AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1782
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....ome-tax Act, 1961 for the assessment year 2017-18. 2. The assessee is mainly aggrieved by the action of the learned Assessing Officer in passing rectification order under section 154 of the Act and denying adjustment/set off of addition of Rs. 1,77,70,000/- by treating the same as income assessable under section 69C read with section 115BBE of the Act, despite the fact that the original assessment order had already attained finality in view of immunity granted under section 270AA of the Act. The assessee has also challenged the ex parte order passed by the learned CIT(A) confirming the action of the Assessing Officer. 3. Brief facts borne out from the record are that the assessee company had filed its return of income declaring loss o....
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..../- (being 5% of Rs. 35,54,00,000/-) is hereby treated as unexplained expenses u/s 69C of the Income-tax Act, 1961 and added to the total income of the assessee company." 5. Thereafter, while computing assessed income, the learned Assessing Officer adjusted the aforesaid addition against current year business loss and ultimately assessed the loss at Rs. 30,12,50,163/-. Simultaneously, penalty proceedings under section 270A(2) were initiated for alleged underreporting of income. 6. Subsequently, the assessee preferred application under section 270AA seeking immunity from levy of penalty under section 270A and immunity from initiation of prosecution proceedings. The learned Assessing Officer, after examining the application filed by the ....
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....he said notice, the Assessing Officer alleged that income assessed under section 69C was liable to be taxed separately and no deduction or set off could be allowed against such deemed income. 9. Finally, the Assessing Officer passed impugned rectification order dated 07.12.2022 under section 154 and recomputed total income at Rs. 1,77,70,000/- by denying set off of business loss and by invoking provisions of section 115BBE. The learned CIT(A), in ex parte proceedings, confirmed the action of the Assessing Officer. 10. Before us, the learned counsel for the assessee submitted that the entire rectification proceedings are wholly without jurisdiction and contrary to the statutory framework of sections 270A and 270AA of the Act. He submit....
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....made purely on estimated basis being 5% of expenditure already debited in the books of account. The Assessing Officer himself in the original assessment order has noted that the assessee had debited such expenditure in the Profit & Loss Account and due to non-furnishing of complete details, 5% thereof was disallowed. Thus, fundamentally and intrinsically, it was merely an ad hoc disallowance of expenditure claimed in books of account. 13. Once expenditure is duly recorded in the books and disclosed in audited financial statements, then by no stretch of imagination can such expenditure be characterized as "unexplained expenditure" within the meaning of section 69C. The provisions of section 69C operate in altogether different field and co....
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....essment proceedings qua the issues accepted therein. 15. In the present case, the assessee, acting upon such statutory framework, consciously chose not to prefer any appeal against the original assessment order. The learned Assessing Officer, while passing order under section 270AA dated 28.02.2020, categorically recorded that all the conditions stipulated under section 270AA stood satisfied. The Assessing Officer himself noted that no appeal had been preferred against the assessment order and further observed that no tax demand was payable since assessed income still remained under loss. It is only thereafter that immunity from penalty proceedings under section 270A was formally granted and the assessee altered its legal position by acc....
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....y mechanism would stand seriously undermined. Such an interpretation would render the protection contemplated under section 270AA wholly illusory. 18. Quite apart from the above, even on merits, the very foundation adopted by the Assessing Officer is legally misconceived. The disallowance in the original assessment order was admittedly made on ad hoc basis being 5% of expenditure already debited in the books of account. Once expenditure is duly recorded in books and reflected in audited financial statements, then the same cannot partake the character of "unexplained expenditure" within the meaning of section 69C. At best, it could have been a case of estimated disallowance under normal computation provisions owing to alleged non-verifica....