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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Bench:
The captioned appeal filed by the Revenue, pertaining to assessment year 2014-15, is directed against the order passed by the Commissioner of Income Tax (Appeal)-12, Kolkata in appeal no. 10101/CIT(A)-12/Kol/2018-19, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 27/12/2016.
At the time of hearing none appeared on behalf of assessee in spite of issuance of notice for hearing more than one occasion and Ld. Departmental Representative(DR), was present for the appellant Revenue. In the absence of any appearance by the assessee, the appeal is being disposed of ex parte qua the
M/s Lalbaba Seamless Tubes Pvt. Ltd. ITA No.58/Kol/2019 Assessment Year:2014-15 assessee, after hearing Ld. DR for the Revenue on merits in terms of Rule 24 of the Income Tax Appellate, Tribunal, Rules, 1963.
The grounds of appeal raised by the Revenue are as follows:
The ld. CIT(A) has erred in law in allowing the set off of current year business loss and carry forward losses and unabsorbed depreciation against the income determined u/s 68 of the I.T. Act since the income determined u/s 68 does not fall under any head in Sec. 14. 2. The appellant craves the leave to make any addition, alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings.
Brief facts qua the issue are that the assessee Company filed its return of income for the A. Y. 2014-15 on 29.09.2014 declaring total Income of Rs. (-) 6,45,82,182/-. The assessment was made u/s. 143(3) on 27.12.2016. by making several addition to the total income. Being aggrieved, the assessee filed appeal before the Ld. CIT(A)-l, Kolkata against the order u/s. 143(3) of the I.T. Act. The Ld. CIT(A), Kolkata has passed order dated 07.04.2017 vide no. 596619881190117/CIT(A)-1/Circle- 3(1)/2016-17 & gave relief to the assessee and directed Assessing Officer to allow the set off of business losses and unabsorbed depreciation for the A. Y. 2010-11 to 2013-14 after due verification. Subsequently the assessee was in the receipt of order u/s. 143(3) dated 27/12/2016 filed a rectification petition before the Assessing Officer on 15.02.2017 for allowing Set off of Business Losses as per Returned Loss of Rs. 6,45,82,182/- which has not been set off losses as per provision of Sec 71(1) read with sec 32(2) of the I.T. Act. The A.O. rejected the petition of the assessee and stated that all other additions totaling of Rs. 11,20,28,453/- were made as un-explained cash credit u/s. 68 of the I.T. Act. The plea of the Revenue is that income assessed u/s. 68 is a technically headless income since it does not fall within the purview of five heads of income contemplated in the Act. Hence assessee’s request for set off brought forward loss / un absorbed depreciation against assessed income u/s. 68 for the A.Y. 2014-15 was not accepted and hence assessee’s petition was rejected.
M/s Lalbaba Seamless Tubes Pvt. Ltd. ITA No.58/Kol/2019 Assessment Year:2014-15 Being aggrieved the assessee appealed before the Ld. CIT(A)-1,Kolkata against rejecting the application for rectification u/s. 154 of the I.T. Act. Ld. CIT(A), Kolkata passed order dated 05.10.2018 vide no. 10101/CIT(A)-12/Kol/2018-19 & gave relief to the assessee & directed the A O to allow the set off of current year business loss and carry forward losses and unabsorbed depreciation after due verification. The detailed order of the ld. CIT(A) is reproduced below:
“3.2. I have considered the facts of the case and the submissions of the appellant. The AO had earlier passed the assessment order under section 143(3) wherein set off of losses under section 71,72 read with Sec. 32(2) of the IT Act was not allowed. The assessee filed a petition under section 154 of the IT Act before the A.O to allow set off of losses as per provisions of the Law since the additions so made u/s 68 of the I.T. Act were to be treated as business income & thereby b/f losses needed to be set off. The AO rejected the 154 petition mainly on the grounds that most of the additions made in the assessment order have been made under section 68 of the IT Act and relied upon the Hon’ble Kerala High Court Judgment in the case of CIT vs Kerala Sponge Iron Pvt. Ltd. (2015) and came to a conclusion that income assessed under section 68 is a “headless income” and therefore came to a conclusion that brought forward losses/depreciation etc. cannot be set off. The appellant has submitted that in the judgement in CIT vs Kerala Sponge Iron Pvt. Ltd. (2015) is not sustainable as the facts of the case are different case the assessee had credited in his books of accounts, with certain cash entries reflected as income from commodities , no description as to the source, identity, etc. were put on record. The Kerala High Court relying on the Gujarat High Court decision in the case of Fakir Mohd. Haji Hassan vs C1T 247 ITR 290 (2001) disallowed the set off of business losses with the unexplained profit from commodities. In the case of Fakir Mohd. Haji Hassan vs CIT 247 ITR 290 (2001) the matter related to disallowance of deduction for confiscation of gold by Custom Authorities and the trading loss thereon due to confiscation claimed by the assessee was not allowed by the High Court.lt is also seen that the Hon’ble Gujarat High Court in its decision in the case of CIT V Radhey Developers India Ltd. has overturned its decision in the case of Faqir Mohd Haji Hassan after making the following order:- "The decisions of this Court in the case of Fakir Mohmed Haji Hasan (Supra) and Krishna Textiles (Supra) are neither relevant nor germane to the issue considering the fact that in none of the decisions the Legislative Scheme emanating from conjoint reading of provisions of section 14 & 56 of the Act have been considered". Income determined under section 68 of the I.T. Act is income under other sources. Brought forward depreciation loss which merges with the current year’s depreciation will therefore have to be allowed as a set off against unexplained income determined under section 68 of the I.T. Act. Rules of set off to be followed will be the one applicable in the year in which set off is being claimed. Thus I find force in the contentions of the appellant and the judgements relied upon are squarely applicable to the present case. Hence the AO is directed to allow the set off of current year business loss and carry forward losses and unabsorbed Page | 3
M/s Lalbaba Seamless Tubes Pvt. Ltd. ITA No.58/Kol/2019 Assessment Year:2014-15 depreciation after due verification . This ground of appeal is treated as allowed for statistical purposes.”
Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us.
The ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity and on the other hand, the ld. Counsel for the assessee has defended the order of the ld. CIT(A).
We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that Assessing Officer made additions in respect of undisclosed sales under section 68 of the Act. Another addition relates to cash credit u/s 68 with respect to unsecured loan. We note that these additions so made u/s 68 of the Act were related to business income therefore brought forward losses needs to be set off. We note that Hon’ble Gujrat High Court in the case of CIT vs. Shilpa Dyeing & Prininting Mills (P) Ltd. reported in [2013] 219 Taxman 279 (Guj) held that section 71 permits assessee to set off loss other than that of capital gains against income from other head which is reproduced for ready reference:
Before us, learned counsel for the revenue placed strong reliance on the decision in case of Fakir Mohmed HajiHasan Vs. Commissioner of Income Tax (supra) and submitted that when the income from undisclosed source does not fall in any of the heads specified in Section 14 of the Act, the business loss of the current year could not have been set off against such income. He submitted that in Deputy Commissioner of Income Tax Vs. RadheDevelopers India Ltd. and anr (supra) this Court had not, in any manner, disagreed with the view in case ofFakirMohmed Haji Hasan Vs. Commissioner of IncomeTax(supra) and thus, such ratio still hold the field. 8. We, however, find that Section 71 of the Act permits an assessee to set off loss other than that of capital gains against income from other head. This very issue came-up for consideration before the Madras High Court in case of Commissioner of Income Tax vs. Chensing Ventures(supra). The Division Bench of the Court considered the issue in following manner: "6.Heard counsel. The Assessing Officer has not given any reason whatsoever to deny the set off of the business loss against the income Page | 4
M/s Lalbaba Seamless Tubes Pvt. Ltd. ITA No.58/Kol/2019 Assessment Year:2014-15 declared under the head & "other sources". Section 71 deals with set off of loss against income under any other head. After setting off losses against the income under the same head, if the net result is still a loss, the assessee can set off the said loss under Section 71 of the Act against income of the same year under any other head, except for losses which arise under the head "capital gains". The income tax is only one tax and levied on the sum total of the income classified and chargeable under the various heads. Section 14 has classified the different heads of income and income under each head is separately computed. Income which is computed in accordance with law is one income and it is not a collection of distinct tax levied separately on each head of income and it is not an aggregate of various taxes computed with reference to each of the different sources separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee is subject to income-tax on his total income though his income under each head may be well below the taxable limit. Hence the loss sustained in any year under any heads of income will have to be set off against income under any other head. In this case, the Assessing Officer made addition of Rs.28,50,000/- as undisclosed income under Section 69 of the Act. Once the loss is determined, the same should be set off against the income determined under any other head of income. In the assessment, no reasons were given by the Assessing Officer to deny the benefit of Section 71 of the Act. The benefit provided under Section 71 of the Act cannot be denied and the learned Standing Counsel appearing for the Revenue is also unable to explain or give reasons why the assessee is not entitled to the benefit of Section 71 of the Act. The reasons given by the Tribunal are based on valid materials and evidence and the same is in accordance with the provisions of Section 71 of the Act. We find no error or legal infirmity in the impugned order."
In the light of the judgment of Hon’ble Gujrat High Court in the case of Shilpa Dyeing and Printing Mills Pvt. Ltd. (supra) we note that there is no infirmity in the order of ld. CIT(A), his order on this issue, is hereby accepted and grounds of appeal raised by the Revenue is dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 13.11.2019
Sd/- Sd/- (S.S.GODARA) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER �दनांक/ Date: 13/11/2019 (SB, Sr.PS)
M/s Lalbaba Seamless Tubes Pvt. Ltd. ITA No.58/Kol/2019 Assessment Year:2014-15 Copy of the order forwarded to: 1. DCIT, Circle-3(1), Kolkata 2. M/s Lalbaba Seamless Tubes Pvt. Ltd. 3. C.I.T(A)- 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File.