Commissioner of Income Tax, Calicut v. Shri P.D. Abraham alias Appachan

## **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 A COPY OF THE ASSESSMENT ORDER DATED 28/12/2007. ANNEXURE B COPY OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 06/07/2009. ANNEXURE C COPY 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 common assessee they are decided together. The assessment year involved is 2005-06. 2. In I.T.A.No.147/2012, Revenue challenges the order passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.No.486/Coch/2009. The Tribunal had considered the appeal filed by the assessee against the order of the Administrative Commissioner under Section 263 of Income Tax Act (hereinafter referred to as ‘the Act’). 3. The issue involved in the said appeal relates to the addition made by the Assessing officer under Section 68 of the Act as business income. The Administrative Commissioner found that the addition made has to be I.T.A.No.147/2012 & 46/2014 2 assessed as income on stand alone basis under Section 69 of the Act. The Tribunal, with reference to the judgment of the Gujarat High Court In **Fakir Mohammed Haji Hassan v. Commissioner of Income tax** _[247 ITR 290 (Guj)],_ relied upon by the Revenue, came to a finding that the said judgment has no application to the facts on hand. The Tribunal further found that the assessee received certain unsecured loan and since there was doubt, addition was to made under Section 68 of the Income tax Act. 4. The issue involved was whether, in the absence of any satisfactory explanation regarding the source of the creditor, can it be said that the credit is not a business income. When the assessee is doing business and has no other source of income, it has to be treated as unaccounted income in the course of its business activities. The Tribunal also relied upon the judgment of th Apex court in **Lakmichand 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 3 infer that the addition made under Section 68 is receipt from the business of the assessee. Further reference is also made to the judgment of this court in **Annamalai Reddiar v. Commissioner of Income Tax** _[53 ITR 601 (Ker)]._ In the light of the aforesaid law laid down by this Court as well as the Supreme Court, the Tribunal formed an opinion that the respondent has no reason to revise the order by exercising jurisdiction under Section 263 of the Act. Accordingly, the said appeal was allowed. 5. On a perusal of the order under Section 263 of the Act, it is clear that the Commissioner of Income Tax proceeded on the basis that when the explanation offered with reference to such income is not satisfactory, it was income from other sources which should have been put in the head meant for income from other sources and therefore the finding of the Assessing Officer was not justified in treating the said income under Section 68 of the Act. In order to exercise jurisdiction under Section 263 of the Act, it I.T.A.No.147/2012 & 46/2014 4 has to be found that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. The Assessing Officer has considered the entire issue and found that the unexplained cash credit is to be treated as income under Section 68. This is not a case where the decision of the Assessing Officer can be treated as erroneous. If two views are possible, the Assessing Officer, having adopted one view, it cannot be said that such an approach is erroneous. That apart, this aspect has been considered by the Apex court in **Lakmichand Baijnath** (Supra) and it is held that even if the explanation given by the assessee, as to how the amounts came to be received, is rejected as untenable, the credits were to be treated as business receipts which are chargeable. When such a view is possible, there was no reason for the Commissioner to have invoked Section 263 of the Act to arrive at a different finding and therefore the said appeal is liable to be dismissed. I.T.A.No.147/2012 & 46/2014 5 6. In I.T.A.No.46/2014 the Revenue challenges the order passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.No.349/Coch/2011. 7. In this case the assessee filed return of income declaring Nil income after setting off the brought forward business loss of Rs.68,32,444/-. A revised return was as filed on 15/03/2006 showing total income as nil after setting off brought forward business loss of Rs.2,07,16,442/-. 8. The Assessing Officer, after having taken up the matter for scrutiny, made an addition of Rs.1,57,04,000/under Section 68 of the Income Tax Act as unexplained cash credit. Assessing Officer also added Rs.9,19,000/- u/s 40(a) (ia) of the Act. The Assessing Officer allowed set off of the additions made under under Sections 68 and 40(a)(ia) against the brought forward losses of earlier assessment years and determined the total income as nil. 9. Thereafter, the internal audit party raised certain objections indicating that by virtue of provisions under I.T.A.No.147/2012 & 46/2014 6 Section 72 of the Act, the carried forward business loss of Rs.3,74,10,442/- could be set off only against the assessee's profits and gains from the business and the excess set off allowed for business loss carried forward against addition made as “unexplained cash credit” under Section 68 to the tune of Rs.1,57,04,000/- is not in order. As already indicated, the Commissioner of Income Tax passed an order under Section 263 of the Act, which is dealt with in I.T.A.No. 147/2012. 10. In the meantime, the Assessing Officer passed an order giving effect to order under Section 263 of the Act. Annexure E is the said order. The matter was carried in appeal by the assessee which came to be allowed. Since the appeal was pending against the order in I.T.A.No.486/2009, the revenue has preferred a further appeal before the Tribunal which came to be dismissed, against which this appeal is filed. Since we have already found that the Administrative Commissioner could not have exercised I.T.A.No.147/2012 & 46/2014 7 jurisdiction to invoke Section 263 of the Act, the assessment order made pursuant to the said order is rightly rejected by the appellate authorities and the Tribunal. Under these circumstances, this appeal also fails and is liable to be dismissed. In the result, both the appeals are dismissed. (sd/-) **(MANJULA CHELLUR, CHIEF JUSTICE)** (sd/-) **(A.M.SHAFFIQUE, JUDGE)** jsr I.T.A.No.147/2012 & 46/2014 8 I.T.A.No.147/2012 & 46/2014 9