The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT) held that set-off of any loss or deduction of any expenditure of business income, prior to Assessment Year (AY) 2016-17 cannot be denied under Section 115BBE of Income Tax Act, 1961.
The assessee M/s Mahaluxmi Food Industries filed his income tax return for AY 2013-14, during the assessment scrutiny under Section 143(3) of the Income Tax Act the Assessing Officer (AO) disallowed the loss incurred to business income under Section 115BBE of Income Tax Act, and further in a subsequent proceeding under Section 154 of the Income Tax Act treated the surrendered business income as unexplained income of the assessee.
Aggrieved by the order assessee filed an appeal before Commissioner of Income Tax (Appeals) [CIT (A)], which upheld the decision of AO.
The assessee filed an appeal before the Income tax Appellate Tribunal (ITAT).
The counsel representing the assessee Ajay Jain, Charted Accountant (CA) contented that, the AO did not make any addition under Sections 68 or 69 or 69A or 69B or 69C or 69D of the Income Tax Act, therefore, there was no question of disallowance of set off of losses against the surrendered business income.
The counsel further submitted that the AO was not justified in changing the nature of the income as ‘unexplained income’ and thereby assessing it under Sections 68 or 69 or 69A of the Income Tax Act in the proceedings carried out under Sectio 154 of the Income Tax Act.
Additionally, he relied on CBDT (Central Board of Direct Tax) Circular No.11 of 2019 where it is clarified that since the term ‘set off of any loss’ was inserted only vide Finance Act, 2016 w.e.f. 01.04.2017 therefore, an assessee would be entitled to claim set off of loss against income determined under Section 115BBE of the Income Tax Act till the assessment year 2016-17.
The Departmental Representative Akashdeep, fairly admitted that case of the assessee is covered by the CBDT Circular as the Assessment Year involved is Assessment Year 2013-14.
The Single Bench of SH. Sanjay Garg, Judicial Member observed that in this case the assessment year involved is A.Y. 2013-14 and that the amendment to the provisions of Section 115BBE of Income Tax Act have been introduced vide Finance Act, 2016 w.e.f. 01.04.2017, the action of the lower authorities in denying the set off of losses to the assessee cannot be held to be justified.
Hence, the Tribunal allowed the appeal and directed the AO to allow the assessee set off of losses in respect of income determined under Section 115BBE of the Income Tax Act.
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