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TMI Blog2018 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. - Decided in favour of assessee - ITA No. 863/JP/2017 - - - Dated:- 21-3-2018 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM Assessee by : Shri S. R. Sharma Rajnikant Bhatra(CA) Revenue by: Smt. Seema Meena (JCIT) ORDER Per: Vikram Singh Yadav, AM This appeal is filed by the assessee against the order of ld. CIT(A)-4 Jaipur, dated 04.09.2017 for the A.Y. 2013-14 wherein the solitary ground of appeal is as under:- That on the facts and in the circumstances of the case, the Ld. CIT(A) is wrong, unjust and has erred in law in confirming action of the Assessing Officer in holding that income surrendered during the course of search u/s 132(4) of the I.T. Act, 1961 cannot be set off against current year s business loss and thereby confirming disallowance of set off of such income to the extent of ₹ 7,67,768/- against business loss. 2. Briefly, the facts of the case are that a search and seizure operation under section 132 of the Act was carried out on the members of Motisons Group on 31.10.2012 of which the assessee is one of the members. During the course of search proceedings at the residence premises of director of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 456. In light of the said decisions, the AO held that no set off of any expenses can be claimed against surrendered income as it is on account of undisclosed business transaction and not the recorded business transaction. The AO further referred to the provisions of Section 115BBE(1)(a) of the Act and held that the undisclosed income of the assessee will be charged @ 30%. It was finally held by the AO that the confession/admission by the assessee company through its Director Sh. Rajendra Tiberawala regarding surrender is binding on the assessee and an amount of ₹ 767,768/- was added and brought to tax in the hands of the assessee company. 3. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the finding of the AO by holding that even before the amended provisions, as relied by the Ld. AR, the Courts are categorical by not allowing the set off of losses with the disclosure made during the course of search and has relied on the decision of the Hon ble Gujarat High Court in the case of Fakir Moh. Hazi Hassan vs. CIT reported in 120 Taxmann 11(Guj). He accordingly confirmed the action of the AO in disallowing the set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an amendment by which words 'or set off of any loss' were inserted in sub-section 115BBE that such set off of loss will be inadmissible. The CBDT explaining the said amended provision of Finance Act, 2016 issued Circular No. 3/2017 dated 20-1-2017 explaining the effect of amendment which reads as under: - 46. Clarification regarding set off of losses against deemed undisclosed income. 46.1 Section 115BBE of the Income-tax Act inter alia provides that the income relating to section 68 or section 69 or section 69A or section 69B or section 69C or section 69D is taxable at the rate of thirty per cent and further provides that no deduction in respect of any expenditure or allowances in relation to income referred to in the said sections shall be allowable. 46.2 Currently, there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE of the Income-tax Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set- off against income referred to in section 115BBE. However, the current language of section 115BE of the Income-tax Act does not convey the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard who has vehemently argued the matter. She relied on the findings of the lower authorities and submitted that the amendment brought in section 115BBE(1)(a) being a clarificatory amendment has to be read as effective from insertion of section 115BBE. 6. We have heard the rival contentions and purused the material available on record. It is not in dispute that the amount of ₹ 36,00,000 of undisclosed investment which has been surrendered during the course of search has been offered to tax subsequently while filing the return of income. It is also not disputed that the assessee has incurred business loss of ₹ 767,768 during the year under consideration. Only limited dispute relates to whether the amount so surrendered during the course of search can be set off against business loss for the year under consideration. In case of ACIT CC-2 Vs. Sanjay Bairathi Gems Ltd (supra), speaking through one of us, we had an occasion to examine a similar issue and therein, we have also referred to the various authorities which have been relied upon by the AO and the ld CIT(A) in the instant case. It would therefore be relevant to refer to the findings in the said decision which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the said amendment which reads as under: Currently, there is uncertainty on the issue of set-off of losses against income referred in section 115BBE of the Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set-off against income referred to in section 115BBE. However, the current language of section 115BBE of the Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, it is proposed to amend the provisions of the sub- section (2) of section 115BBE to expressly provide that no set off of any loss shall be allowable in respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 10. In light of above, given the fact that the AO has invoked the provisions of section 11BBE in the instant case, the provisions of sub-section (2) to section 11BBE are equally applicable. The amendment brought in by the Finance Act, 2016 whereby set off of losses against income referred to in section 69B has been denied is stated clearly to be effective from 1 April 2017 and will accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It would therefore to relevant to refer to the facts and the legal proposition laid down by the Hon ble Gujarat High Court decision in case of Shilpa Dyeing Printing Mills (P) ltd. Facts of the case Brief facts are that, the respondent-assessee is a company engaged in the business of dying and printing. During the course of scrutiny for the assessment year 2008-09, the Assessing Officer noticed that in a survey action conducted at the business premises of the assessee, it had declared a sum of ₹ 100.98 lacs (rounded off) on account of excess stock. In the return, the assessee had suggested current year's loss against such income. Assessing Officer holding a belief that income from unlisted source would not fall under any of the heads of the income, the same has to be taxed separately, the current losses cannot be set off against such income. Findings and legal proposition 8. We, however, find that Section 71 of the Act permits an assessee to set off loss other than that of capital gains against income from other head. This very issue came-up for consideration before the Madras High Court in case of Chensing Ventures (supra). The Division Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,it was observed as under: The decisions of this Court in the case of Fakir Mohmed Haji Hasan (supra) and Krishna Textiles (supra) are neither relevant nor germane to the issue considering the fact that in none of the decisions the Legislative Scheme emanating from conjoint reading of provisions of sections 14 56 of the Act have been considered. The Apex Court in the case of D.P. Sandu Bros.Chembur P. Ltd.,(supra) has dealt with this very issue while deciding the treatment to be given to a transaction of surrender of tenancy right. The earlier decisions of the Apex Court commencing from case of United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC) have been considered by the Apex Court and, hence, it is not necessary to repeat the same. Suffice it to state that the Act does not envisage taxing any income under any head not specified in section 14 of the Act. In the circumstances, there is no question of trying to read any conflict in the two judgments of this Court as submitted by the learned Counsel for the Revenue. 10. In our opinion, the statutory provisions contained in Section 71 was applicable in the present case. By applying the decision in case of Fakir Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as per Section 14 of the Act and therefore, the assessee would be entitled for the set off under proviso of section 71 of the act. As far as the case of Attar Singh Gurmukh Singh (Supra) is concerned, the same would not be applicable in the present facts and circumstances of the case since it is not the case that there was unexplained expenditure made by the assessee. 9. Therefore, we are of the opinion that the CIT (Appeals) as well as the ITAT have committed error in refusing giving set off to the assessee under Section 71 of the act and accordingly, we allow these appeals by setting aside the order dated 28.02.2005 passed by the Income Tax Appellate Tribunal (the ITAT) and order dated 07.07.2014 passed by the Commissioner of Income Tax (Appeals) Ahmedabad [the CIT (Appeals)]. 15. In light of above, we are of the view that the assessee deserve to succeed in the subject appeal and will be eligible for set off business loss of ₹ 86,96,733 against the income of ₹ 2,31,41,217 which has been brought to tax under section 69B read with section 115BBE of the Act. In the result, grounds taken by Revenue are dismissed. 7. We also refer to the decision of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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