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2023 (5) TMI 825 - AT - Income TaxRevision u/s 263 - computation of income where the surrendered income is considered separately as deemed income and not as business income, after setting off the same against the business loss it will still show a net loss figure and there wouldn’t be any taxable income resulting in nil tax liability for the impugned assessment year 2016-17 - HELD THAT:- The phrase prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the AO. In the instant case, we find that even where the AO had considered amount surrendered as deemed income as against business income, he would still be required to allow set off of the same against regular business income, being the legal position under pre-amended law (as we have discussed subsequently) and the order so passed cannot therefore be held as erroneous in allowing set off of business income against income surrendered irrespective of different classification and also cannot be held as prejudicial to the interest of the Revenue as there is clearly no loss to the Revenue. As regard the assessee’s eligibility to set off business loss against deemed income for the impugned assessment year 2016-17, the matter is no more res integra as it has held by various Benches of the Tribunal that the amendment brought in by the Finance Act, 2016 is prospective in nature. We refer to case of Sanjay Bairathi Gems Ltd. [2017 (8) TMI 721 - ITAT JAIPUR] wherein, speaking through one of us, it was held that the amendment brought in by the Finance Act, 2016, whereby set off of losses against income referred to in section 69B has been denied is stated clearly to be effective from 1-4-2017 and will accordingly, apply to assessment year 2017-18 onwards and for the year under consideration i.e, assessment year 2013-14, there is no restriction to set off of business losses against income brought to tax us 69B. In the instant case, the show-cause pertaining to assessment year 2016-17 has been issued by the ld PCIT on 31/01/2022 which is subsequent to issuance of aforesaid CBDT Circular dated 19/06/2019 which itself shows that the initiation of proceedings u/s 263 are not in compliance with the aforesaid CBDT Circular. As been emphasized by the CBDT that the pending assessment and litigations should be handled taking into consideration the clarification so issued and in the instant case, a fresh litigation has been started by the Department by initiation of action u/s 263 which is clearly in the teeth of the CBDT Circular and cannot be sustained in the eyes of law. Thus the impugned order passed by the ld PCIT u/s 263 of the Act cannot be sustained in the eyes of law. Decided in favour of assessee.
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