TaxTMI 
TaxTMI 
2018 (4) TMI 19
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....of which the assessee is one of the members. During the course of search proceedings at the residence premises of director of the assessee company, Sh. Prashant Tiberawala, a sale deed dated 16/04/2012 in respect of residential plot C-114, Lal Kothi, Jaipur was found. According to sale deed, the assessee company had purchased the said residential plot through its Director Sh. Rajendra Tiberawala for a total consideration of Rs. 1,64,00,000/- from Smt. Sunita Agarwal whereas the value of the property determined by the Registering Authority was at Rs. 1,97,58,518/-. In its statements recorded u/s 132(4) during the course of search, the Director of the assessee company, Sh. Rajendra Tiberawala admitted undisclosed investment of Rs. 36,00,000/- in the purchase of the said residential plot and surrendered the same in the hands of the company. 2.1 Subsequently, while filing the return of income, the assessee company has disclosed and offered to tax the said surrendered amount of Rs. 36,00,000/- under the head "income from other sources" and at the same time, claimed set off of the said income against the current year business loss of Rs. 767,768/-. During the course of assessment procee....
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....IT reported in 120 Taxmann 11(Guj). He accordingly confirmed the action of the AO in disallowing the set off of business loss of Rs. 767,778 against the amount surrendered during the course of search. Now, the assessee is in appeal before us. 4. During the course of hearing, the Ld. AR submitted that surrendered undisclosed income declared under the head "income from other sources" is liable to be taxed u/s 69/69A of the IT Act, 1961 and that income is to be taxed in accordance with Section 115BBE of IT Act, 1961 introduced by Finance Act, 2012 w.e.f. 1.4.2013 i.e. from A.Y. 2013-14. The Ld. AO has referred while making discussion in assessment order judgments of P & H High Court KIM Pharma P. Ltd. Vs CIT (ITA No. 106 of 2011) reported at (2013) 35 Taxman.com 456 and ITAT Chandigarh Bench judgment in case of Liberty Plywood (P) Ltd. Vs. CIT (2013) 35 Taxman.com 456 in which it is held that amount surrendered in survey/search not reflected in books of accounts and no source from where it was derived is deemed income u/s 69A and set off of losses u/s 70 and 71 is not possible against such income. However these judgments relates to period prior to introduction of Section 115BBE and a....
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....wever, the current language of section 115BE of the Income-tax Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, the provision of sub-section (2) of section 115BBE of the Income-tax Act has been amended as to expressly provide that no set off of any loss shall be allowable in respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 46.3 Applicability: This amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years." 4.2 It was submitted that assessee had correctly offered the entire surrendered income to tax after claiming set off of current year business loss and current year depreciation u/s 71 while filing the return of income of this year which is admissible and Ld. A.O. has erred in assessing the surrendered income of Rs. 36,00,000/- and disallowing the current year business loss of Rs. 7,67,768/- without giving set off. 4.3 It was submitted that the Jaipur Bench of ITAT in case of ACIT, CC-2, Jaipur vs. Girdhar Associates (ITA No. 1043/JP/2013 vide order dated 04-0....
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....nt to refer to the findings in the said decision which are reproduced herein: "7. We have heard the rival contentions and perused the material available on record, the factual matrix and various decisions relied upon by both the parties. The Assessing officer has brought to tax, undisclosed investment in excess stock of stones, gold & jewellery found and surrendered during the course of search proceedings which has not been recorded in the books of accounts of the assessee, under the provisions of section 69B read with section 115BBE of the Act. Further, the Assessing officer has not allowed the set off of business loss of Rs. 86,96,733 against the said income of Rs. 2,31,41,217 which has been brought to tax under section 69B read with section 115BBE of the Act. The Assessing officer has however allowed the carry forward of said business loss to be set off in the subsequent assessment years. The fact that the business loss has been incurred during the year is thus not in dispute. The limited dispute relates to set off of said business loss against the income which has been brought to tax under section 69B read with section 115BBE of the Act. 8. Firstly, regarding the contention....
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....rom 1 April 2017 and will accordingly, apply to assessment year 2017-18 onwards. Accordingly, for the year under consideration, there is no restriction to set off of business losses against income brought to tax under section 69B of the Act. 11. Further, the matter could be looked at from another perspective. The provisions relating to set off of losses are contained in Chapter-VI relating to aggregation of income and set off of losses. Whenever legislature desires to restrict set-off of loss or allowance of loss, in a particular manner, usually, the provisions are made in Chapter-VI such as non-allowance of business loss against salary income as provided in section 71(2A), and treatment of short- term or long-term capital losses. There is no specific provision which restrict set off of business losses against income brought to tax under section 69B. Interestingly, both section 69B and section 71 falls under the same chapter VI. In the absence of any provisions in section 71 falling under Chapter-VI which restrict such set off, in the instant case, set off of business losses against income brought to tax under section 69B cannot be denied. 12. Now, we refer to various judicial ....
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....Bench of the Court considered the issue in following manner: "6. Heard counsel. The Assessing Officer has not given any reason whatsoever to deny the set off of the business loss against the income declared under the head & "other sources". Section 71 deals with set off of loss against income under any other head. After setting off losses against the income under the same head, if the net result is still a loss, the assessee can set off the said loss under Section 71 of the Act against income of the same year under any other head, except for losses which arise under the head "capital gains". The income tax is only one tax and levied on the sum total of the income classified and chargeable under the various heads. Section 14 has classified the different heads of income and income under each head is separately computed. Income which is computed in accordance with law is one income and it is not a collection of distinct tax levied separately on each head of income and it is not an aggregate of various taxes computed with reference to each of the different sources separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee i....
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....Haji Hasan (supra) as explained in case of Radhe Developers Incia Ltd. (supra), the same cannot be declined. In the result, no question of law arises. Tax appeal is, therefore, dismissed." 14. It is also noted that in latest decision of Hon'ble Gujarat High Court in case of Krishnamegh Yarn Industries (supra) which has been brought to our attention by the ld CIT DR to support his contentions regarding applicability of section 69B, the earlier decision in case of Shilpa Dyeing and Printing Mills has been followed for setting off of losses under section 71 against such income. The relevant findings of Hon'ble High Court are as under: "8. We have learned advocates for the respective parties. Perused the orders of the CIT (Appeals) as well as the ITAT. It is an undisputed fact that during scrutiny, the assessee himself has disclosed the fact that in his books of account, he had shown less stock to the tune of Rs. 10,06,987/-. It is also an admitted fact that when the physical stock was examined by the authority, the value of the said stock was Rs. 13,33,485/-, however, as per the books of account, the value of stock was to the tune of Rs. 3,26,498/- i.e. amount to the tune of Rs. 1....