AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 210
X X X X Extracts X X X X
X X X X Extracts X X X X
....cribed cost formulas as per AS-2 mandated by section 145(2) to be followed by the assessee. 4. Whether on the facts and in the circumstances of the case the CIT (A) was right in considering the addition of Rs. 2,32,09,339/- by AO as a disallowance of expenses u/s 115BBE, which has nowhere been mentioned in the assessment order. 5. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 2,32,09,339/- in view of the fact that this amount formed part of the value of excess stock found as on date of search and hence is the unexplained investment of the assessee liable to be taxed u/s 115BBE of the Act. 6. The Appellant crave, leave or reserves the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." Ground No. 1 is regarding the addition made by the AO under the head Income from House property was deleted by ld. CIT (A). 2. The assessee is an Individual and was proprietor of M/s. Harsh Jewellers which was engaged in the business of trading and manufacturing of gems and jewellery items mainly on wholesale basis. During the course of assessment pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e also taken a note of factual matrix of the case as well as applicable case laws as relied upon by the assessee. It is submitted that during the period under appeal, assessee had let out a portion of his home located at 462, Ekta Block, Mahaveer Nagar, Jaipur; for an annual rent of Rs. 65,000/- while the other portion of the house was occupied by the assessee for his residential purpose. Accordingly, assessee had allocated the interest paid on housing loan towards SOP and rented property. However, AO took the ALV for the let out portion at Rs. 1,10,400/- and accordingly enhanced the rental income by Rs. 45,400/- in the ALV for the year which is based as per ALV of the last year. After allowing statutory deduction @ 30%, AO has made the addition of Rs. 31,780/- (Rs. 45,400 - 13,620) to the house property income. As per provision of sub-sec (2)& (4) of section 23 the Act, Assessee is entitled for one house to be kept as 'SOP', on which no notional rent can be taken into a/c for computation of House Property Income. In view of this facts, addition of Rs. 31,780/- is hereby deleted. Assessee's Gr. No. 1 to 1.1 stands allowed." Thus the ld. CIT (A) has given the finding that the ALV ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the decision of Hon'ble Delhi High Court in para 3.2.2 as under :- " 3.2.2. I have duly considered assessee's submission and carefully perused the assessment order. In the year under appeal, AO has invoked the provision of sec. 14A read with Rule 8D and made the addition of Rs. 73,332/-. It is submitted that during the FY relevant to AY 2013-14, assessee had claimed interest expenditure of Rs. 14,44,298/- on unsecured loan and also received dividend of Rs. 31,034/-. In this regard, AO has observed that assessee had invested fund in shares from where exempt income arises and has incurred interest expenses on loans and advances. AO has also observed that there is direct nexus between loan amounts and investments in shares. In view of these facts, AO invoked the provisions of sec. 14A read with Rule 8D and disallowed Rs. 73,332/-. Assessee submits that interest expenditure is incurred for the business purpose where provisions of sec. 14A will not apply. However, relying on the decision of Hon'ble ITAT Delhi in case of DCM Ltd (supra), assessee has made alternative plea to sustain total disallowance upto Rs. 31,034/- i.e. to be restricted to exempt income earned of Rs. 31,034/- onl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e action under section132 of the Act in case of assessee group, therefore, the AO has framed the assessment under section 143(3) read with section 153B(1)(b) of the Act. The assessee filed its return of income declaring total income of Rs. 9,43,99,690/-. However, the AO has framed the assessment at the total income of Rs. 12,09,86,280/- by making the additions as under :- Return Income Rs. 9,43,99,690/- Add: Addition of Income from House property as discussed in para No. 6 Rs. 31,780/- Add : Disallowance u/s. 14A as discussed in para No. 7 Rs. 73,332/- Add : Disallowance u/s. 80G as discussed in para No. 8 Rs. 2,685/- Add : Addition of unexplained Cash found during search as discussed in para No. 9. Rs. 32,69,455/- Add : Addition of on account of excess stock found as discussed in para No. 10. Rs. 2,32,09,339/- Assessed Total Income Rs. 12,09,86,281/- R/O Rs. 12,09,86,280/- The dispute in ground nos. 3 to 5 of the revenue's appeal is regarding the addition made under section 69 read with section 115BBE on account of excess stock of Rs. 12,11,17,822/-. The ld. CIT (A) deleted the said addition made by the AO by accepting the claim of the assessee that the price of g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the books of accounts it becomes part of the regular stock-in-trade and, therefore, the valuation of that stock as on 31st March, 2013 has to be taken at the prevailing price which was done by the assessee. The provisions of section 115BBE(2) are applicable only for the assessment year 2017-18 and not for the year under consideration. Hence the reliance placed by the AO on sub-section (2) of section 115BBE is misconceived. In support of his contention he has relied upon the following decisions :- ACIT vs. Sanjay Bairathi Gems Ltd. In ITA No. 157/JP/2017 ( Jaipur Trib.) M/s. Pitamber Commodity Futures Pvt. Ltd. vs. ACIT In ITA No. 863/JP/2017 (Jaipur Trib.) CIT vs. Shilpa Dyeing & Printing Mills (P) Ltd. 219 Taxman 279 (Guj. HC) 10. We have considered the rival submissions as well as the relevant material on record. As far as the excess stock found during the survey, the assessee has not disputed the quantity of excess stock and the only dispute is regarding the amount surrendered on account of excess stock during the survey as well as in the statement recorded under section 131 of the Act in post survey enquiry on 1st March, 2013 which was not offered to tax in the return ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re 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 of the ld CIT DR that the provisions of section 115BB....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n denied is stated clearly to be effective from 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 deni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n case of Chensing Ventures (supra). The Division 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase. By applying the decision in case of Fakir Mohmed 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision of the Coordinate Bench in the case of ACIT CC-2, Vs. M/s Girdhar Associates (supra) wherein it was held as under: " 3.5 We have heard the rival contentions and perused the materials available on record including the Circular No. 3/2017 dated 20th Jan. 2017 issued by the CBDT, Ministry of Finance, New Delhi. It is not imperative to repeat the facts of the case as it is found that the issue in question is covered by the Circular No. 3/2017 dated 20-01-2017 issued by the CBDT, Ministry of Finance, New Delhi relating to the issue of section 115BBE of the Act and this section is operative from the assessment year 2017-18 and not related to the issue prior to it. Hence, the application of Section 115BBE of the Act applied by the AO on the assessee is not applicable in the present facts and circumstances of the case. In view of the above deliberations, the Ground No. 2 of the Revenue is dismissed." 8. In light of above discussions, it is clear that the amendment brought in section 115BBE wherein no set off of losses against surrendered income brought to tax is prospective in nature and doesn't apply for the assessment year under consideration. The decisions relied upon by the....