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2019 (10) TMI 728 - AT - Income TaxAddition u/s 69 or 40A - Expenses incurred in cash - Cash found with an employee of the appellant from his residence at the time of search operation - setoff of loss against the addition made u/s.68/69 - CIT (A) held that addition cannot be made u/s. 40A (3), because the hotel was under construction and no expenses have been claimed in the profit & loss acount, however, he has made the addition u/s.69 on the ground that these payments towards capital-work-in-progress - HELD THAT:- From the documents placed in the paper book as well as observations noted in the impugned assessment order, it is an admitted fact that these seized documents was not found from the premises of the assessee company albeit it was from the premises of Shri Mandeep Singh in Goa, who was an employee of the assessee-company at the relevant time. The assessee had submitted that he had his own independent construction business also. However, neither the statement of Shri Mandeep Singh was recorded nor any evidence has been produced by the assessee that he carried on any independent construction business. However if one goes by the presumption under the law, then if the documents have not been found from the premises of the assessee, then presumption u/s.132(4A) r.w.s. 292C cannot be drawn against the assessee. Without going into the merits of the addition made u/s.69 and cash found with an employee of the assessee made u/s 68 of the Act, we find substance in the argument raised by the ld. counsel that said addition should be set off from the losses on account of depreciation and business loss. The said loss was claimed in the revised return and it consists of loss arising from depreciation put to use w.e.f. 01.03.2011 and business loss during the year. As per CBDT Circular No.11/2019 dated 19th June, 2019, Assessing Officer should allow the said loss against the addition made u/s.68/69 etc. and the amendment brought by the Finance Act, 2016 is w.e.f. 01.04.2017 and any denial of such set off is only applicable from the Assessment Year 2017-18; and assessment for the period prior to Assessment Year 2017-18, such set off would be allowed against income determined u/s.115BBE. Thus, in view of clear cut clarification by the CBDT, we hold that the addition made u/s. 69 and addition u/s.68 is liable to be set off from the loss. Accordingly, the additions made by the Assessing Officer and confirmed by the Ld. CIT (A) would be liable to be set off from such losses. With this direction, the appeal of the assessee is partly allowed
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