TaxTMI 
TaxTMI 
2023 (5) TMI 825
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....urvey material and other available information as per the assessment record and allowed the set-off of business loss against the income declared during survey. 3. That the Ld. PCIT has failed to appreciate that the assessment had been completed after due consideration of various replies by the Assessing Officer during the course of assessment proceedings and the Assessing Officer having taken a possible view and, therefore, the assumption of jurisdiction u/s 263 was not called for by the Ld. PCIT. 4. That the Ld. PCIT had failed to appreciate that at the time of survey, it was clearly stated that the nature of Income offered during survey was business Income and the same was credited in the profit and loss account and the AO was of the view that the income offered during survey, being the business income, has to be charged at the normal rate of tax and, as such, the same has rightly been set-off against the current year business loss. 5. Notwithstanding the above said grounds of appeal, it is submitted that even on merits, the finding of Ld. PCIT that no set-off of losses is to be allowed, if the income offered during survey is to be taxed as per provisio....
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....sequently, the assessment records were called for and examined by the Ld. PCIT, Patiala and a show-cause dt. 31/01/2022 was issued. In the show-cause, it was stated that the assessee has filed its return of income on 15/10/2016 wherein the assessee has shown the surrendered income of Rs. 1,07,00,000/- besides other business receipt of Rs. 38,97,500/- and after claiming various deductions against these incomes, has declared current year loss of Rs. 47,28,534/-. It was stated by the Ld. PCIT that the assessee has nowhere specified the nature of additional income surrendered nor AO made any inquiry regarding the nature and the head of income under which assessee has offered additional income. It was accordingly held by the Ld. PCIT that in absence of any inquiry and details furnished by the assessee, the income offered cannot be termed as business receipt and chargeable to tax under section 115BBE of the Act. Accordingly it was held by the Ld. PCIT that the order so passed by the AO is erroneous and prejudicial to the interest of the Revenue and needs to be revised under section 263 of the Act and an opportunity was granted to the assessee to show cause and file necessary submission w....
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....he gross profit and NP ratio have been given. It was submitted that a comparative chart of the expenses is given at page 24 of the paper book and then another questionnaire was issued as per page 25 & 26 of the paper book to which the reply was given at page 27. Then again, another show-cause notice was issued to which the assessee reply as per page 32 of the paper book and thereafter the assessment was framed as per the returned income and while framing the assessment, the Ld. Assessing Officer has mentioned that the requisite information was called from time to time and which have been furnished and /examined. It was accordingly submitted that there was due application of mind by the Assessing officer while passing the assessment order. 6. It was further submitted that subsequently, a notice u/s 263 dated 31.01.2022 was issued by the ld PCIT and the only issue raised was that no enquiry was made with regard to the nature of surrendered income and to which, the assessee furnished a detailed reply which have been placed in the paper book pages 33 to 40 of the paper book and the followings contentions were raised: a. "The amount offered was over & above the normal busine....
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.... the AO has not put up the issue in detail in the assessment order does not mean that the issue has not been verified in detail by him. In the case of assessee, specific queries were raised on the issue under consideration and detailed replies were filed by the assessee which were duly considered by the AO and decision has been taken by him on the basis of the facts of the case which clearly identifies that the surrender pertains to the business income of the assessee and therefore, the same has been taxed at normal rates of tax. 9. It was further submitted that the ld PCIT has held the order passed by the Ld. AO as erroneous as well prejudicial by applying the explanation 2 to section 263 which is totally incorrect as the case of the assessee does not fall in any of the limb of explanation 2 to section 263. The AO has made in depth enquiries on the issues concerned and there is no lack of enquiry as specific enquiry was asked by the AO on the concerned issue and in depth reply was also filed on the same. Therefore, even after the thorough application of mind by the AO, merely because it seems to the ld PCIT that issue had remain unattended by the AO, he cannot call for applicat....
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....hese incomes resulting into current year loss of Rs.47,28,534/-. If the said amount of Rs.1,07,00,000/- was of business income, the assessee could have shown it as business income in its ITR which the assessee didn't show. The contention of the assessee that surrendered amount was receivables/ debtors not recorded in the regular books of the business is nothing but an after-thought because even during the course of assessment proceedings, the assessee had nowhere specified the nature of additional income surrendered. The amount surrendered by the assessee remained unexplained during the course of survey as well as during the assessment proceedings. In the absence of any enquiry and details furnished by the assessee, the income offered cannot be termed as business receipts and is, accordingly, chargeable to tax u/s 115BBE of the Income Tax Act, 1961. Further the reliance of the assessee on the case laws of DCIT, Ludhiana Vs Khurana Rolling Mills Pvt. Ltd and Famina Knit Fabs Vs ACIT, Ludhiana is totally misplaced as the facts of those cases are entirely different from the fact of the case of the assessee. In assessee's case the assessee himself has admitted (in its surrender let....
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....vision thereof shall be futile and revenue neutral as the provisions of sec. 115BBE as applicable upto the A.Y. 2016-17 (relevant to the A.Y. of the assessee) duly allows the setting up of losses and accordingly even if the surrendered amount is to be excluded from the profit and loss account of the business and considered as deemed income, the business losses and the depreciation losses including the brought forward losses shall be set off against this deemed income and the net result of computation of income shall remain the same as has been assessed in the assessment order. The same is demonstrated as under: Net (Loss) as per P/L A/c as (4728534) has been originally filed Less: surrendered income considered 10700000 as business income credited to the P/L A/c now excluded therefrom and considered as deemed income Loss under business head (15428534) Add: depreciation debited to P/L 8369043 Net Loss before depreciation (7059491) Add: deemed income (surrendered Income) 10700000 3640509 Less: depreciation u/s 32 (allowable 3640509 depreciation is Rs. 8369043/- but restricted ....
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....534/- and there wouldn't be any taxable income resulting in nil tax liability for the impugned assessment year 2016-17. The same is not different from what the assessee has done while filing its return of income. The tax impact under both the scenarios is nil and in such a situation, the order so passed by the AO cannot be held as erroneous as well as prejudicial to the interest of the Revenue. It is a settled legal position that for exercise of jurisdiction u/s 263 of the Act, the assessment order should be erroneous as well as prejudicial to the interest of the Revenue and both these conditions needs to be satisfied. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. In the instant case, we find that even where the AO had considered amount surrendered as deemed income as against business income, he would still be required to allow set off of the same against regular business income, being the legal position under pre....
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....the provisions of section 115BBE comes under Chapter-XII providing for determination of rate of tax in certain special cases and accordingly, it relates to quantification of the amount of tax and not to the computation of total income and therefore, the amendment brought in by the Finance Act 2016 would not affect the computation of total income. It was accordingly contended that the business losses in the instant case cannot therefore be allowed set off against the amount brought to tax under section 69B in terms of undisclosed investment in stock of stones, gold and jewellery. 9. It is noted that by the Finance Act, 2016, an amendment has been brought-in in section 115BBE(2) wherein it has been provided that "notwithstanding anything contained in this Act, no set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income as referred to clause (a) of subsection (1) of the Act. If we were to accept the contentions of the ld CIT(DR), the question that arises is would that interpretation render sub-section (2) otiose and what was the necessity for bringing in the subject amendment. The intent of the legislature has been provided ....
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....T has also clarified the aforesaid position vide its CBDT Circular No. 11 of 2019 dt. 19/06/2019 stating that the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017 and the assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17 and contents therefore read as under : "Subject: Clarification regarding non-allowability of set-off of losses against the deemed income under section 115BBE of the Income-tax Act, 1961 prior to assessment-year 2017-18-reg. With effect from 01.04.2017, sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides that where total income of an assessee includes any income referred to in section(s) 68/69j69A/69B/69Cj69D of the Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing the income referred to in section 115BBE(1) of the Act. 2. In this regard, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that in assessments prior to assessm....