Assessee wins appeal on set-off of losses against deemed income

The Tribunal allowed the Assessee's appeal, emphasizing the entitlement to set off losses against income determined u/s. 115BBE for the relevant assessment year 2014-15. The Tribunal held that set off of losses against deemed income u/s. 115BBE can be allowed to the Assessee until assessment year 2016-17. The Assessing Officer was directed to re-compute the Assessee's income accordingly.

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Issues:
1. Non-allowance of set off of business losses against income determined u/s. 69 of the Act.

Analysis:
The appeal was filed by the Assessee against an order passed by the Commissioner of Income-tax (Appeals) for the assessment year 2014-15. The Assessee, an individual, had initially filed a return of income electronically but later admitted an omission related to construction business and speculative losses. The Assessing Officer added unexplained cash credits and disallowed the set off of losses against business income. The Commissioner affirmed the additions, leading to the current appeal.

The Assessee argued that the disallowance of set off of business losses was the main grievance, citing legal precedents and legislative amendments. The Assessee emphasized that the CBDT Circular No. 11/2019 clarified the allowability of set off of losses against deemed income u/s. 115BBE of the Act before the assessment year 2017-18. The Assessee also highlighted judgments supporting the claim for set off of losses against income determined u/s. 115BBE.

The Department refuted the Assessee's claim, asserting that the impugned order was proper and did not warrant interference. After hearing both parties and examining the records, the Tribunal focused on the issue of non-allowance of set off of business losses against income determined u/s. 69 of the Act. The Tribunal noted that the legislative amendments and CBDT Circular clarified the scope of set off of losses against deemed income u/s. 115BBE.

The Tribunal observed that the provisions of sub-section (2) inserted in section 115BBE of the Act by the Finance Act, 2016 did not apply to the assessment year in question (2014-15). Citing various judicial decisions, the Tribunal held that once income is determined under any provision mentioned in section 115BBE, set off of losses against such income can be allowed to the Assessee, but only until assessment year 2016-17. The Tribunal directed the Assessing Officer to re-compute the Assessee's income accordingly.

Ultimately, the Tribunal allowed the Assessee's appeal, emphasizing the entitlement to set off losses against income determined u/s. 115BBE for the relevant assessment year. The order was pronounced on 25/05/2022.

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