2022 (5) TMI 1488 - AT - Income Tax

Set off of business losses against the income determined u/s. 69 denied - Unexplained income - difference in turnover - Assessee has not maintained any books of account during the year, though it was supposed to do, added the amount as unexplained cash credits in the income of the Assessee and also did not allow the claim of the Assessee qua set off of losses against the business income by determining the amount as speculative losses, being non-genuine and non-bona fide - HELD THAT - As the case before us pertains to assessment year 2014-15 and the income determined by the Assessing Officer and affirmed by the ld. Commissioner specifically covers u/s. 115BBE of the Act, therefore, the provisions of sub-sec. (2) inserted vide Finance Act, 2016 in section 115BBE of the Act, shall not be applicable to the instant case. Even otherwise, various High Courts including Hon ble Gujrat High Court in the case of CIT vs. Shilpa Dyeing Printing Mills P. Ltd. 2015 (7) TMI 691 - GUJARAT HIGH COURT whileconsidering the amendment in section 115BBE(2) of the Act brought by Finance Act, 2016 and the CBDT Circular No. 11/2019 has held that once loss is determined, the same should be set off against the income determined under any other head of income including undisclosed income . Amendment brought in section 115BBE vide Finance Act, 2016 and CBDT Circular No. 11/2019 have been taken into consideration by various High Courts including case of PCIT vs. Aacharan Enterprises (P) Ltd. 2020 (1) TMI 1351 - RAJASTHAN HIGH COURT and even by Delhi Tribunal in the case of Ace Infracity Developers P. Ltd. 2021 (3) TMI 267 - ITAT DELHI and clearly held that the amendment made vide Finance Act, 2016 to the provisions of section 115BBE providing that no set off of any loss shall be allowed to the Assessee against deemed income u/s. 68, 69, 69A to 69D, could not be applied retrospectively and shall be applicable from assessment year 2017-18 onwards, as clarified by the CBDT vide Circular No. 11/2019 - We are also in agreement with the claim of the Assessee that the facts in the case of Kim PharmaPvt. Ltd. 2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT wherein as followed the ratio laid down in the case of Fakir MohmedHaji Hasan 2000 (8) TMI 44 - GUJARAT HIGH COURT are factually dissimilar to the instant case. Once the income has been determined in any of the provision, as mentioned in section 115BBE of the Act, then set off of any loss against such income can be allowed to the Assessee, however, till the assessment year 2016-17 only but not from 2017-18 onwards, as it clearly appears from the amendment made by the Finance Act, 2016 in section 115BBE of the Act and CBDT Circular No. 11/2019 (supra) wherein it has been specifically clarified. Hence, we are inclined to allow the claim of the Assessee for setting off the losses against income referred to in section 115BBE of the Act as well. The Assessing Officer is directed to re-compute the income of the Assessee accordingly as per terms of this order. Appeal filed by the Assessee stands allowed.

Summary

Issues:
1. Non-allowance of set off of business losses against income determined u/s. 69 of the Act.

Analysis:
The appeal was filed by the Assessee against an order passed by the Commissioner of Income-tax (Appeals) for the assessment year 2014-15. The Assessee, an individual, had initially filed a return of income electronically but later admitted an omission related to construction business and speculative losses. The Assessing Officer added unexplained cash credits and disallowed the set off of losses against business income. The Commissioner affirmed the additions, leading to the current appeal.

The Assessee argued that the disallowance of set off of business losses was the main grievance, citing legal precedents and legislative amendments. The Assessee emphasized that the CBDT Circular No. 11/2019 clarified the allowability of set off of losses against deemed income u/s. 115BBE of the Act before the assessment year 2017-18. The Assessee also highlighted judgments supporting the claim for set off of losses against income determined u/s. 115BBE.

The Department refuted the Assessee's claim, asserting that the impugned order was proper and did not warrant interference. After hearing both parties and examining the records, the Tribunal focused on the issue of non-allowance of set off of business losses against income determined u/s. 69 of the Act. The Tribunal noted that the legislative amendments and CBDT Circular clarified the scope of set off of losses against deemed income u/s. 115BBE.

The Tribunal observed that the provisions of sub-section (2) inserted in section 115BBE of the Act by the Finance Act, 2016 did not apply to the assessment year in question (2014-15). Citing various judicial decisions, the Tribunal held that once income is determined under any provision mentioned in section 115BBE, set off of losses against such income can be allowed to the Assessee, but only until assessment year 2016-17. The Tribunal directed the Assessing Officer to re-compute the Assessee's income accordingly.

Ultimately, the Tribunal allowed the Assessee's appeal, emphasizing the entitlement to set off losses against income determined u/s. 115BBE for the relevant assessment year. The order was pronounced on 25/05/2022.