SMT.MEENA JOBBY,PALAKKAD vs. THE ITO, PALAKKAD

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ITA 589/COCH/2019Status: DisposedITAT Cochin10 March 2020AY 2015-165 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that for the assessment year 2015-2016, the loss from house property could be set off against additions made under Section 68, as the amendment restricting such set-offs was applicable from AY 2017-2018. Therefore, the assessment order was not prejudicial to the revenue.

What were the facts?

The assessee declared income from bakery/food products and other sources, which the AO treated as unexplained cash credit. The CIT revised the assessment order, deeming it prejudicial to revenue. The assessee argued that a significant loss from house property would offset any additions.

What were the issues?

Whether the assessment order was prejudicial to the interest of the revenue, considering the availability of house property loss to offset additions under Section 68.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 263

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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: Shri Chandra Poojari, AM & Shri George George K, JM

Hearing: 10.03.2020Pronounced: 10.03.2020

This appeal at the instance of the assessee is directed against the order of the Commissioner of Income-tax dated 26.08.2019, passed/s 263 of the I.T.Act. The relevant assessment year is 2015-2016.

2.

The solitary issue argued by the learned AR is that the assessment order is not prejudicial to the interest of the revenue. According to the learned AR, even assuming that bakery and food product of Rs.6,00,000 and income declared under the head “income from other sources” amounting to Rs.35,00,000 is assessed u/s 68 r.w.s. 115BBE of the I.T.Act, there would not be any additional tax liability since assessee

2 Smt.Meena Joby. is having loss from “income from house property” amounting to Rs.50,09,687.

3.

The brief facts of the case are as follows: The assessee is an individual. For the assessment year 2015-2016, the return of income was filed on 30.09.2015. The assessment was completed u/s 143(3) of the I.T.Act on 07.12.2017. Subsequently notice u/s 263 of the I.T.Act was issued. The reason for issuance of notice u/s 263 of the I.T.Act, reads as follow:

“In computing total income, apart from bakery / food products income (Business) of Rs.6,00,000/-, the assessee had returned the following under income from Other Sources.

(i) Share from Food Court Rs.25,00,000 (ii) Income from Display Rs. 5,00,000 (iii) Income from Dairy Farm Rs. 5,00,000 ---------------- Total Rs.35,00,000 ============ No documentary evidences are available in the file in support of this income. Under Section 68 rws 115BBE unexplained cash credit is to be taxed @ 30% without allowing any deduction for expenditure under any other provisions of the Act. Further, assessee’s case is covered under 44AB audit report. Why these receipts were not recorded in the books of accounts of the assessee was not explained during assessment proceedings.”

4.

The assessee’s AR appeared from time to time and filed objections to the proposed revision u/s 263 of the I.T.Act. It was submitted that during the assessment year 2015-2016,

3 Smt.Meena Joby. the assessee was having loss from house property amounting to Rs.50,09,687, which can be set off against any addition made u/s 68 of the I.T.Act. The CIT, however, rejected the contentions raised by the assessee. The CIT set aside the assessment with the direction to the Assessing Officer to redo the assessment de novo after obtaining and verifying all the relevant details.

5.

Aggrieved by the order of the CIT dated 16.08.2019, passed u/s 263 of the I.T.Act, the assessee has preferred this appeal before the Tribunal. The learned Counsel for the assessee submitted that the issue in question is squarely covered in favour of the assessee by the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. v. CIT [(2019) 419 ITR 322 (Ker.)]. The learned Departmental Representative strongly supported the order passed u/s 263 of the I.T.Act.

6.

We have heard the rival submissions and perused the material on record. The Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra) had categorically held that the amendment which prohibits / restricts the set off of losses against income from other sources, was inserted by the Finance Act, 2016 with effect from 01.04.2017 only, i.e. from assessment year 2017-2018 onwards. In the instant case, admittedly, the assessee was having loss from house property to the tune of Rs.50,09,687. Even assuming that the net income from bakery / food products estimated at Rs.6

4 Smt.Meena Joby. lakh and income declared under the head “income from other sources” amounting to Rs.35 lakh are to be treated as unexplained credit, to be added u/s 68 r.w.s. 115BBE of the Act, there would not be any difference in tax liability, since the loss income from house property could be set off against any addition u/s 68 of the I.T.Act, in view of the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra). In the instant case, the concerned assessment year is 2015-2016. Therefore, the amendment brought about by the Finance Act, 2016 in view of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra) does not have application for the assessment year under consideration. Hence, the assessment order dated 07.12.2017, for the assessment year 2015-2016, cannot be stated to be an order, which is prejudicial to the interest of the revenue. Accordingly, we set aside the order passed by the CIT u/s 263 of the I.T.Act in view of the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra). It is ordered accordingly.

7.

In the result, the appeal filed by the assessee is allowed. Order pronounced on this 10th day of March, 2020.

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