2021 (2) TMI 1081 - AT - Income Tax

Tribunal rules Section 115BBE Income Tax Act not retrospective

The Tribunal held that Section 115BBE of the Income Tax Act is prospective and does not apply to the assessment year 2008-09. It allowed the assessee to ... Disallowance u/s 69C - unexplained expenditure claimed by the assessee - set off of losses against deemed undisclosed income - Eligibility of benefit of section 71 - provisions of section 115BBE Applicability - whether the provisions of section 115BBE of the Act is prospective or retrospective in nature? - HELD THAT:- In the present case, during survey an income was surrendered and added in the income of the assessee and consequent business loss was claimed, the same is available for set-off against business loss. Even the Hon'ble High Court of Madras in the case of CIT vs. Chensing Ventures [2007 (4) TMI 204 - MADRAS HIGH COURT] has considered an identical issue and held that the AO cannot deny benefit of section 71 of the Act, and the AO has to consider the undisclosed income u/s. 69 of the Act, but once the loss is determined, the same should be set-off against the income determined under any other head of income. We are of the considered view that the provisions of section 69C of the Act, will apply but consequent loss is to be set-off against this income. As regards to applicability of section 115BBE of the Act, as clarified by the CBDT as provisions brought out by the Finance Act, 2016 in the statute book w.e.f. 01.04.2017, the same is prospective and not retrospective. Appeal of the assessee is allowed. Issues Involved:1. Applicability of Section 115BBE of the Income Tax Act.2. Set-off of losses against income under Section 115BBE.3. Retrospective or prospective nature of Section 115BBE.4. Validity of additions made under Section 69C of the Income Tax Act.Issue-wise Detailed Analysis:1. Applicability of Section 115BBE of the Income Tax Act:The Tribunal examined whether the provisions of Section 115BBE, which were brought into the statute book by the Finance Act, 2016 and effective from 01.04.2017, apply to the assessment year 2008-09. The Tribunal noted that the CBDT issued Circular No. 11 of 2019, clarifying that the amendment in Section 115BBE to disallow set-off of losses is applicable from the assessment year 2017-18 onwards. The Tribunal concluded that Section 115BBE is prospective in nature and does not apply to the assessment year 2008-09.2. Set-off of Losses Against Income Under Section 115BBE:The Tribunal referred to the CBDT Circular No. 11 of 2019, which clarified that the term 'or set off of any loss' was specifically inserted in Section 115BBE(2) by the Finance Act, 2016, effective from 01.04.2017. Therefore, for assessment years prior to 2017-18, an assessee is entitled to claim set-off of losses against income determined under Section 115BBE. The Tribunal also cited judicial precedents, including the decisions of the Gujarat High Court in CIT v. Shilpa Dyeing & Printing Mills (P) Ltd. and the Madras High Court in CIT v. Chensing Ventures, which supported the view that losses should be set off against income under any head.3. Retrospective or Prospective Nature of Section 115BBE:The Tribunal analyzed whether the provisions of Section 115BBE are retrospective or prospective. It referred to the explanatory notes to the provisions of the Finance Act, 2016, issued by the CBDT, which clarified that the amendment to Section 115BBE is effective from 01.04.2017 and applies to assessment year 2017-18 and subsequent years. The Tribunal concluded that Section 115BBE is prospective and does not apply to the assessment year 2008-09.4. Validity of Additions Made Under Section 69C of the Income Tax Act:The Tribunal addressed the addition of Rs. 75,00,000 made by the Assessing Officer under Section 69C due to non-availability of bills or evidence to support the purchases. The Tribunal noted that the assessee had shown the expenditure in its regular business accounts, thereby explaining the source. Consequently, the provisions of Section 69C could not be invoked. The Tribunal cited the decision of the Gujarat High Court in CIT v. Shilpa Dyeing & Printing Mills (P) Ltd., which held that income declared in a survey should be taxed as business income and available for set-off against business losses. The Tribunal also referred to the Madras High Court's decision in CIT v. Chensing Ventures, which supported the set-off of business losses against undisclosed income.Conclusion:The Tribunal allowed the appeal of the assessee, holding that the provisions of Section 115BBE are prospective and not applicable to the assessment year 2008-09. The Tribunal also held that the assessee is entitled to set off the business loss against the income determined under Section 69C. The appeal was allowed, and the earlier addition made by the Assessing Officer was deleted. The order was pronounced in the open court on 16th February 2021 at Chennai.