ACIT, Circle-24(1), New Delhi V. Sri Balaji Forgings (P) Ltd., New Delhi

ITA 3330/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5076 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 15-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Bogus
• Section: 68; 69; 6; 69C; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘B’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA No.3330/Del./2019 (ASSESSMENT YEAR : 2015-16) ACIT, Circle 24 (1), vs. Sri Balaji Forgings (P) Limited, New Delhi. WZ-106/80, Near Cambridge School, Rajouri Garden, New Delhi – 110 027. (PAN : AAACS1255L) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Gautam Jain, Advocate REVENUE BY : Md. Gayasuddin Ansari, Senior DR Date of Hearing : 19.07.2022 Date of Order : 21.07.2022 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the Revenue is directed against the order of the ld. CIT (A)-8, New Delhi dated 06.02.2019 pertaining to assessment year 2015-16. 2. The grounds of appeal raised by the Revenue read as under :- “1. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) has erred in holding that the bogus income of Rs.9,40,17,274/- declared by the assessee cannot be ITA No.3330/Del./2019 2 added u/s 68 of the Act even if the assessee failed to prove the source and genuineness of the transactions. 2. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) has erred in deleting the addition of Rs.9,40,17,274/- made by AO as unexplained cash credit u/s 68 r.w.s. 115BBE of the I T Act without appreciating the facts that the new section 115BBE of the I T Act was inserted from the Finance Act, 2012 w.e.f. AY 2013-14 instated of the Finance Bill 2016.” 3. Brief facts of the case are that the assessee is engaged in the business of manufacturing industry. The assessee has filed return of income on 29.10.2015 for AY 2015-16 declaring income of Rs.39,98,870/-. The case was taken up for scrutiny and assessment u/s 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) was completed by AO on 29.12.2017, determining assessed loss at Rs.9,00,18,404/- under normal provision of income and Rs.9,40,17,274/- under section 68 r.w.s. 115BBE of I.T. Act, by making addition of Rs.9,40,17,274/- on account of unexplained cash credit u/s 68 r.w.s. 115BBE of the I.T. Act. 4. Ld. counsel of the assessee at the outset submitted that the issue is squarely covered in favour of the CBDT Circular No.11/2019 dated 19.06.2019 and he has also referred to catena of cases in this regard. Per contra, ld. DR for the Revenue did not object to the fact that the issue is ITA No.3330/Del./2019 3 covered in favour of the assessee by the decision of ld. CIT (A) with reference to CBDT Circular itself in this regard. 5. We may gainfully refer to the order of ld. CIT (A)’s which is exhaustive one as under :- “The contention of the Appellant has been considered and the order of AO has also been perused. It is seen from the order of the AO that the AO has treated the commodity trading profit of Rs.9,40,17,274/- earned by the appellant during the year under consideration as income from unexplained credit. Accordingly, it was treated as unexplained cash credit u/s 68 r.w.s. 115BBE. The details of such income are as follows: Sr.No. Particulars Amount (in INR) 1 Naravani Commodities 8,00,17,273 2 Imperial Commodities 15,00,000 3 Subh Commodities Pvt. Ltd. 1,03,00,090 4 Vinavak Commodities 21,99,910 It is seen that the Assessing Officer has computed the income at page 12 in para 7 of the order as under: Total income from business/profession Rs. (as declared by the assessee) 39,98,870 Less: Reduce the bogus income from commodity shown by the assessee (-) Rs.9,40,17,274 Total loss (-) Rs.9,00,18,404 Add: As per para 6 above u/s 68 r.w.s. 115BBE Rs..9,40,17,274/- ITA No.3330/Del./2019 4 4.1 It will be apparent from the aforesaid that the Assessing Officer determined the loss at Rs.9,00,18,404/- but has not set off the same against income of Rs.9,40,17,274/- being income from trading in share commodity and brought to tax u/s 68 of the Act read with section 115BBE of the Act. However, it is seen that the Section 115BBE of the Act as applicable to the instant year read as under: "Tax on income referred to in section 68 or section 69 or section 69A or section 698 or section 69C or section 690. 11588E. [(1) Where the total income of an assessee,- a) includes any income referred to in section 68, section 69, section 69A, section 698, section 69C or section 690 and reflected in the return of income furnished under section 139;or b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 698, section 69C or section 690, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of- i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).] ITA No.3330/Del./2019 5 (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) 16a[and clause (b)] of sub-section (1).]" It will be apparent from the aforesaid section that there is no provision to deny the set off of loss u/s 115BBE of the Act. Further, section 115BBE of the Act has been amended by Finance Act' 2016 w.e.f. Assessment Year 2017-18.The amended section reads as under: "(1) Where the total income of an assessee,- (a) includes any income referred to in section 68, section 69, section 69A, section 698, section 69C or section 690 and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 698, section 69C or section 690, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i). ITA No.3330/Del./2019 6 (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 460[or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (l).] 4.2 It is further seen that in Finance Bill 2016, an amendment had proposed in section 115BBE of the Act, whereby the following provision had been proposed with effect from 1 st day of April 2017 as under :- “Amendment of Section 11588E In section 11588E of the Income Tax Act, in sub-section (2), after the word "allowance", the words "or set off of any loss" shall be inserted with effect from the i" day of April 2017. " Further notes on clauses to the Finance Bill' 2016 in this respect as read as under: "Clause 51 of the 8i11 seeks to amend section 11588E of the Income Tax Act relating to tax on income referred to in section 68 of section 69 of section 69A or section 698 or section 69C or section 69D Sub-section (1) of section 11588E, inter alia provides that the income relating to the above referred sections are taxable at the rate of thirty percent. Sub-section (2) of the said section 11588E provides that no deduction in respect of any expenditure or allowances in relation to income referred to in the aforesaid sections shall be allowable. It is proposed to amend the said sub-section (2) of section 11588E so as to provide that the set off of any loss shall ITA No.3330/Del./2019 7 also be not allowable in respect of income under the aforesaid sections. This amendment will take effect from t" April 2017 and will, accordingly apply in relation to the assessment year 2017-18 and subsequent years." Also memorandum explaining the Finance Bill' 2016 viz-a-viz the above amendment, read as under: "Clarification regarding set off losses against deemed undisclosed income. "Section 11588E of the Act, inter alia, provides that the income relating to section 68 of section 69 of section 69A or section 698 or section 69C or section 690 is taxable at the rate of thirty percent and further provides that no deduction in respect of any expenditure or allowances in relating to income referred to in the said sections shall be allowable. Currently, there is uncertainty on the issue of set off of losses against income referred in section 11588E of the 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 an section 11588E. However, the current language of section 11588E of the Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, it is proposed to amend the provisions of sub-section (2) of section 11588E to expressly provide that no set off of any loss shall be allowable in respect of income under section 68 of ITA No.3330/Del./2019 8 section 69 or section 69A or section 698 or section 69C or section 69D. This amendment will taken effect from I" April 2017 and will accordingly, apply in relation to assessment year 2017-18 and subsequent years." [Clause 51] 4.3 From the above discussion, it is very clear that the provisions of section 115BBE with respect to the prohibition of set off of losses against income would be applicable from AY 2017-18 onwards and are therefore not applicable to the current assessment year AY 2015-16. It is further seen from the pronouncement by Hon'ble Supreme Court in CIT Vs. Vatika Township (P) Ltd, reported in 367 ITR 466 where in general principles concerning retrospectivity were identified and held that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.” 6. Thereafter, ld. CIT (A) referred to other case laws in this regard and finally concluded as under :- “Therefore, considering the facts and circumstances of the case, the amended provisions of the section 115BBE for prohibition of set off of losses are not applicable to the AY under consideration and since the assessee has fully disclosed the profits earned from commodity trading, the action of the AD is not tenable and accordingly the separate addition of Rs.9,40,17,274/- made by the AD u/s 68 read with section 115BBE is hereby deleted.” ITA No.3330/Del./2019 9 7. Against this order, Revenue has filed an appeal before us. 8. As already noted by us, ld. counsel of the assessee has referred to CBDT Circular No.11/2019 wherein Head Note reads as under :- “SECTION 71, READ WITH SECTION 115BBE, OF THE INCOME-TAX ACT, 1961 – LOSSES – SET OFF OF FROM ONE HEAD AGAINST INCOME FROM AN OTHER – CLARIFICATION REGARDING NON-ALLOWABILITY OF SETOFF OF LOSSES AGAISNT THE DEEMED INCOME UNDER SECTION 115BBE OF THE INCOME TAX ACT, 1961 PRIOR TO ASSESSMENT YEAR 2017-18.” 9. It was categorically mentioned in the circular that an assessee is entitled to claim set off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17. The same view was adopted in following case laws :- (i) Vijaya Hospitality and Resorts Ltd. vs. CIT – 419 ITR (322 (Kerala); (ii) PCIT vs. Aacharan Enterprises (P) Ltd. – 273 taxman 85 (Raj.); (iii) Shree Karthik Papers Ltd. vs. DCIT 273 taxman 467 (Mad); (iv) M/s. Sangeet Resorts vs. DCIT – ITA No.561/Chd/2019; (v) M/s. Star Ply Board Ltd. vs. PCIT – ITA No.668/Chd/2019; (vi) M/s. Innovative Construction (P) Ltd. vs. ACIT - ITA No.1084/Mum/2019; and (vii) Ace Infracity Developers (P) Ltd. vs. DCIT – 188 ITD 589 (Del-Trib). ITA No.3330/Del./2019 10 10. Moreover, as noted by us, ld. DR for the Revenue fairly accepted that in view of the aforesaid CBDT Circular, the decision of ld. CIT (A) is a correct one and it does not need any interference on our part. Accordingly, we uphold the order of ld. CIT (A) and decide the issue in favour of the assessee. 11. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on this 21 st day of July, 2022. Sd/- sd/- (YOGESH KUMAR US) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 21 st day of July, 2022 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-8, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.