Wingsfield Knitwear Pvt. Ltd., Ludhiana V. ACIT, C-1, Ludhiana

ITA 1406/CHANDI/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2782 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 22-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT MEHRAADDL CIT
• Keywords: Unexplained investment; Deemed to accrue or arise in india; Set aside
• Section: 133A; 69B; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 1406/CHD/2017 / ASSESSMENT YEAR : 2013-14 WINGSFIELD KNITWEAR PVT LTD., C-119, PHASE V, FOCAL POINT, LUDHIANA VS. ! THE ACIT, CIRCLE-1, LUDHIANA ' # ./ PAN NO: AAACW5076F '$/ APPELLANT &''$ / RESPONDENT ()*+ /ASSESSEE BY : SHRI VIBHOR GARG, CA *+ / REVENUE BY : SHRI ROHIT MEHRA,ADDL. CIT , -*) .# /DATE OF HEARING : 26.02.2020 /0 *) .# / DATE OF PRONOUNCEMENT : 28.02.2020 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 16.08.2017 OF THE COMMISSIONER OF INCO ME TAX (APPEALS)- 1, LUDHIANA [HEREINAFTER REFERRED TO AS CIT (A) ]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1 . THAT THE IMPUGNED APPELLATE ORDER IS BAD BOTH ON FACTS AND LAW. ITA NO. 1406-CHD-2019- WINGSFILED KNITWEAR PRIVATE LTD. LUDHIANA 2 2. THAT THE LD. APPELLATE AUTHORITY WRONGLY AND ILLEGALLY HELD THAT THE INSERTION OF SUB- SECTION 2 OF SECTION 115 BBE BY FINANCE ACT, 2016 W.E.F. 01.04.2017 HAS RETROSPECTIVE APPLICATION FROM 01.04.2013 AND CONSEQUENTLY ERRED IN CONFIRMING THE ACTION OF THE LID. A.O. IN NOT ALLOWING THE SET -OFF OF BUSINESS LOSS OF RS. 31,64,629/- AGAINST THE SURRENDERED INCOME OF RS. 1,00,00,000/- . 3. THAT THE LD. APPELLATE AUTHORITY WRONGLY AND ILLEGALLY CONFIRMED AN ASSESSED INCOME OF RS. 99,93,000/- AGAINST THE DECLARED INCOME OF RS. 68,28,370/-. 4. THAT THE APPELLANT SEEKS PERMISSION TO ADD, DELETE, AMEND, MODIFY OR ELUCIDATE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 5. IT IS PRAYED THAT THE APPEAL MAY KINDLY BE ACCEPTED AND THE IMPUGNED ORDER MAY KINDLY BE SET ASIDE, ADDITIONS BE DELETED, INTER - ALIA HOLDING T HAT SUB- SECTION 2 OF SECTION 115 BBE IS APPLICABLE PROSPECTIVELY I.E. W.E.F. 01.04.2017 OR ANY OTHER RELIEF TO WHICH THE APPELLANT MAY BE FOUND ENTITLED TO. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE CASE OF THE ASSESSEES BUSINESS PREMISES WAS SURVEYED UNDER SECTION 133A O F THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') ON 31.8.2012, WHEREU PON, IT WAS NOTED THAT THERE WERE UNACCOUNTED RECEIVABLE OF RS. 71 LA KS AND UNEXPLAINED INVESTMENT IN BUILDING AT RS. 20 LAKHS BESIDES EXCE SS CASH OF RS. 9 LAKH WHICH WERE UNRECORDED IN THE BOOK OF ACCOUNT MAINTA INED. TO MAKE UP SUCH DISCREPANCY, THE ASSESSEE COMPANY CAME FORWARD WITH THE DECLARATION OF AN ADDITIONAL INCOME OF RS. 1 CRORE WHICH WAS OVER AND ITA NO. 1406-CHD-2019- WINGSFILED KNITWEAR PRIVATE LTD. LUDHIANA 3 ABOVE THE NORMAL INCOME OF THE ASSESSEE FOR ASSESSM ENT YEAR 2013-14. HOWEVER, IN THE CONSOLIDATED PROFIT AND LOSS ACCOUN T, THOUGH THE SURRENDERED INCOME WAS CREDITED, THE SAME WAS SET O FF AGAINST THE BUSINESS LOSSES INCURRED DURING THE YEAR UNDER CONS IDERATION ON THE REASONING THAT THE UNCOUNTED RECEIVABLE, UNEXPLAINE D INVESTMENT IN BUILDING AND EXCESS CASH FOUND WERE INCOME FROM BUS INESS AND PROFESSION. AFTER THE SET OFF OF BUSINESS LOSSES O F RS. 31,64,629/- AGAINST THE SURRENDERED INCOME, THE NET INCOME WAS DECLARED AT RS. 68,35,371/-. THE ASSESSING OFFICER FOLLOWING THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S KIM PHARMA (P) LTD. VS CIT, PANCHKULA & OTHERS IN ITA NO. 106 OF 2011 AND DULARI DIGITAL PHOTO SERVICES PVT LTD VS CIT, ITA NO. 189 OF 2012 TREATED THE ADDITIONAL INCOME DISCLOSED DURING THE SURVEY OPERATION AS DEEMED INCOME UNDER THE PROVISIONS OF SECTION 69 A & 69B OF THE ACT SEPARATELY AND SUBJECTED THE SAME TO TAXATION WITHO UT ALLOWING THE SET OFF OF SUCH INCOME WITH THE ASSESSED BUSINESS LOSS OF RS. 31,64,629/-. 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER IN NOT ALLOWING THE SET OFF OF CURRENT YEAR BUSINESS L OSS FROM THE ADDITIONAL INCOME HOLDING THAT THE AMENDMENT BROUGHT TO SECTIO N 115BBE OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') W.E.F. 1 .4.2017 WAS CLARIFICATORY IN NATURE AND, HENCE, APPLICABLE RETR OSPECTIVELY. ITA NO. 1406-CHD-2019- WINGSFILED KNITWEAR PRIVATE LTD. LUDHIANA 4 5. HOWEVER, BEFORE US, LD. COUNSEL FOR THE ASSESSE E RELIED UPON THE CIRCULAR NO. 11 OF 2019 OF THE CBDT, WHICH READS AS UNDER:- CIRCULAR NO. 11/2019 GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NORTH-BLOCK, NEW DELHI, DATED THE 19 TH OF JUNE, 2019 SUBJECT: CLARIFICATION REGARDING NON-ALLOWABILITY O F SET-OFF OF LOSSES AGAINST THE DEEMED INCOME UNDER SECTION 115BBE OF T HE INCOME-TAX ACT, 1961 PRIOR TO ASSESSMENT-YEAR 2017-18-REG. WITH EFFECT FROM 01.04.2017, SUB-SECTION (2) OF SEC TION 115BBE OF THE INCOME-TAX ACT, 1961 (ACT) PROVIDES THAT WHERE TOTAL INCOME OF AN ASSESSEE INCLUDES ANY INCOME REFERRED TO IN SECTION (S) 68/69/69A/69B/69C/69D OF THE ACT, NO DEDUCTION IN R ESPECT OF ANY EXPENDITURE OR ALLOWANCE OR SET OFF OF ANY LOSS SHA LL BE ALLOWED TO THE ASSESSEE UNDER ANY PROVISIONS OF THE ACT IN COMPUTI NG 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 PRIO R TO ASSESSMENT YEAR 2017-18, WHILE SOME OF THE ASSESSING OFFICERS HAVE ALLOWED SET OFF OF LOSSES AGAINST THE ADDITIONS MADE BY THEM UNDER SECTION(S) 68/69/69A/69B/69C/69D, IN SOME CASES, SET OFF OF LO SSES AGAINST THE ADDITIONS MADE UNDER SECTION 115BBE(1) OF THE ACT H AVE NOT BEEN ALLOWED. AS THE AMENDMENT INSERTING THE WORDS 'OR SET OFF OF ANY LOSS' IS APPLICABLE WITH EFFECT FROM 1 ST OF APRIL, 2017 AND APPLIES FROM ASSESSMENT YEAR 20 17-18 ONWARDS, CONFLICTING VIEWS HAVE BEEN TAKEN BY THE A SSESSING OFFICERS IN ASSESSMENTS FOR YEARS PRIOR TO ASSESSMENT YEAR 2017 -18. THE MATTER HAS BEEN REFERRED TO THE BOARD SO THAT A CONSISTENT APPROACH IS ADOPTED BY THE ASSESSING OFFICERS WHILE APPLYING PROVISION OF SECTION 115BBE IN ASSESSMENTS FOR PERIOD PRIOR TO THE ASSESSMENT YEAR 2017-18. 3. THE BOARD HAS EXAMINED THE MATTER. THE CIRCULAR NO . 3/2017 OF THE BOARD DATED 20 TH JANUARY, 2017 WHICH CONTAINS EXPLANATORY NOTES TO T HE PROVISIONS OF THE FINANCE ACT, 2016, AT PARA 46.2, REGARDING AMENDMENT MADE IN SECTION 115BBE(2) OF THE ACT MENTIONS THAT CURRENTLY THERE IS UNCERTAINTY ON THE ISSUE OF SET-OFF OF LOSSES AGAIN ST INCOME REFERRED TO IN SECTION 115BBE. IT ALSO FURTHER MENTIONS THAT THE P RE-AMENDED PROVISION OF SECTION 115BBE OF THE ACT DID NOT CONVEY THE INTENT ION THAT LOSSES SHALL NOT BE ALLOWED TO BE SET-OFF AGAINST INCOME REFERRED TO IN SECTION 115BBE OF THE ITA NO. 1406-CHD-2019- WINGSFILED KNITWEAR PRIVATE LTD. LUDHIANA 5 ACT AND HENCE, THE AMENDMENT WAS MADE VIDE THE FINANCE ACT, 2016. 4. THUS KEEPING THE LEGISLATIVE INTENT BEHIND AMENDME NT IN SECTION 115BBE(2) VIDE THE FINANCE ACT, 2016 TO REMOVE ANY AMBIGUITY OF INTERPRETATION, THE BOARD IS OF THE VIEW THAT SINCE THE TERM 'OR SET OFF OF ANY LOSS' WAS SPECIFICALLY INSERTED ONLY VIDE THE FINAN CE ACT 2016, W.E.F. 01.04.2017, AN ASSESSEE IS ENTITLED TO CLAIM SET-OFF OF LOSS AGAINST INCOME DETERMINED UNDER SECTION 115BBE OF T HE ACT TILL THE ASSESSMENT YEAR 2016-17. 5. THE CONTENTS OF THIS CIRCULAR MAY BE CIRCULATED WI DELY FOR INFORMATION OF ALL STAKEHOLDERS AND DEPARTMENTAL OFFICERS. THE PEN DING ASSESSMENTS AND LITIGATIONS ON THIS ISSUE MAY BE HANDLED ACCORDINGL Y. 6. HINDI VERSION TO FOLLOW. SD/- UNDER SECRETARY (ITA.II), CBDT 6. A PERUSAL OF THE ABOVE CIRCULAR REVEALS THAT THE CBDT NOW HAS CLARIFIED THE MATTER THAT THE ASSESSEE WILL BE ENTI TLED TO SET OFF OF LOSS AGAINST INCOME DETERMINED U/S 115BBE OF THE ACT TIL L ASSESSMENT YEAR 2016-17. THE ASSESSMENT YEAR UNDER CONSIDERATION BEING ASSESSMENT YEAR 2013-14, THE ASSESSEE IS ACCORDINGLY ENTITLED TO THE SET OFF OF THE CURRENT YEAR LOSSES AGAINST THE DEEMED INCOME. THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.02.2020. SD/- SD/- ( . . / N.K. SAINI) ( / SANJAY GARG) !'# / VICE PRESIDENT $% / JUDICIAL MEMBER DATED : 28.02.2020 .. RAJARAJESWAWR.) ITA NO. 1406-CHD-2019- WINGSFILED KNITWEAR PRIVATE LTD. LUDHIANA 6 2*&)34 54 ) / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. &''$ / THE RESPONDENT 3. , 6) / CIT 4. , 6) ( )/ THE CIT(A) 5. 47 &)8 , .8 , 9:;< / DR, ITAT, CHANDIGARH 6. ;= - / GUARD FILE 2 , / BY ORDER, > / ASSISTANT REGISTRAR