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Facts
The assessee, engaged in manufacturing, reported commodity trading profits of Rs. 9.40 crores, which were set off against business losses for AY 2015-16. The Assessing Officer doubted the genuineness of these transactions, invoking Section 68 and making an addition under Section 68 read with Section 115BBE. The CIT(A) deleted this addition, stating that the assessee had fully disclosed the profits and Section 115BBE's amended provisions were not applicable for the relevant assessment year.
Held
The Tribunal upheld the CIT(A)'s decision, confirming that the assessee had fully disclosed the commodity trading profits. It clarified that the prohibition on setting off losses under Section 115BBE was effective from AY 2017-18, not AY 2015-16. The Tribunal also noted that an earlier ITAT order had already decided this issue in the assessee's favour and even if the addition was sustained, it would be offset by business losses, making the revenue's appeal academic.
Key Issues
Whether an addition under Section 68 read with Section 115BBE for commodity trading profits set off against business loss was justified for AY 2015-16, considering the effective date of Section 115BBE's prohibition on loss set-off.
Sections Cited
143(2), 143(3), 68, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the ld. CIT(A)- 8, New Delhi dated 06.10.2019 pertaining to A.Y. 2015-16.
Brief facts of the case are that the assessee is engaged in the business of manufacturing industry. The assessee has filed return of income on 29.10.2015 for A.Y 2015-16, declaring an income of Rs. 39,98,870/-. The case was selected for scrutiny under CASS and notice u/s 143(2) was issued on 13/04/2016 and the same was duly served upon the assessee.
On perusal of the P&L accounts the Assessing Officer noted that the assessee has shown other income in the form of commodity trading profit ofRs.9,40,17,274/ which has been set off against the business loss. The assessing officer found that the assessee had claimed trading in commodities from the following parties:
Sr. No. Particulars Amount (in INR) 1. Narayani Commodities 8,00,17,273 2 Imperial Commodities 15,00,000 0. Subh Commodities Pvt. Ltd. 1,03,00,090 4. Vinayak Commodities 21,99,910 Total 9,40,17,273
The assessing officer doubted the veracity of the transaction in commodity profit and made enquiries which led the AO to believe that the transactions are not genuine and he invoked the provisions of section 68 of the IT Act. Thus, assessment u/s 143(3) of the Act was completed by the Assessing Officer on 29.12.2017 determining assessed loss at Rs. 9,00,18,404/- under normal provision of income. The Assessing Officer further made an addition of Rs. 9,40,17,274/- on account of unexplained cash credit u/s 68 r.w.s 115BBE of the Income- tax Act, 1961 [the Act, for short]of the Act.
Aggrieved with the addition of Rs. 9,40,17,274/- u/s 68 made by Assessing Officer the assessee went in appeal electronically before the ld. CIT(A). The CIT(A) deleted the addition holding that since the assessee has fully disclosed the profits earned from commodity trading, the action of the AO is not tenable and that the amended provisions of the section 115BBE for prohibition of set off of losses are not applicable to the AY under consideration.
Aggrieved the Revenue appealed before the ITAT which vide order dated 21.07.2022 upheld the order of CIT(A). This order of the ITAT was recalled vide M.A. 155/Del/2023 dated 19/03/2024 for the purpose of adjudicating ground no. 1 of the Revenue’s appeal which was left unadjudicated.
The ld DR argued that the AO has demonstrated that the transactions in commodity entered into by the assessee are bogus and the addition u/s 68 need to be sustained.
Per contra, the ld counsel of the assessee stated that addition u/s 68 needs to be set off against business loss as the prohibition for set off of loss u/s 115BBE(2) is applicable from the AY 2017-18. The impugned assessment being for the AY 2015-16, the AO should have allowed the set off of business loss from the income added u/s 68 of the IT Act.
We have heard the rival submissions and have perused the relevant material on record. We have also gone through the elaborate discussion by both the lower authorities and the earlier decision of ITAT (supra) which has dealt with each and every detail thoroughly.
10. We find that ground no.1 and ground no. 2 taken by the Revenue are interlinked. The CIT(A) has deleted the addition of Rs. 9,40,17,274/-holding that as the assessee has fully disclosed the profits earned from the commodity trading. The CIT(A) has also held that prohibition of set off of losses against income referred to u/s 68 r.w.s 115BBE would be effective from 01.04.2017. We also find that this decision of ITAT dated 21.07.2022 (supra ) has upheld the CIT(A) order in entirety. We are therefore of the view that the issue of addition of income added u/s 68 taken up in ground no. 1, has inherently been decided by the ITAT in its earlier decision dated 21.07.2022 in assessee’s favour. In any case, in the event the addition of Rs 9,40,17,274/- is sustained, the assessee will get the benefit of set off of the business loss determined by the Assessing Officer. In either scenario, there is no effect on the taxable income of the assessee for the instant year. Considering the facts of the case, ground no 1 taken by the Revenue has become academic. Accordingly, the appeal is dismissed.
In the result, the appeal of the Revenue in stands dismissed.
The order is pronounced in the open court on 14.06.2024.