2018 (8) TMI 665 - AT - Income Tax

Assessment u/s 115BBE - Additions u/s 68 - unexplained cash credit - genuineness of commission income - AO denied the current year loss will not be set off against income assessed u/s 115BBE - Held that - By virtue an amendment has been brought in by the Finance Act, 2016 in Section 115BBE(2) of the IT Act, the words or set off of any loss were inserted w.e.f. 01.04.2017. The said amendment has been made w.e.f. assessment year 2017-18 as also clarified by the CBDT Circular No. 3/2017 dated 20-01-2017. In the instant case, it is not disputed by the Revenue that the assessee has current year business losses including current year depreciation excluding a part of the business income declared as commission income which has been reclassified by the Assessing Officer and brought to tax under the head income from other sources . In our view, the assessee is eligible to claim set off of current year business loss including current year depreciation against current year income assessed under the head income from other sources under section 71 of the Act. The amendment brought by the Finance Act, 2016 in section 115BBE(2) is effective from assessment year 2017-18 and is not applicable for the impugned assessment year. Decided partly in favor of assessee.

Summary

Issues:
1. Disallowance of commission income as unexplained cash credit under section 68 of the Income Tax Act.
2. Disallowance of leasing commission as unexplained cash credit under section 68 of the Income Tax Act.
3. Disallowance of set off of current year loss against income assessed under section 115BBE of the Income Tax Act.

Analysis:
1. The appellant contested the disallowance of commission income of ?38,09,900 from a specific company, arguing that it was genuine. The Assessing Officer treated this income as unexplained cash credit under section 68 of the Income Tax Act. The appellant challenged this decision before the ITAT, claiming the income was correctly declared under the head "profit and gain of business/profession." The ITAT examined the case and allowed the appeal, emphasizing that the Assessing Officer's approach was incorrect.

2. Similarly, the appellant disputed the disallowance of leasing commission amounting to ?40,62,000 from another company, contending that it was genuine income. The Assessing Officer categorized this income as unexplained cash credit under section 68 of the Income Tax Act. The appellant argued that the current year business loss, including depreciation, should be set off against this income. The ITAT reviewed the case and decided in favor of the appellant, stating that the Assessing Officer's action was unjustified.

3. The crucial issue revolved around the disallowance of set off of current year loss against income assessed under section 115BBE of the Income Tax Act. The appellant maintained that the current year business loss, along with depreciation, should be allowed as a set off against the income charged to tax under section 115BBE. The ITAT referred to a relevant amendment brought by the Finance Act, 2016, which clarified the provisions related to set off of losses against deemed undisclosed income. The ITAT, relying on precedents and legal interpretations, concluded that the appellant was eligible for the set off of current year business loss against the income assessed under section 115BBE. Consequently, the ITAT partially allowed the appeal on this ground.

In conclusion, the ITAT ruled in favor of the appellant, allowing the appeal and setting aside the disallowances made by the Assessing Officer. The ITAT emphasized the eligibility of the appellant to set off current year business losses against the income assessed under section 115BBE, based on the applicable legal provisions and precedents.