VISHWANSHU VIJAYKUMAR AGARWAL,MUMBAI vs. DCIT 17(1), MUMBAI

Ground Nos. 1 to 3 raised by the assessee are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) upholding the order passed by the AO. Therefore, I have decided to adjudicate these grounds through the present consolidated order.

The Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised before the Revenue Authorities and also relied upon the written submissions.

On the contrary, the Ld. DR appearing on behalf of the Revenue relied upon the orders passed by the Revenue Authorities.

I have heard the counsels for both parties, perused the material placed on record, the judgments cited before me, and the orders passed by the Revenue Authorities. From the records, I notice that the assessee has challenged the order of the Ld. CIT(A) holding that the AO/CPC was empowered under Section 154 to rectify the mistake and withdraw the incorrect set-off of the brought forward short-term capital loss of Rs. 13,45,198 claimed against the total capital gains earned during the year.

I notice that the issue regarding the wrong computation of income under Section 115BBE and the denial of set-off of brought forward short- term capital loss was adjudicated on the basis that the assessee had challenged the rectification order passed under Section 154 by the CPC, wherein the income chargeable under Section 115BBE was recomputed at Rs. 39,53,293 instead of Rs. 26,08,095, thereby denying the set-off of the brought forward short-term capital loss of Rs. 13,45,198.

According to the assessee, since the loss was available on record, the CPC ought to have allowed its set-off while computing the income even under Section 115BBE of the Act.

On the other hand, the Ld. CIT(A) has minutely discussed the issue and rightly concluded that the provisions of Section 115BBE constitute a special charging provision governing the taxation of income referred to in Sections 68, 69, 69A, 69B, 69C and 69D of the Income-tax Act, 1961, i.e., unexplained cash credits, unexplained investments, unexplained money, unexplained expenditure, etc.

Accordingly, it was rightly concluded that where income is brought to tax under Section 115BBE, the statute itself prohibits any adjustment or set- off of losses.

In this regard, I have also examined the settled legal position, particularly in the case of CIT vs. Fakir Mohmed Haji Hasan (247 ITR 290), wherein the Hon'ble Gujarat High Court categorically held that deemed income under Section 69 cannot be adjusted against losses.

Similarly, in the case of Kim Pharma (P.) Ltd. vs. CIT (216 Taxman 153), the Hon'ble Punjab & Haryana High Court held that unexplained income taxed under the special provisions cannot be set off against business losses. The same legal position has been reiterated in PCIT vs. Deccan Jewellers (P.) Ltd. (438 ITR 113), wherein the Hon'ble Supreme Court approved the view that income taxed under Section 115BBE constitutes a separate class of income to be taxed independently without any deduction or set-off.

Thus, after considering the relevant facts and circumstances of the case and the judicial precedents discussed above, I am also of the considered view that the bar contained under Section 115BBE(2) is absolute and mandatory. As per the facts of the present case, the CPC brought certain income to tax under Section 115BBE and, while processing the original return, an erroneous set-off of the brought forward short-term capital loss had been allowed. However, such allowance was clearly contrary to the statutory prohibition contained in Section 115BBE of the Act. Therefore, the said error constituted a mistake apparent from the record, and since the Act itself prohibits such set-off, the CPC was fully empowered under Section 154 of the Act to rectify the mistake and withdraw the incorrect set-off.

Accordingly, the recomputation of income by denying the adjustment of the brought forward loss was strictly in accordance with the provisions of law.

Ground No.4: Moreover, since the enhanced income under Section 115BBE has been found to be legally sustainable, the consequential levy of interest is also mandatory.

No new facts, circumstances, or documentary evidence have been placed on record by the Ld. AR to controvert or rebut the findings recorded by the Ld. CIT(A). Therefore, I find no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Accordingly, the grounds raised by the assessee are dismissed, and the order of the Ld. CIT(A) is upheld.

In the result, appeal filed by the Assessee stands dismissed.