M/S. VIJAY STEEL CORPORATION PVT. LTD,MUMBAI vs. ACIT 13(3) (2), MUMBAI

This appeal by the assessee is directed against the order of Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [in short 'the CIT(A)’] dated 07/12/2021 for the assessment year 2013-14.

Shri Vivek Jani appearing on behalf of the assessee submitted that this appeal arises out of proceedings under section 154 of the Income Tax Act, 1961 [ in short ‘the Act’]. The assessee filed its return of income for assessment year 2013-14 declaring total income as ‘Nil’ after carrying forward loss of Rs.3,58,70,809/-. In scrutiny assessment proceedings the Assessing Officer inter-alia made addition of Rs.48,95,746/- under section 68 of the Act by disallowing assessee’s claim of unsecured loans. The additions/ disallowance made during assessment proceedings were set off against carry forward of business loss and unabsorbed amount of loss was allowed to be carry forward vide assessment order dated 17/03/2016 passed u/s. 143(3) of the Act. Thereafter, the provisions of section 115BBE of the Act were amended by the Taxation Laws (2nd Amendment) Act, 2016 w.e.f. 01/04/2017. Consequent to the amendment, the Assessing Officer invoked the provisions of section 154 of the Act and held that the addition made u/s 68 of the Act is to be taxed separately and cannot be allowed to set off against loss. The ld.Counsel for the assessee submitted that the CBDT vide Circular No.11/2019 dated 19/06/2019 has clarified that amendment to section 115BBE of the Act vide Finance Act,2016 would not affect set off of any loss prior to assessment year 2017-18 i.e. the assessee would be entitled to claim set off of loss against income determined under section 115BBE of the Act till assessment year 2016-17.

Shri S.N.Kabra representing the Department vehemently defended the impugned order . However, the ld.Departmental Representative fairly admitted that the Tribunal in assessee’s appeal for assessment year 2013-14 has deleted the addition made by Assessing Officer under section 68 of the Act.

Both sides heard. The solitary issue raised in this appeal is against the invoking of section 154 of the Act to disallow set off of addition made under section 68 of the Act against business losses.

In scrutiny assessment proceedings, the Assessing Officer inter-alia made addition of Rs.48,95,746/- under section 68 of the Act on account of unproved unsecured loans. The aforesaid addition along with other additions made were set off against business loss. Subsequent to the assessment order, the provisions of section 115BBE of the Act were amended by Taxation Laws (2nd Amendment) Act (supra). Consequent to the amendment, the Assessing Officer invoked provisions of section 154 thereby denying set off of disallowance made under section 68 of the Act . The assessee had also filed appeal against the addition made in the assessment order. The assessee was unsuccessful before the CIT(A). In appeal before the Tribunal, the assessee agitated the addition made under section 68 of the Act on merits. The Tribunal vide order dated 27/01/2022(supra) deleted the addition made under section 68 of the Act. Once substratum for which provisions of section 154 were invoked has erroded, the rectification made under section 154 of the Act becomes redundant. Even otherwise the CBDT has clarified vide its Circular No.11/2019(supra) that the amendment made by Finance Act, 2016 w.e.f 01/04/2017 with respect to set off of loss against income determined under section 115BBE of the Act would be operative only after assessment year 2016- 17. The relevant extract of the CBDT clarification is reproduced herein below:

Thus, in view of the above we find merit in appeal by the assessee. Hence, the impugned order is set aside and appeal is allowed.