the value thereof may be deemed to be the income of the assessee of the financial year immediately preceding the assessment year in which the assessee is found to be the owner of such bullion, etc. 6.1 The scheme of ss. 69, 69A, 69B and 69C would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion, etc. owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and money, or value of articles not recorded in the books of accounts or the unexplained expenditure may be deemed to be the income of such assessee. It

9 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under s. 14 of the Act, it would not be possible to classify such deemed income under any of these heads including income from "other sources" which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under s. 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of s. 69, 69A, 69B and 69C will not apply, in which event, the provisions regarding deductions, etc. applicable to the relevant head of income under which such income falls will automatically be attracted. 6.2. The opening words of s. 14 "Save as otherwise provided by this Act" clearly leave scope for "deemed income" of the nature covered under the scheme of ss. 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from "other sources" because the provisions of ss. 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc. and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head "income from other sources". Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of ss. 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions. 14. Thus, Hon’ble Gujrat High Court in the case has clearly analyzed that where source of income is not known, such deemed income will not fall under the head “income from other sources” and accordingly will not be available for set-off under section 71 of the Act. 15. In a subsequent judgment in the case of DCIT versus Radhey developers India Ltd, 329 ITR 1, the Hon’ble Gujarat High Court held that the income tax Act envisages every income under any of the heads specified in section 14 of the Act. The observation of the Hon’ble High Court are as under:

“15. 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 ss. 14 and 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)

10 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 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 s. 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.” 16. The Hon’ble High Court has found that the judgment in the case of Fakir Mohmed Haji Hasan (supra) was not applicable to the case before them. In our opinion, observations of the Hon’ble High Court are with reference to known sources of income as in the case of D.P. Sandhu Brother Chambur Private Limited (supra). 17. Further, the Authorized Representative of the assessee has also relied on the judgment of Gujarat High Court in the case of CIT Vs. Shilpa Dyeing and Printing Millls Ltd, (supra) following the judgment of the DCIT Vs. Radhe Developers India Ltd, (2010) 329 ITR 01 (Gujrat). However, we find that in the case of Shilpa Dyeing and Printing Mills Ltd (supra) the assessee disclosed the unaccounted stock under the head ‘other income’ as miscellaneous income and Tribunal, thus, allowed that adjustment of the income declared on unaccounted stock for set-off against the business loss as evident from questions of law raised by the revenue as under: 1. ……………. 2. Whether on facts and circumstances of the case and in law the Hon’ble ITA T in justified in not treating the income of Rs. 1, 00, 98, 672/-as deemed income as provided in this the scheme of section 69 of the Act 3. Whether in the facts and circumstances of the case and in law the Hon’ble ITA T in justified in deleting an addition of Rs. 1, 00, 98, 672/-by treating the same as business income and thus allowing set-off of business loss

11 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 19. The issue has also been decided by the Hon’ble Punjab and Haryana High Court in the case of Kim Parma private limited versus CIT 258 CTR for 454 and held that deemed income under 69,, 69A, 69B, & 69C of the Act are not assessable under the head income from other sources relying on the Gujarat High Court decision in the case of Fakir Mohmed Haji Hasan versus CIT 247 ITR 290. 20. This issue of set-off of losses against the deemed income under section 68/69 has also been decided by the Tribunal Ahmadabad bench in the case of Gujarat Infrapipes Private Limited Vs. ITO in ITA No. 1036/Ahd/2007 as under:

“10. We have heard the parties and gone through the facts of the case. The issue raised in terms of ground no.3 before us is as to whether the unaccounted stock of 31,751 kgs found during the survey can be assessed u/s 69B /69C of the Act or under the head business income. Undisputedly, the assessee admitted during the course of survey that they did not maintain any stock register on day-to-day basis for production nor it was possible to do so. In reply to question no. 6 of his statement , the assessee accepted the difference of 31751 kgs and voluntarily offered the amount of Rs. 14,35,000 for tax as additional income over & above, the income which the company earned till the date of survey. In these circumstances, the ld. CIT(A) observed that it is not the assessee's case that such unexplained purchases then lying with the assessee in the form of unsold goods / stock had been accounted for nor even that the said stock represented purchases for which relevant purchase bills were available or that the same have been shown or produced nor even the assessee made such a claim at any stage and that being so the unexplained stock represents unexplained expenditure in these purchases. In this context, the ld. CIT(A) referred to the observations of the Hon'ble Gujarat High Court in the case Fakir Mohammed (supra). As observed by the Hon'ble jurisdictional High Court in the aforesaid decision the scheme ofsections 69, 69A, 69B and 69C would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion etc. owned by the assessee or the source of expenditure incurred by the assessee are not explained at all or not satisfactorily explained, then the value of such investments and money, or value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of the assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will therefore be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under section 14, it would not be possible to classify such deemed income under any of these heads including 'Income from other sources' which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of these heads by virtue of a satisfactory explanation being

12 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 given, then these provisions of sections 69,69A, 69B and 69C will not apply, in which event the provisions regarding deductions etc. applicable to the relevant head of income under which such income falls will automatically be attracted. In the facts of the case income has been brought to tax u/s 69C of the Act on fulfilling the requirements by virtue of the deeming provisions.The scope of a charging section cannot be enlarged by importing further fiction by deeming the sum received as income from business or other sources. If the words of a statute are precise and unambiguous, they must be accepted as declaring the express intention of the Legislature. It was trite proposition in law that a legal fiction has to be strictly construed. As was observed by the Hon'ble Supreme Court in Bengal Immunity Co. Ltd. vs. State of Bihar (1955) 2 SCR 603 legal fictions are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond that legitimate field. In the present case the fiction is limited to the cases provided in the sections 69B/69C and cannot be extended further to hold that income is to be assessed under the head'Other Sources or 'Profits and Gains of Business or Profession'.Consequently, the assessee's claim of set off of current and brought forward depreciation agisnst such income is not tenable.. 10.2 Now adverting to the decisions relied upon on behalf of the assessee .First such decision is in the case of Krishna Textiles(supra), wherein facts were that during the course of assessment proceedings for the assessment year 1987-88, the Assessing Officer called for the copy of account of the assessee as appearing in the books of Gujarat Mineral Development Corporation (GMDC) and compared with the copy of account of assessee. The Assessing Officer observed that certain drafts allegedly sent to GMDC by the assessee totalling to Rs. 1,92,161 had not been accounted for in the books of the assessee but the entries in respect thereof appeared in the account of the assessee in the books of GMDC The assessee replied that the accounts of GMDC could not be reliable and the assessee had not sent the above drafts. The Assessing Officer was not satisfied with the explanation furnished by the assessee and he made the impugned addition of Rs. 1,92,161. In the light of these facts, Hon'ble High Court observed that since there is an admitted position that the assessee was carrying on the business of coal and lignite and purchases were made from time to time from GMDC, in that case, even if any addition is required to be made under section 69C, the entire expenditure towards it has to be allowed as a deduction undersection 37(1) of the Act. The assessment year under consideration is admittedly 1987-88 to which the effect of this amendment will not be applicable. Apparently, such are not the facts in the case under consideration. 10.3 As regards decision of the ITAT ,relying upon the decision of the Hon'ble Supreme Court in ITO Vs. Sandhu Brothers(Chembur), 273 ITR 1(SC), with due respect, we are of the opinion that the observations of the Hon'ble Supreme Court in the said decision were in relation to a different context ,not relevant to the facts of the case under consideration. In the said decision, the primary question involved was as to whether the amount received by the assessee on surrender of tenancy rights is liable to capital gains tax under section 45 of the Income-tax Act, 1961 or was taxable as "Income from other sources" under section 10(3) read with section 56 of the Act . In that context Hon'ble Apex Court held that section 56 provides for the chargeability of income of every kind which has not to be excluded from the total income under the Act, only if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. Therefore, if the income is included under any one of the heads, it cannot be brought to tax under the residuary provisions of section 56. 10.4 However, the facts in the case under consideration are totally different. From the aforesaid decisions We are of the opinion that the observations of the Hon'ble Apex Court

13 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 in the said decision can not be straight away applied in the facts of the case under consideration. In this context ,Hon'ble Supreme Court cautioned in their recent decision dated 6.3.2009 in the case of State of AP Vs. M.Radha Krishna Murthy,[Criminal Appeal no. 386 of 2002] " 6. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes ...................... 8. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. 9. The following words of Lord Denning in the matter of applying precedents have become locus classicus: "Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive." *** *** *** "Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it." 10.5 In the light of aforesaid observations of the Hon'ble Apex Court, we are of the opinion that the reliance by the assessee on the decisions in the case of Krishna Textiles(supra) and of the ITAT, relying upon the decision of the Hon'ble Supreme Court in the case of Sandhu Brothers(Chembur) is totally misplaced. 10.6. In view of the foregoing and especially in view of the aforesaid decision of the Hon'ble jurisdictional High Court in Fakir Mohammed Haji Hassan(supra), we uphold the findings of the ld. CIT(A) in confirming the addition of Rs.14,35,000/- on account of unexplained expenditure represented by the unaccounted stock and the disallowance of claim for set off of current and brought forward depreciation. Thus, ground no. 3 & 4 in the appeal are dismissed.” 21. In the case above also, the Tribunal has distinguished the facts of the case of DP Sandhu Bros Chambur Private Limited (supra) as the question before the Hon’ble Supreme Court in the said case was different and held that placing

14 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 reliance on the decision of the Hon’ble High Court & Tribunal, relying upon the decision of the Hon’ble Supreme Court in the case of D.P. Sandhu Bros. Chambur Private Ltd. (supra) is totally misplaced. The facts in the case in hand are also similar and hence reliance placed by the assessee on various decisions mentioned is misplaced. In background of the above discussion, thus respectfully following the judgment of the Hon’ble Gujarat High Court in the case of Fakir Mohammed Haji Hassan (supra), Hon’ble Punjab and Haryana High Court in the case of Kim Pharma Private Limited Vs. CIT (supra) and the decision of the Tribunal in the case of Gujarat Infra Pipes Private Limited (supra), we hold that business loss of Rs. 1,62,35,194/- in the case of assessee cannot be set off against the income of Rs. 1,68,29,316/- assessed under the deeming provisions of section 68, which is not falling under any of the five heads of income. Accordingly, the grounds No. 1 and 2 of the appeal are allowed. 22. Ground No. 3 of the appeal being general in nature not required to adjudicate upon by us. 23. In the result, the appeal filed by Revenue is allowed. ITA No. 2809/Del/2013 for AY : 2008-09 24. The grounds raised by the Revenue are as under: 1. The learned Commissioner of Income Tax(Appeals) has erred in law and on facts in allowing the business loss amounting to Rs. 75,97,380/- to be set off against the income amounting to Rs. 74,61,300/- determined under the deemed provisions of section 68. 2. The learned Commissioner of Income Tax(Appeals) has erred in law and on facts by upholding the submission of the assessee ignoring the provisions of section 14, 68, 70 and 71 of IT Act. 3. That the learned Commissioner of Income Tax(Appeals) has erred in law and on facts in deleting the other two additions of Rs. 8,14,965/- and Rs. 37,621/- made by the Assessing Officer as these were added by the assessee himself in his computation of income.

15 ITA Nos. 2808 & 2809/Del/2013 AYs: 2003-04 & 2008-09 25. We find that the grounds No. 1 and 2 of the appeal are identical to the grounds No. 1 and 2 of the appeal in ITA No. 2808/Del/2013, thus, following our finding in para numbers 4 to 21, we allow these grounds of the Revenue. 26. In ground No. 3, the Revenue has raised that the addition of Rs. 8,14,965/- and Rs. 37,621/- were made by the AO as those were added by the assessee itself in the computation of income. The ld. Commissioner of Income Tax(Appeals) has deleted these two additions on the ground that same were not discussed in the body of the assessment order. We find that whether those two additions are made by the assessee itself in the computation of income, is a matter of verification and, therefore, in the interest of justice, we restore the matter to the file of the Assessing Officer with the direction to verify whether the same was already added by the assessee in the computation of income, and if so, then the additions made by the AO are justified. Accordingly, this ground of the Revenue is allowed for statistical purpose. Thus, the appeal is allowed for statistical purposes. 27. In the result, appeals filed by Revenue in ITA No. 2808/Del/2013 is allowed and the appeal in ITA No. 2809/Del/2013 is allowed for statistical purposes. The decision is pronounced in the open court on 2nd June, 2016.

Sd/- Sd/- (I.C. SUDHIR) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 2nd June, 2016. Laptop/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi