Claim of Loss against Surrendered Business Income Rejected on Ground of Unexplained Income: ITAT Directs Re-adjudication [Read Order]

The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT) directed the assessing officer to re-adjudicate the rejection of a claim of loss against the surrendered business income as unexplained income. 

Mahaluxmi Food Industries, the appellant assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the action of the assessing officer in disallowing the carry forward losses by way of invoking the provisions of Section 115BBE(2) of the Income Tax Act,1961 against the surrendered business income of the assessee. 

Ajay Jain, the counsel for the assessee contended that the assessing officer did not make any addition under sections 68 or 69 of the Income Tax Act in the assessment order and thus there was no question of disallowance of set off of losses against the surrendered business income. 

It was also submitted that the assessing officer treated the surrendered business income during the survey action as unexplained income of the assessee and applied the provisions of Section 115BBE(2) of the Income Tax Act to disallow the set off of a loss against surrendered income and not justified in changing the nature of the income. 

Akashdeep, the counsel for the revenue strongly supported the decisions made by the lower authorities. It was also submitted that the disallowance made by the assessing officer to the claim of losses against the surrendered business income based on unexplained income was as per the law.

The bench observed that the action of the lower authorities in denying the set off of losses to the assessee cannot be held to be justified and are liable to be deleted. 

A single-member bench comprising Sanjay Garg ( Judicial) directed the assessing officer to re-adjudicate for allowing the claim of set-off of losses in respect of income determined under section 115BBE of the Income Tax Act while allowing the appeal filed by the assessee. 

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