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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ NEW DLEHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI N.K. CHOUDHRY
This appeal has been preferred by the Assessee against the order dated 22.03.2018, impugned herein, passed by the learned Commissioner of Income-tax (Appeals)-1, Gurgaon (in short ‘learned Commissioner’) u/s. 250(6) of the Income-tax Act, 1961 (in short ‘the Act’) for the assessment year 2014-15.
Brief facts, relevant for adjudication of this appeal, are that the Assessee, being an individual had filed its return of income electronically on dated 29.09.2014 by declaring an income of Rs.7,27,940/- on turnover of Rs.97,60,257/- u/s. 44AD of the Act, which was taken into consideration by the Assessing Officer by issuing statutory notices and seeking certain information from the Assessee. In response to the said notices, the Assessee vide letter dated 29.04.2016 submitted thatthe amount of Rs.1,34,30,000/-, which relates to the construction business, remained omitted while filing the original return of income and therefore, the difference in turnover is Rs.1,34,30,000/- and the addition in the profit @ 8% amounting to Rs.10,74,400/- may be added in the income of the Assessee.
2.1 The Assessee also submitted that though the Assessee is liable tomaintain the books of account, however failed to maintain the same during the year. Further at the time of filing the return, the Assessee inadvertently omitted to consider the turnover in other accounts and filed its return u/s. 44AD of the Act. The Assessee further claimed that during the year it has suffered a huge loss of Rs.1,52,32,097/- in Future & Options.
2.2 The Assessing Officer considered the claim of the Assessee, but did not get impressed and made the addition of Rs.1,34,70,000/- as unexplained cash credits. Further, the Assessing Officer also determined the amount of Rs.1,52,32,097/- as speculative loss claimed by the Assessee, being non-genuine and non-bonafide, and therefore the same cannot be set off against the business income.
3 The Assessee being aggrieved, preferred first appeal before the ld. Commissioner, who vide impugned order, though sought report of the Assessing Officer, however, affirmed the action of the Assessing Officer in making the addition of Rs.1,34,70,000/- as income of the Assessee from undisclosed sources and is taxable u/s. 69 of the Act by holding as under :
“5.4 I have carefully considered the appellant's submissions. It is evident from the detailed discussion in the assessment order that the appellant had no evidence with regard to its claim that he was carrying on construction business. As mentioned above vide his submissions dated 17.01.2018, the appellant had himself admitted that he had not maintained any account during the year and therefore the records of receipts was not maintained. Further, as pointed out above, the appellant was specifically asked by me to produce bills and vouchers and any other evidence in support of his contentions that he had carried out any business activity in the form of construction during the year. The appellant admitted that no such evidence was available as no bills and vouchers were maintained. Keeping in view the aforesaid facts, it is held that the appellant had not carried out any business activity during the year under consideration and as such the cash deposits in the bank account were out of his undisclosed income. Further, as pointed out by the Assessing Officer in the assessment order the excess of cash deposits over cash withdrawals in the bank account of the appellant during the year was Rs. 1,34,70,000/-. As the sources of these cash deposits have not been explained by the appellant, the whole of this amount is the income of the appellant from undisclosed sources. As pointed out above, the appellant vide revised computation filed during the assessment proceedings had shown the amount of Rs. 1,34,7000/- as his income and vide his submissions dated l7.01d018 during appellate proceedings, the appellant had submitted that he agreed to pay tax on Rs. 1,34,70,000/-. It is accordingly held that this amount ofRs. 134,70,000/- was income of the appellant from undisclosed sources and is taxable under section 69 of the Income Tax Act.”
3.1 The learned Commissioner with regard to the losses claimed by the Assessee to the tune of Rs.1,52,32,097/-, on the basis of the report of the Assessing Officer wherein the Assessing Officer accepted the loss to the tune of Rs.1,49,01,258/-, accepted the said amount of Rs.1,49,01,258/- as business losses, however, declined to allow the setting off the said loss against income assessed u/s. 69 of the Act while relying upon the decisions of Hon’ble Punjab & Haryana High Court in the case of Dulari Digital Photo Services Pvt. Ltd. vs. CIT in of 2012 (219 taxman 126 (P&H) and in the case of M/s. Kim PharmaPvt. Ltd. vs. CIT in ITA No. 106 of 2011 (258 CTR 454).
Being aggrieved, the Assessee has preferred the instant appeal and in support of its case, mainly emphasised that though the Assessee has preferred the appeal against affirmation of the disallowance and sustenance of disallowing the set off of business loss amounting to Rs.1,49,01,258/-, however, the main grievance of the Assessee is non-allowing the set off of business lossesfrom the income including deemed income u/s. 68 determined against the Assessee. The Assessee also claimed that the ld. Commissioner, while sustaining the disallowance of set off of determined business lossesfrom the deemed income u/s. 68 of the Act, relied upon the judgment in Kim Pharma (P) Ltd. (supra) by Hon’ble Punjab & Haryana High court, in which the judgment of Hon’ble Gujrat High Court in Fakir Mohamed Haji Hasan vs. CIT, 247 ITR 290 (2001) was followed, wherein there was no determined loss and the main issue before the courts in both the aforementioned cases was whether a deemed income be taxed outside the ambit of heads of income as classified under section 14 of the Act. The Assesseefurther claimed that Hon’ble Gujrat High Court in the case of CIT vs. Shilpa Dyeing & Printing Mills P. Ltd., 219 taxman 279 (2013), has clearly held that ‘once loss is determined, the same should be set off against the income determined under any other head of income including undisclosed income’.
4.1 Ld. AR of the Assessee further submitted that vide Finance Act 2016, sub-section (2) has been inserted in section 115BBE whereby it has been provided that not-withstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the Assesseeunder any provision of this Act in computing his income referred to in clause (a) and clause (b) of sub-section (1).The said provision has been made effective from 01.04.2017 onwards, meaning thereby upto AY 2016-17 deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the Assessee under any provision of this Act in computing his income referred to in clause (a) and clause (b) of sub-section (1).
4.2 Further, the CBDT, vide circular No. 11/2019 dated 19.06.2019 issued a clarification qua non-allowability of set off of losses against the deemed income u/s. 115BBE of the Act prior to assessment year 2017-18 by clarifying as under :
“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.” 4.3 Learned AR also relied upon various judgments passed by the Hon’ble High Courts and the Tribunal, wherein the Hon’ble Courts have taken into consideration the aforesaid CBDT Circular No. 11/2019 (supra) and allowed the claim qua set off of losses against income determined u/s. 115BBE of the Act. The Assessee also submitted that the decision of Hon’bleGujrat High Court in the case of Fakir Mohmed Haji Hasan (supra) has already been nullified by Hon’ble Apex Court.
On the contrary, ld. DR refuted the claim of the Assessee and vehemently supported the impugned order by submitting that order under challenge does not suffer from any perversity, impropriety and/or illegality, hence, needs no interference.
Having heard the parties and perused the material available on record, the only issue raised before us by the Assessee relates to non-allowing of set off of business losses against the income determined u/s. 69 of the Act. The Assessee in the instant case, after filing of the original return of income on dated 9.09.014, wherein an income of Rs.7,27,940/- on turnover of Rs.97,60,257/- u/s. 44AD of the Act, was declared, claimed that the amount of Rs.1,34,30,000/- relating to the construction business remained omitted while filing the original return of income and, therefore, on difference of Rs.1,34,30,000/- in the turnover of the Assessee, the addition in profit @ 8% amounting to Rs.10,74,400/- may be added to the income of the Assessee. The Assessing Officer by considering the fact that the Assessee has not maintained any books of account during the year, though it was supposed to do, added the amount of Rs.1,34,70,000/- as unexplained cash credits in the income of the Assessee and also did not allow the claim of the Assesseequa set off of losses against the business income by determining the amount of Rs.1,52,32,097/- as speculative losses, being non- genuine and non-bona fide.
6.1 The ld. Commissioner while considering the appeal of the Assessee sought remand report from the Assessing Officer and after considering the remand report, affirmed the addition of Rs.1,34,70,000/- as income of the Assessee from undisclosed sources taxable u/s. 69 of the Act. The ld. Commissioner, on the basis of remand report, out of Rs.1,52,32,097/-, which was claimed as set off as business losses from income, accepted the amount of Rs.1,49,01,258/- as business losses, however, declined to allow the setting off the said losses against the income assessed u/s. 69 of the Act by relying upon the decisions of Hon’ble Punjab & Haryana High Court in the case of Dulari Digital Photo Services Pvt. Ltd. and M/s. Kim PharmaPvt. Ltd. (supra).
6.2 The claim of the Assessee before us is that according to the amendment made in section 115BBE of the Act by Finance Act, 2016, the CBDT has inserted sub-sec. (2) whereby it has been enumerated that no deduction in respect of any expenditure or allowance or set off of any loss, shall be allowed to the Assessee under any provision of this Act in computing his income referred to in clause (a) and clause (b) of sub-sec. (1).
6.3 The CBDT vide Circular No. 11/2019 issued on 19.06.2019 clarified qua allowability of set off of losses against the deemed income u/s. 115BBE of the Act prior to assessment year 2017-18.
6.4 We observe that the CBDT vide circular No. 11/2019 (supra) in order to remove any ambiguity of interpretation and keeping in view the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016, clarified that since the term ‘set off of any loss’was specifically inserted w.e.f. 01.04.2017 vide Finance Act, 2016, an Assessee is entitled to claim set off of loss against income determined u/s. 115BBE of the Act till the assessment year 2016-17.
6.5 As the case before us pertains to assessment year 2014-15 and the income determined by the Assessing Officer and affirmed by the ld. Commissioner to the tune of Rs.1,52,32,097/- specifically covers u/s. 115BBE of the Act, therefore, the provisions of sub-sec. (2) inserted vide Finance Act, 2016 in section 115BBE of the Act, shall not be applicable to the instant case.
6.6 Even otherwise, various High Courts including Hon’ble Gujrat High Court in the case of CIT vs. Shilpa Dyeing & Printing Mills P.
Ltd. (supra), whileconsidering the amendment in section 115BBE(2) of the Act brought by Finance Act, 2016 and the CBDT Circular No. 11/2019 (supra), has held that “once loss is determined, the same should be set off against the income determined under any other head of income including undisclosed income”.
6.7 We further like to add that amendment brought in section 115BBE vide Finance Act, 2016 and CBDT Circular No. 11/2019 (supra) have been taken into consideration by various High Courts including Rajasthan High Court in the case of PCIT vs. Aacharan Enterprises (P) Ltd., 273 Taxman 85 (Raj. HC)(2020) and even by Delhi Tribunal in the case of Ace Infracity Developers P. Ltd. vs. DCIT (ITA No. 1087/Del/2018) decided on 05.03.2021 and clearly held that the amendment made vide Finance Act, 2016 to the provisions of section 115BBE providing that no set off of any loss shall be allowed to the Assessee against deemed income u/s. 68, 69, 69A to 69D, could not be applied retrospectively and shall be applicable from assessment year 2017-18 onwards, as clarified by the CBDT vide Circular No. 11/2019 (supra). We are also in agreement with the claim of the Assessee that the facts in the case of Kim PharmaPvt. Ltd. (supra) wherein the Hon’ble Punjab & Haryana High Court has followed the ratio laid down in the case of Fakir MohmedHaji Hasan (supra) by Hon’ble Gujrat High Court, are factually dissimilar to the instant case.
6.8 On the aforesaid analysis, we are of the considered opinion that once the income has been determined in any of the provision, as mentioned in section 115BBE of the Act, then set off of any loss against such income can be allowed to the Assessee, however, till the assessment year 2016-17 only but not from 2017-18 onwards, as it clearly appears from the amendment made by the Finance Act, 2016 in section 115BBE of the Act and CBDT Circular No. 11/2019 (supra) wherein it has been specifically clarified. Hence, we are inclined to allow the claim of the Assessee for setting off the losses against income referred to in section 115BBE of the Act as well. The Assessing Officer is directed to re-compute the income of the Assessee accordingly as per terms of this order.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 25/05/2022.