2019 (10) TMI 1264 - AT - Income Tax

Revision u/s 263 - addition holding the unsecured loans from four parties as unexplained cash credits u/s 68 however, while computing tax the AO allowed set off losses against this income u/s 68 in violation of the provisions of section 115BBE - HELD THAT - From circular No 11/2019 dated 19th of June 2019 the term or set off of any loss has been inserted vide Finance Act, 2016 and the assessee is entitled to claim set off of losses against income determined under section 115BBE of the Act, till the assessment year 2016-17. Since the assessee s appeal pertains to the assessment year 2014-15, it was entitled to claim set off losses against income determined under section 115BBE of the Act. Therefore, in our considered view, since the impugned order passed by the Ld. Pr.CIT is contrary to the expressed provisions of the Act the same is liable to be set aside. Jaipur Bench of the ITAT has held in the case of Navjeevan Trade Commerce (P) Ltd vs. ITO 2018 (8) TMI 665 - ITAT JAIPUR has held that since the amendment brought by the Finance Act, 2016 in section 115BBE(2) was effective from assessment year 2017-18, the assessee was eligible to claim set off of current year business loss including depreciation, against current year income under the head Income assessed from other sources, under section 71 of the Act. The assessee in this case had declared commission and brokerage income in its profit and loss account and offered the same to tax under the head profit and gain of the business. The AO treated it as unexplained cash credit and brought to tax under section 68 read with section 115JBBE. Hence, the assessee s case is also covered by the decision of the Jaipur Bench of the Tribunal. Since, the impugned order passed by the Ld. Pr. CIT u/s 263 is contrary to the provisions of the Act and contrary to the decision of the Jaipur Bench of Tribunal discussed above, we allow the sole ground of appeal of the assessee

Summary

Issues:
1. Revision of assessment order under section 263 of the Income Tax Act, 1961.
2. Applicability of provisions of section 115BBE regarding set-off of losses against income.

Analysis:

Issue 1: Revision of assessment order under section 263 of the Income Tax Act, 1961
The appeal was filed against the order passed by the Principal Commissioner of Income Tax (PCIT) revising the assessment order passed by the Assessing Officer (AO) under section 143(3) of the Act for the assessment year 2014-15. The PCIT revised the order on the grounds that the AO allowed set off of losses against income determined under section 68 of the Act in violation of section 115BBE. The assessee challenged this revision on the basis that the provisions of section 115BBE were not applicable to their case as the amendment was effective from the assessment year 2017-18 onwards. The Circular issued by the CBDT clarified that the amendment in section 115BBE(2) was applicable from the assessment year 2017-18 onwards. The Tribunal held that since the amendment was not applicable for the assessment year 2014-15, the PCIT's order revising the assessment was not sustainable in law.

Issue 2: Applicability of provisions of section 115BBE regarding set-off of losses against income
The Tribunal analyzed the provisions of section 115BBE and the Circular issued by the CBDT to determine the applicability of the set-off of losses against income determined under section 115BBE of the Act. The Circular clarified that the term "or set off of any loss" was inserted via the Finance Act, 2016, effective from 01.04.2017, allowing an assessee to claim set off of losses against income determined under section 115BBE until the assessment year 2016-17. Since the appeal pertained to the assessment year 2014-15, the assessee was entitled to claim set off losses against income determined under section 115BBE. The Tribunal also referred to a decision by the Jaipur Bench of the ITAT, which supported the assessee's claim for set-off of current year business loss against current year income under the head "Income assessed from other sources." The Tribunal concluded that the PCIT's order was contrary to the provisions of the Act and the decision of the Jaipur Bench of the Tribunal, and therefore, allowed the appeal and quashed the order passed by the PCIT.

In conclusion, the Tribunal allowed the appeal filed by the assessee for the assessment year 2014-2015, holding the PCIT's order as not sustainable and bad in law.