2021 (3) TMI 267 - AT - Income Tax

Unexplained investment u/s 69 - surrender of income - provisions u/s 115BBE w.e.f. 01.04.2013 in the provision of Income Tax statute and by virtue of sub-section (2) of section 115BBE, no set off of loss u/s 69 can be allowed - disallowance of set off of brought forward losses against the income assessed u/s 68 - HELD THAT - From perusal of Section 115BBE, it is very clear that any expense or allowance shall not be allowed from the income assessed u/s 69 but, this Section does not indicate that set off of brought forward business losses shall not be allowed from income assessed u/s 69 for the purpose of calculating tax u/s 115BBE. This is further confirmed by the amendment made under the Finance Act, 2016, which is applicable from AY 2017-18. Pre-amended provision of Section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in Section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016. Thus keeping the legislative intent behind amendment in Section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under Section 115BBE of the Act till the assessment year 2016-17. Since, CBDT Circular No. 11/2019 dated 19.06.2019 was issued after the order of the CIT(A), the CIT(A) did not have the benefit of the circular. Therefore, we are of the view that the Circular applies in the present assessee s case as the Assessment Year before us is that of A.Y. 2015-16 and till A.Y. 2016-17, the assessee is entitled to claim se-off of loss against income determined under Section 115BBE of the Act. The appeal of the assessee is allowed.

Summary

Issues:
- Disallowance of set off of depreciation and business loss
- Jurisdiction of CIT(A) to make additions not considered by AO

Analysis:

Issue 1: Disallowance of set off of depreciation and business loss
The appellant, engaged in real estate development, filed an appeal against the CIT(A)'s order confirming the addition of ?21,58,600 on account of undisclosed income. The appellant surrendered ?2,47,00,000 during search proceedings, leading to a revised return showing total income of ?2,25,41,400 after setting off unabsorbed depreciation. The Assessing Officer disallowed the set off of depreciation and business loss, treating the surrendered income as business income. The appellant argued that set off of losses against income assessed under section 69 was allowable for AY 2015-16. The appellant cited relevant case laws and CBDT Circular No. 11/2019 to support their claim. The appellant contended that the CIT(A) lacked jurisdiction to make additions on issues not considered by the Assessing Officer, citing various judicial precedents.

Issue 2: Jurisdiction of CIT(A) to make additions not considered by AO
The appellant argued that the CIT(A) did not have the authority to confirm the addition of ?21,58,600 as the Assessing Officer did not address any issue related to section 69 during assessment. The appellant emphasized that the CIT(A)'s powers are limited to issues considered by the AO, as per judicial decisions. The appellant highlighted that the CIT(A) confirmed the addition based on the nature of the surrendered income under section 69, despite the AO not raising this issue. The appellant supported their argument with relevant case laws and emphasized that the CIT(A) overstepped their jurisdiction by making disallowances on unaddressed issues. The appellant's contention was supported by the legislative intent behind the Finance Act, 2016, which clarified the allowance of set off of losses against income assessed under section 115BBE until AY 2016-17. Consequently, the appeal of the assessee was allowed based on the legislative intent and the CBDT Circular No. 11/2019.

In conclusion, the ITAT Delhi allowed the appeal, emphasizing the entitlement of the assessee to claim set off of loss against income determined under Section 115BBE until AY 2016-17. The judgment highlighted the jurisdictional limitations of the CIT(A) and the legislative intent behind the Finance Act, 2016, to support the appellant's case.