The Cochin bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri George George K., Judicial Member and Shri Laxmi Prasad Sahu, Accountant Member has held that the circulars issued by the Central Board of Direct Taxes (CBDT) are binding on the income tax officials.
The assessee, M/s Heera Kerala Developers is a company engaged in the business of the development of the property. During the course of assessment proceedings, the AO observed that the assessee has received an amount of Rs.71,56,000/- from M/s. J.M. Financial Trustee Company Pvt. Ltd. through issue of secured debentures. The assessee was required to prove the ingredients as per Section 68ofthe Income Tax Act, 1961. Since the assessee was unable to prove the ingredients as per Section 68 of the Act, the AO added the sum to the income of the assessee under Section 68 of the Act and computed the income at Rs.18,30,069/- after setting off the loss for the current year from the additions made under Section 68 of the Act. The assessment was later concluded and subject to revision under section 263 of the Act.
After analysing the facts and evidences, the Tribunal observed that there was an addition made by the AO under Section 68 of the Act to the tune of Rs.71,66,000/- which has been set off from the returned loss of Rs.53,25,931/-.
Allowing the plea of the assessee, the Tribunal observed that “From the above circular it is clear that before 1st April 2017 the assessee was eligible to claim set off of loss against the income under Section 115BBE of the Act and the impugned case on hand relates to AY 2014-15. The Revenue officers are bound to follow the circular issued by the CBDT but here in this case the learned PCIT has exercised his jurisdiction in spite of the clear cut clarification of the CBDT in the circular cited above. Therefore, the learned PCIT’s order is not sustainable. Accordingly the order passed by the AO which is para materia with the circular issued by the CBDT is not erroneous and not prejudicial to the interest of Revenue.”
Shri Raja Kannan, Advocate appeared for the assessee.
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