TaxTMI 
TaxTMI 
2024 (5) TMI 638
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....are not pressed. Accordingly, these three grounds are dismissed as not pressed. 3. In appeal for AY 2015-16 in ITA No. 1001/Kol/2023 ground nos. 1, 2, 3 and 4 are not pressed. Accordingly, these four grounds are dismissed as not pressed. There are three other issues which have been raised in this year vide ground nos. 6, 7 and 8 which are reproduced as under: "6. Ld. CIT(A)(NFAC) has erred in confirming addition of Rs. 66,61,440/- as excess payment to related party u/s. 40A(2)(b). 7. Ld. CIT(A)(NFAC) has erred in confirming of a sum of Rs. 1,39,218/- under section 14A. 8. Ld. CIT(A)(NFAC) has erred in confirming addition of Rs. 2,58,64,275/- of advances outstanding during previous financial year." 4. In order to deal with the common ground in both the appeals, we take the facts from AY 2011-12. Assessee filed its return of income on 30.09.2011 reporting total income as loss of Rs. 2,33,13,760/- which was assessed at Rs. 1,83,04,823/- u/s. 143(3) vide order dated 24.03.2014. Subsequently, case was reopened u/s. 147 by issuing notice u/s. 148 on 27.03.2018. Return in response to notice u/s. 148 was filed on 14.04.2018 by reporting the same loss as done in the original retu....
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....tion 115BBE, relevant extract of the same are reproduced for ease of reference. "14. Based on the rival contentions, on analyzing the factual situation, it is evident that the assessment pertains to the period from 1st April 2013 to 31st March 2014. It is not in dispute that the addition of Rs. 56,24,264/- made in the assessment is undisclosed income coming within the purview of section 68, it being a sum found credited in the books of the assessee with respect to which the explanation offered was not found to be satisfactory by the Assessing Officer. Since section 115BBE was introduced with effect from 0l.04.2013, it cannot be disputed that no deduction in respect of any expenditure or allowance can be allowed with respect to the said amount. But question is whether set off of any loss shall be allowed against the said undisclosed income. In order to decide the question it is crucial to decide the nature of such income. Contention for the revenue is that, it will not fall within any of the category of income under the classifications contained in section 14. In other words, such income cannot be treated as "profits and gains of business" or it cannot be considered as "income fro....
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....ontained in section 14, it is evident that, as on the date of the assessment such income was included under a special classification by virtue of section 115BBE. It is pertinent to note that, 115BBE had prohibited allowance of deductions alone, as it stood unamended as on the relevant date of the assessment. The explanatory notes to the provisions of the Finance Act, 2016 enumerates the reasons for introduction of the further amendment barring the set off, with effect from 1.4.2017. It is stated that,- "Currently, there is uncertainty on the issue of set-off oflosses against income referred to in section 115BBE of the Income Tax Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set-off against income referred to in section 115BBE. However, the current language of section 115BBE 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 the sub-section (2) of section 115BBE of the Income Tax Act has been amended as to expressly provide that no set off any loss shall be allowable in respect of income ....
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....ial available on record. Before us Ld. Counsel has claimed the set off of addition made u/s. 68 from its business loss reported in the return which has been denied by the Ld. AO as well as Ld. CIT(A). We find that in the present case, the issue is already held to be in favour of the assessee by the Hon'ble High Court of Kerala in the case of Vijaya Hospitality & Resorts Ltd. (supra) wherein the amendment brought in section 115BBE(2) are effective from 01.04.2017. We also note that CBDT in its circular referred above has categorically allowed to claim the set off of loss against the income determined u/s. 115BBE after AY 2016-17. In the present case before us, the year under consideration is AY 2011-12 and 2015-16 in which the claim of set off of loss is permissible. Accordingly, in terms of the CBDT Circular and respectfully following the decision of Hon'ble High Court of Kerala (supra) we allow ground taken by the assessee in this respect for both the appeals before us. 8. Now, we take up appeal for AY 2015-16 in ITA No. 1001/Kol/2023 to deal with the other issues. Ground no. 6 is in respect of addition made u/s. 40A(2)(b) for excess payment made to related party amounting to Rs.....
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....ses. According to the assessee, Ld. AO cannot sit in the arm chair of the businessman and decide what a business man is supposed to do. Assessee had incurred loss during the year and there was no incentive for it to inflate its purchase bills. Thus, the disallowance made by the Ld. AO are merely on the basis of surmises and conjectures. On this issue from the perusal of the order of Ld. CIT(A), we find that no finding has been given by him while disposing the appeal. 9. Per contra, Ld. CIT, DR placed reliance on the orders of the authorities below. 10. From the perusal of the order of Ld. AO, we note that he has considered the purchase transaction of only one unrelated party to compare it with the purchases made by the assessee from the related party and arrived at the conclusion to make the disallowance. Contrary to this, assessee has furnished details of purchase transactions from several other unrelated parties which demonstrates that purchases have been made at higher rates from them as compared to the one from the related party. Also, it is undisputed that there is a loss scenario both, in the hands of the assessee and the one from whom purchases have been made which is a re....