Tribunal grants set-off of business loss, directs fresh consideration under Section 68. CIT(A) should admit additional evidence.

The Tribunal partly allowed the appeal, directing a fresh consideration by the AO regarding the addition under Section 68. The assessee was granted the benefit of set off of the current year's business loss against the addition made under Section 68, as provisions disallowing such set off were not applicable for the assessment year in question. The Tribunal also held that the CIT(Appeals) should have admitted additional evidence filed by the assessee to allow proper adjudication of the issue, remanding the matter to the AO for reconsideration.

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Issues:
1. Treatment of unexplained cash credit under Section 68 of the Income-Tax Act.
2. Refusal of set off of current year's loss against income added under Section 68.
3. Admission of additional evidence before the CIT(Appeals) under Rule 46A of the I.T. Rules, 1963.

Analysis:

1. Treatment of Unexplained Cash Credit:
The appeal concerned the treatment of unexplained cash credit under Section 68 of the Income-Tax Act. The Assessing Officer (AO) added a sum as unexplained cash credit due to outstanding creditors representing purchases on credit by the assessee. The AO proceeded with the addition as the assessee failed to provide satisfactory explanations regarding the nature and source of these credits. However, the Tribunal held that under Section 68, only credit entries in the books of account for the relevant previous year can be treated as unexplained cash credit in the absence of proper explanation by the assessee. Opening balances cannot be added under Section 68.

2. Refusal of Set Off of Current Year's Loss:
The AO refused to allow the set off of the current year's loss against income added under Section 68, citing Section 115BBE(2) of the Act. The AO relied on provisions effective from 1.4.2017, disallowing deductions or set off of losses against income added under Section 68. However, the Tribunal noted that the CBDT clarified the prospective applicability of this amendment in Circular No.11 of 2019, making it inapplicable to AY 2015-16. Therefore, the Tribunal held that the assessee should be entitled to set off the current year's business loss against the addition made under Section 68.

3. Admission of Additional Evidence:
The CIT(Appeals) refused to accept additional evidence filed by the assessee, citing Rule 46A of the I.T. Rules, 1963. The rule outlines specific circumstances under which additional evidence can be admitted, including situations where the AO refused to admit relevant evidence or if the appellant was prevented from producing relevant evidence. The Tribunal held that the closure of the assessee's business in June 2015 constituted a sufficient cause for non-production of evidence before the AO. Therefore, the CIT(Appeals) should have admitted the additional evidence to allow proper adjudication of the issue. The Tribunal remanded the issue to the AO for fresh consideration with regard to the addition under Section 68, considering the additional evidence provided by the assessee.

In conclusion, the Tribunal partly allowed the appeal, directing a fresh consideration by the AO regarding the addition under Section 68 while granting the assessee the benefit of set off of the current year's business loss against the addition made under Section 68, as the relevant provisions were not applicable for the assessment year in question.

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