TMI Blog2019 (7) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... ered during the survey was unaccounted business income of the assessee and not from any other sources. Section 115BBE of the Act was inserted by Finance Act, 2012 w.e.f. 1.4.2013 which restricts the claim of deduction in respect of any expenditure or allowance or set off of any loss against the income shown by the assessee or assessed u/s 68, 69, 69A,69B, 69C 69D of the Act. The instant appeal relates to Assessment Year 2012-13 and therefore the assessee s case will not be hit by provisions of Section 115BBE(2) of the Act. We therefore find no inconsistency in the finding of Ld. CIT(A) and the same requires no interference. - Decided against revenue - ITA No.828/Ind/2018 - - - Dated:- 26-7-2019 - Kul Bharat, Judicial Member And Manish Borad, Accountant Member For the Assessee : S/Shri S.S. Deshpande V.K. Ladda, CAs For the Revenue : Smt. Vinita Dubey, Sr.DR ORDER PER MANISH BORAD, AM. The above captioned appeal of revenue pertaining to Assessment Year 2012-13 is directed against the orders of Ld. Commissioner of Income Tax (Appeals), Ujjain (in short CIT(A) ), dated 04.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed income at ₹ 1,25,54,135/-. Ld. A.O also worked out the loss for the year at ₹ 25,64,726/- on estimate basis taking the figures of gross profit and expenses shown by the assessee in the financial statements. 4. Aggrieved assessee preferred appeal before Ld. CIT(A) challenging the disallowances claimed on the expenses including the depreciation, interest and remuneration to partners totaling to ₹ 91,75,248/-. Ld. CIT(A) allowed the assessee s appeal thereby giving detailed finding of fact and placing reliance on various judgments and also taking note that the amendment in the statue by way of inserting Section 115BBE of the Act was brought into effect from 1.4.2013 by the Finance Act 2012 which provides that no deduction in respect of any expenditure or allowance or set off of any loss is to be allowed against the income declared or assessed u/s 68, 69, 69A,69B, 69C 69D. Ld. CIT(A) also held that before the amendment came into effect, the assessee is eligible for claiming the expenses against the income surrendered during the course of survey which was offered as business income. 5. Now the Revenue is in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited balance sheet the assessee included the alleged surrendered income as part of business income and after claiming necessary expenses including depreciation, interest, remuneration paid to partners and other incidental expenses offered net income of ₹ 33,78,890/- for tax. Ld. A.O did not allow the claim of any expenditure against the surrendered income which in his view was taxable u/s 69 as unexplained investment and assessee was liable to tax on the amount of ₹ 1,25,01,135/-. 10. We observe that when the issue came up before the Ld. CIT(A) the claim of expenses made by the assessee were allowed observing as follows:- 4.2 Ground No.2, 5 6:- Through these grounds of appeal the appellant has challenged for not allowing the remuneration, interest, depreciation and expenses out of the additional income declared by the appellant amounting to ₹ 1,25,01,135/_. The appellant declared a sum of ₹ 1,25,01,135/- during the survey on account of difference in investment in the construction/interior of hotel premises as represented by undeclared business income. The same is undisclosed business income assessable under the head bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provision of taxing income of the nature referred to in the specified Sections at the normal rate / applicable rate of income-tax applicable on total income of the assessee has been changed w.e.f. 1.4.2013 by the Finance Act, 2(H2 as a result of introduction of section 115BBE dealing with a special rate of tax applicable to Income of the nature referred to in sections 68, 69, 69A, 69B, 69C 69D. It is also provided that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing . deemed income under the said sections. This amendment will take effect from lst April, 2013 and will, accordingly, apply in relation to the assessment year 2013 -14 and .subsequent assessment years. The section has since its introduction by the FA, 2012 w.e.f. AY, 2013-14 been amended twice - once vide ~A, 2016 w.e.f. 1.4.17 when sub-section (2) was amended to prohibit setting off of any loss against income of the nature referred .to in specified sections and second time by the Taxation Laws (Second Amendment) Act, 2016 w.ef 1.4.2017; The provision of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome referred to in clause (a) of sub-section(1). With effect from AY 2017-18, sub-section (2) prohibits setting off any loss against income of the nature referred to in specified sections. In this way, in respect of the income covered by clause(a) of subsection (1) of the above section, basic exemption, deductions and set-off of losses are also not allowable. All these provisions will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. It may further be observed that while calculating Gross total income , an assessee may, up to AY 2017-18, set-off current year s losses under section 71 with income of the nature referred to in specified sections. However, w.e.f. AY 2017-18, sub-section (2) of section 115BBE prohibits set off of any loss against the income of the nature referred to in specified sections. The investment is made in the property which is used for the purpose of business. The income arising from the said business has been shown as a business income. Against this business income depreciation for the assets used for the purpose of business is an allowable expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total ₹ 91,75,248/- is an allowable expenditure. Therefore, the addition made by the AO amounting to ₹ 33,25,887/- is confirmed. The appellant will get the relief of ₹ 91,75,248/-. Therefore the appeal on these grounds is partly Allowed. 11. We further find that the similar issue was dealt by the Coordinate Bench, Jaipur in the case of M/s. Sanjay Bairathi Gems Ltd, Jaipur vide ITA No.157/JP/17(supra) wherein also the Tribunal after considering the various judgments of Hon ble courts held that the assessee is eligible for set off of business loss against the income brought to tax u/s 69B r.w.s 115 BBE of the Act. The relevant portion of the judgment is reproduced below; 6. Per contra, the ld AR drawn our reference to the decision of the Coordinate Bench in case of Satish Kumar Goyal vs JCIT (2016) 70 taxmann.com 382 (Agra) wherein it was held that business losses of the assessee could be set off under section 71 against the income assessable under section 68 under the head income from other sources t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination of rate of tax in certain special cases and accordingly, it relates to quantification of the amount of tax and not to the computation of total income and therefore, the amendment brought in by the Finance Act 2016 would not affect the computation of total income. It was accordingly contended that the business losses in the instant case cannot therefore be allowed set off against the amount brought to tax under section 69B in terms of undisclosed investment in stock of stones, gold and jewellery. 9. It is noted that by the Finance Act, 2016, an amendment has been brought-in in section 115BBE(2)wherein it has been provided that notwithstanding anything contained in this Act, no set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income as referred to clause (a) of subsection (1) of the Act. If we were to accept the contentions of the ld CIT(DR), the question that arises is would that interpretation render sub-section (2) otiose and what was the necessity for bringing in the subject amendment. The intent of the legislature has been provided in the memorandum explaining the said amendment which reads as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al pronouncements quoted by both the parties. We find that the decision of Hon'ble Gujarat High in case of Fakir Mohmed Haji Hasan (supra) and subsequent decision of the Hon'ble Madras High Court in case of Chensing Ventures (supra) are two earliest decisions on the subject where the Hon'ble Courts have taken a divergent view in the matter. As per the decision of Hon'ble Gujarat High Court, the addition on account of unexplained investment would be considered as total income of the previous year without allowing set-off of business loss. As per Madras High Court's decision, the addition would be set-off against the business loss and the balance addition, if any, would form part of the total income and attract tax. 13. It is noticed that the Hon'ble Gujarat High Court in case of CIT vs Shilpa Dyeing Printing Mills (P) ltd (supra) had an occasion to consider an identical issue where the said divergent view has been reconciled. In that decision, the Hon'ble High Court has considered its earlier decision rendered in case of Fakir Mohmed HajiHasan (supra) as explained in another decision in case of Radhe Developers Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee is subject to income-tax on his total income though his income under each head may be well below the taxable limit. Hence the loss sustained in any year under any heads of income will have to be set off against income under any other head. In this case, the Assessing Officer made addition of ₹ 28,50,000/- as undisclosed income under Section 69 of the Act. Once the loss is determined, the same should be set off against the income determined under any other head of income. In the assessment, no reasons were given by the Assessing Officer to deny the benefit of Section 71 of the Act. The benefit provided under Section 71 of the Act cannot be denied and the learned Standing Counsel appearing for the Revenue is also unable to explain or give reasons why the assessee is not entitled to the benefit of Section 71 of the Act. The reasons given by the Tribunal are based on valid materials and evidence and the same is in accordance with the provisions of Section 71of the Act. We find no error or legal infirmity in the impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted fact that when the physical stock was examined by the authority, the value of the said stock was ₹ 13,33,485/-, however, as per the books of account, the value of stock was to the tune of ₹ 3,26,498/- i.e. amount to the tune of ₹ 10,06,987/- was not recorded in the books of account. However, it is admitted by the assessee himself that he has not completely disclosed the stock in the books of account. Now, considering the proviso of Section 69(B) of the act, we are of the opinion that the assessee had not fully disclosed the stocks in the books of account and therefore, the Assessing Officer as well as the CIT (Appeals) have rightly observed that the case of the assessee would fall under the proviso of Section 69(b) of the act. We are also of the opinion that the submissions made by the learned advocate is that the case would fall under the proviso of Section 69(c) of the act does not apply to the facts of the present case. It is not the case of the revenue that there is an unexplained expenditure, which would cover under the proviso of this Act and therefore, the assessee would not be entitled for the set off under the proviso of Section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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