2023 (11) TMI 81 - AT - Income Tax

Set-off of the losses against the deemed income u/s 69C - Determination of correct head of income - AO had denied such set-off only on the ground that the deemed income u/s 69C does not fall within any category of income contained in section 14 of the Act - HELD THAT - Hon ble Supreme Court in the case of CIT vs. D. P. Sandhu Bros. Chembur (P.) Ltd. 2005 (1) TMI 13 - SUPREME COURT and in the case of United Commercial Bank Ltd. vs. CIT 1957 (5) TMI 11 - SUPREME COURT held that the provisions of the Income Tax Act does not envisage taxing any income under any head not specified u/s 14 of the Act. The Hon ble Madras High Court in the case of CIT vs. Chensing Ventures 2007 (4) TMI 204 - MADRAS HIGH COURT as well as case of CIT vs. Shilpa Dyeing Printing Mills (P.) Ltd. 2015 (7) TMI 691 - GUJARAT HIGH COURT held that the income of such nature from undisclosed sources to be treated as income, should be assessed under income from other sources . Therefore, in the light of this legal position, there is no iota of doubt that the deemed income assessed u/s 69C of the Act should not be treated as income falling outside the ambit of classification contained in section 14. As it is only from the assessment year 2017-18, the Parliament had introduced the amended provisions of section 115BBE prohibiting the set-off of the losses against such deemed income. Therefore lower authorities committed illegality in not allowing the set-off of the losses against the deemed income u/s 69C - we direct the AO to allow the set-off of the losses against the deemed income u/s 69C of the Act. Grounds of appeal filed by the assessee stand allowed.

Summary

Issues:
The appeals filed by the assessee against orders of ld. Commissioner of Income Tax (Appeals) for assessment years 2011-12 to 2014-15.

ITA No.85/NAG/2018, A.Y. 2011-12:
The appellant, a company engaged in land business, filed a return showing a loss. Subsequently, after search operations, a notice was issued for filing a return of income. The appellant disclosed unexplained expenditure as income under section 69C. The Assessing Officer denied set-off of loss against this income, citing it doesn't fall under any income category. The CIT(A) upheld this decision. The appellant argued that recent court decisions allowed such set-off. The Tribunal agreed, citing legal precedents and the absence of a bar pre-amendment to section 115BBE. The lower authorities were deemed to have erred, and the set-off was allowed.

ITA Nos.86, 87 & 210/NAG/2018, A.Ys. 2012-13 to 2014-15:
The facts and issues in these appeals were identical to the first appeal. The decision in the first appeal was applied to these, and the set-off of losses against deemed income under section 69C was allowed.

In conclusion, all four appeals of the assessee were allowed based on the above reasoning.