2021 (3) TMI 390 - AT - Income Tax

Set off the unabsorbed depreciation/business loss of the assessee incurred during the year and/or brought forward from previous years with the addition made u/s 68 - HELD THAT - As the assessee has submitted that in the light of the Circular No.11/2019 dated 19.06.2019 the assessee may be given benefit of set off of income determined u/s 68 of the Act against unabsorbed loss as the assessment years involved in these appeals are 2013-14 and 2014-15 which are prior to assessment year 2017-18. The ld. Departmental Representative has also fairly agreed that the assessee is entitled to the set off of income against losses as per the above CBDT Circular. These grounds of the appeals of the assessee are hereby allowed and the Assessing Officer is directed to give the benefit of set off of losses against income determined for the assessment year under consideration as per the aforesaid CBDT Circular.

Issues:
1. Contesting additions made on account of unexplained unsecured loan under section 68 read with section 115BBE of the Income Tax Act.
2. Disallowance of interest paid to a specific entity based on the loan being considered as bogus.
3. Allowing set off of unabsorbed losses against income determined under section 68 read with section 115BBE for assessment years prior to 2017-18.

Analysis:

Issue 1:
The appellant contested the additions made by the Assessing Officer on account of an unexplained unsecured loan. The Assessing Officer invoked section 68 along with section 115BBE of the Income Tax Act for the impugned additions. The appellant argued that all documents proving the identity and creditworthiness of the loan creditor, as well as the genuineness of the transaction, were submitted to the Assessing Officer. Additionally, the appellant raised concerns regarding the denial of the right to counter findings based on information from DDIT(Investigation) Kolkata and Departmental Inspector, which were not provided during assessment or appellate proceedings. The appellant also sought to set off unabsorbed depreciation/business losses against the addition made under section 68.

Issue 2:
In the appeal for the assessment year 2014-15, the appellant challenged the disallowance of interest paid to a specific entity, M/s Captain Traders Pvt. Ltd., based on the loan being considered as bogus and added under section 68 in the preceding year. The appellant also sought to set off unabsorbed depreciation/business losses against the addition made under section 68 for this assessment year.

Issue 3:
The appellant relied on CBDT Circular No.11/2019 dated 19.06.2019, which clarified the non-allowability of set-off of losses against deemed income under section 115BBE before the assessment year 2017-18. The Circular highlighted conflicting views among Assessing Officers regarding the set-off of losses against additions made under section 115BBE before 2017-18. It emphasized that the amendment inserting the provision for set-off of losses against such income was effective from 01.04.2017. The Circular stated that an assessee could claim set-off of losses against income determined under section 115BBE until the assessment year 2016-17. The appellant, citing this Circular, argued for the set off of unabsorbed losses against income determined under section 68 read with section 115BBE for the assessment years 2013-14 and 2014-15. The Departmental Representative agreed with this interpretation. Consequently, the Tribunal allowed the appeals partly, directing the Assessing Officer to provide the benefit of set-off of losses against the income determined for the respective assessment years in accordance with the CBDT Circular.

In conclusion, the Tribunal partially allowed the appeals, granting the appellant the benefit of setting off unabsorbed losses against income determined under section 68 read with section 115BBE for the relevant assessment years, based on the provisions outlined in the CBDT Circular No.11/2019.

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