Nilgiri Dairy Farm Private Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) quashed a rectification order passed under Section 154 of the Income-tax Act that denied the assessee the benefit of set-off of business losses against an addition of ₹1.77 crore. The original assessment had disallowed 5% of certain expenses on an estimated basis due to inadequate supporting details and incorrectly treated the amount as unexplained expenditure under Section 69C. Subsequently, the assessee obtained immunity under Section 270AA by accepting the assessment and refraining from filing an appeal. Nearly three years later, the Assessing Officer invoked Section 154 and Section 115BBE to deny loss set-off and convert the assessed loss into taxable income. The Tribunal held that once immunity under Section 270AA was granted, the assessment attained statutory finality and could not be substantially altered through rectification proceedings. It further ruled that an estimated disallowance of recorded expenses could not be characterized as unexplained expenditure under Section 69C.
Core Issue: Whether, after granting immunity under section 270AA and the assessee accepting the assessment without filing an appeal, the Assessing Officer could invoke section 154 to deny loss set-off by treating an ad hoc disallowance of expenditure already recorded in the books as unexplained expenditure under section 69C taxable under section 115BBE, thereby converting the assessed loss into taxable income.
