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TMI Blog2019 (11) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... med. The assessable income stood at '' Nil', after the set off. Against the order of assessment a suo motu revision proceedings was initiated by the Principal Commissioner of Income Tax, Kochi, in exercise of the power vested under Section 263 of the Act, on the basis that; "Assessee's income included Rs. 56,24,264/-, deemed income being unexplained cash credit under Section 68. Deemed income u/s. 68 to 69D are not classified under any heads of income u/s 14 of the Act. Therefore, set off of brought forward loss against this deemed income is not correct". In the revisional order, the Commissioner of Income Tax (CIT) held that, the Assessing Officer(AO) had committed a mistake in allowing the set off, in a manner prejudicial to the interest of the revenue and therefore the assessment order was set aside and remitted to the AO to complete the assessment de-novo, after affording opportunity to the assessee. Aggrieved by the said order of the CIT the assessee had approached the Tribunal in the appeal. 3. The Tribunal while considering the appeal had relied on its own decision in M/s Beema Jewels v. Pr. CIT(ITA No.208/COCH/2018 dated 20.08.2018). It was noticed that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. Abraham's case and has the Tribunal erred or not in sustaining the order of the Commissioner of Income Tax without returning a finding on the acceptance or otherwise of the judgment of the Jurisdictional High Court in P.D. Abraham's case? E. Whether or not the Commissioner of Income Tax and Hon'ble Tribunal erred in not noticing/adverting to Section 115BBE and the amendment to sub-section (2) of Section 115BBE vide Finance Act 2016 and also the binding departmental circular clarifying sub-section (2) of Section 115BBE to be prospective in nature. F. Whether the Tribunal and the CIT have erred or not in disallowing the set off of the brought forward losses against the deemed income allowed by the assessing authority in its original order and whether or not such disallowance is contrary to law insofar as assessment year 2013-2014 concerned?" 5. Heard Sri. A. Kumar, learned counsel appearing for the appellant and Sri. Jose Joseph, Standing Counsel for Government for India (Taxes) for the respondents. 6. One of the main contention raised on behalf of the appellant is that, the reliance placed by the Tribunal on the decision of this court in Kerala Sponge Iron L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) are not relevant or germane to the issue involved therein, because the scheme emanating from a conjoint reading of the provisions of Sections 14 and 56 of the Act was not considered. Referring to the decisions of the Honourable Supreme Court in CIT v. D.P Santo bros.Chembur Pvt.Ltd [(2005) 193 CTR SC 578] and in United Commercial Bank Ltd.v. CIT [(1957) 32 ITR 688 SC] it was held that, the Act does not envisage taxing of any income under any head not specified in Section 14 of the Act and therefore there is no question of trying to read any conflict in the judgments of that court. 9. But the High Court of Gujarat itself in a still later decision in Shilpa Dyeing and Printing Mills Pvt.Ltd.(supra) found that, by applying the decision in Fakkir Mohmed Haji Hasan(supra), as explained in Radhe Developers(supra) the benefit of Section 71 as applicable to the facts involved in the said case cannot be declined when the question of set off was considered. While deciding the issue as to whether set off can be given with respect to income from an unlisted sources, the benefit of Section 71 with respect to set off was denied by the Assessing Officer by relying on Fakkir Mohmed Haji Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd.(supra), this court had failed to take note of the principle settled in the decisions of the High Court of Gujarat in Radhe Developers(supra) and Shilpa Dyeing & Printing Mills (P) Ltd. (supra) and also the decision of the High Court of Madras in Chensing Ventures (supra) as well as the decisions of the Honourable Supreme Court relied upon in those cases. It is further pointed out that this court while deciding Kerala Sponge Iron Ltd. (supra) had also omitted notice of an earlier decision of this court in P.D Abraham(supra), which was decided in March 2014. One of the issues considered in P.D Abraham(supra) was that, whether in the absence of any satisfactory explanation regarding source of the creditor, can it be said that the credit is not a business income. Referring to the decisions of the Honourable Supreme Court in Lakhmichand Baijnath v. Commissioner of Income Tax [(1959) 35 ITR 416 (SC)], in which it was found that it is not unreasonable to infer that the addition made under Section 68 is receipt from the business of the assessee; and also relying on the decision of this Court in Annamalai Reddiar v. Commissioner of Income Tax [53 ITR 601 (Ker). the tribunal in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would not be wholly set off under clause (i) and clause (ii), the amount of depreciation not set off can be set off from income from other head, if any, available for the assessment year. It was observed that the language of Section 32(2) is very clear and there is hardly anything contained in Section 32(2) to prevent such set off of carried forward depreciation being given to the assessee under the head of income from business or income from other sources. 13. Controverting the arguments on behalf of the appellant, learned Standing Counsel for Government of India (Taxes) made an elaborate scanning of the various provisions under which the scheme of the Act is framed. Referring to the charging provision in Section 4, it is pointed out that the income tax shall be charged with respect to the total income of every person for the previous year. Section 5 provides that the total income includes all income from whatever sources derived. Such income takes in the income which is deemed to have accrued, going by sub-section (1)(b) of Section 5. The method of computation of tax is governed under the provisions of Section 14 to Section 59. Section 14 would provide that, while computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unabsorbed portion of depreciation carried forward, is the contention. 14. Based on the rival contentions, on analyzing the factual situation, it is evident that the assessment pertains to the period from 1st April 2013 to 31st March 2014. It is not in dispute that the addition of Rs. 56,24,264/- made in the assessment is undisclosed income coming within the purview of Section 68, it being a sum found credited in the books of the assessee with respect to which the explanation offered was not found to be satisfactory by the Assessing Officer. Since Section 115BBE was introduced with effect from 01.04.2013, it cannot be disputed that no deduction in respect of any expenditure or allowance can be allowed with respect to the said amount. But question is whether set off of any loss shall be allowed against the said undisclosed income. In order to decide the question it is crucial to decide the nature of such income. Contention for the revenue is that, it will not fall within any of the category of income under the classifications contained in Section 14. In other words, such income cannot be treated as "profits and gains of business" or it cannot be considered as "income from other s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssifications contained in Section 14, it is evident that, as on the date of the assessment such income was included under a special classification by virtue of Section 115BBE. It is pertinent to note that, 115BBE had prohibited allowance of deductions alone, as it stood unamended as on the relevant date of the assessment. The explanatory notes to the provisions of the Finance Act, 2016 enumerates the reasons for introduction of the further amendment barring the set off, with effect from 1.4.2017. It is stated that, "Currently, there is uncertainty on the issue of setoff 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 115BBE of the Income-Tax Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, the provision of the sub-section (2) of Section 115BBE of the Income Tax Act has been amended as to expressly provide that no set off any loss shall be allowable in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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