2020 (6) TMI 132 - AT - Income Tax

Set off business losses with the surrendered/ disclosed business income - HELD THAT - This issue now stands clarified with the CBDT Circular No.11 of 2019 whereby the CBDT has clarified that an assessee will be entitled to set off of losses against income determined u/s 115BBE of the Act till assessment year 2016-17 - The assessment years involved in these appeals being 2012-13 2013-14, therefore, the assessee is accordingly entitled to set off of current year losses against deemed income. In view of our observations made above, Ground No.2 in both the appeals is accordingly allowed in favour of the assessee. Investment made in jewellery did not have any link / concern with the business of the assessee, therefore, the disallowance of interest made by the Assessing Officer was justified. Investment made in jewellery - Whether investment did not have any link / concern with the business of the assessee, therefore, the disallowance of interest made by the AO was justified - HELD THAT - There is merit in the arguments of the AR that once the addition has been made on account of unrecorded sales, then no addition on account of shortage of stock or investment in stock is required to be made. Under the facts and circumstances of the case the arguments of the AR appears acceptable and the addition made by the AO is not found sustainable and hence deleted.

Summary

Issues:
1. Assessee's appeals for assessment years 2012-13 & 2013-14
2. Revenue's appeal for assessment year 2013-14

Analysis:

Assessee's Appeals (2012-13 & 2013-14):
- The appeals raised multiple grounds, including disallowance of set off of business losses, disallowance of depreciation on machinery, addition on account of funds invested by a company, and excess raw material consumption.
- The CBDT Circular No.11 of 2019 clarified that an assessee can set off losses against income determined under section 115BBE of the Act until assessment year 2016-17.
- As the assessment years were 2012-13 & 2013-14, the assessee was entitled to set off current year losses against deemed income. Consequently, Ground No.2 in both appeals was allowed in favor of the assessee.

Revenue's Appeal (2013-14):
- The Revenue's appeal contested the deletion of additions made on account of disallowance of interest in jewelry investment and gross profit from unaccounted sales.
- The CIT(A) upheld the deletion of the additions, stating that the income was already declared by the assessee during the search proceedings.
- The CIT(A) found the AR's arguments acceptable, emphasizing that once an addition is made for unrecorded sales, further additions for stock shortages or investment in stock are not warranted.
- Ground No.1 of the Revenue's appeal was allowed, while Ground No.2 was dismissed based on the CIT(A)'s reasoning.
- Ground No.3 of the Revenue's appeal was of a general nature and did not require specific adjudication.

In conclusion, both the assessee's appeals and the Revenue's appeal were partly allowed based on the specific issues raised and the interpretations of relevant legal provisions and circulars. The judgments were delivered by Shri Sanjay Garg, Judicial Member, and Ms. Annapurna Gupta, Accountant Member of the Appellate Tribunal ITAT Chandigarh.