Case Law Details
Sri. John Daniel Vs ACIT (ITAT Cochin)
The assessee an individual is proprietor of Sunmoon Hospitality. For the assessment year 2015-2016, the return of income was filed on 31.10.2015 declaring total income of Rs.22,18,070. The assessment u/s 143(3) of the I.T.Act was completed vide order dated 30.03.2017, wherein the total income arrived was at Rs.26,05,110.
Subsequently, the CIT issued notice u/s 263 of the I.T.Act. According to the CIT, the assessment completed u/s 143(3) of the I.T.Act on 30.03.2017 is erroneous and prejudicial to the interest of the revenue for the reason that the Assessing Officer had allowed set off loss against income declared under the head `income from other sources’ [the assessee had claimed set off of business loss (Rs.13,34,494)] and house property loss (Rs.5,15,439) against Rs.30,00,000 declared by the assessee as `income from other sources’. The assessee contended that the Assessing Officer has rightly allowed set off of income from other sources against other heads of income because up to assessment year 2016-2017 there was no prohibition on set off of losses. It was contended that the amendment to section 115BBE of the I.T.Act restricting the set off of any loss was inserted by the Finance Act, 2016 with effect from 01.04.2017 only, hence, not applicable to the concerned assessment year 2015-2016.
ITAT have heard the rival submissions and perused the material on record. The Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra) had categorically held that amendment which prohibits / restricts the set off of losses against `income from other sources’ was inserted by the Finance Act, 2016 with effect from 01.04.2017 only i.e. assessment year 2017-2018 onwards. In view of the judgment of the Hon’ble High Court, ITAT hold that there is no prohibition of set off of loss against income declared under the head income from `other sources’ for the relevant assessment year. Hence, the assessment order dated 30.03.2017 is not erroneous and prejudicial to the interest of revenue. Accordingly, ITAT hold that the order passed by the CIT u/s 263 of the I.T.Act is invalid in view of the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra). It is ordered accordingly. In the result, the appeal filed by the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal at the instance of the assessee is directed against the order of the Commissioner of Income-tax dated 10.01.2019, passed/s 263 of the I.T.Act. The relevant assessment year is 2015-2016.
2. The grounds raised read as follows:-
“1. The learned CIT is against law in holding that the assessment order for Asst.Year 2015-16 dt 30/03/2017 is erroneous and prejudicial to the interest of the revenue.
2. The learned CIT failed to understand that treating Rs.30 lakhs as income u/s 68 and applying the provisions of 115BBE would not have made any tax effect since the amendment to section 115BBE restricting the set off of any loss inserted by the Finance Act 2016 is effective for Asst Year 2017-18 onwards only.”
3. The brief facts of the case are as follow:
The assessee an individual is proprietor of Sunmoon Hospitality. For the assessment year 2015-2016, the return of income was filed on 31.10.2015 declaring total income of Rs.22,18,070. The assessment u/s 143(3) of the I.T.Act was completed vide order dated 30.03.2017, wherein the total income arrived was at Rs.26,05,110.
4. Subsequently, the CIT issued notice u/s 263 of the I.T.Act. According to the CIT, the assessment completed u/s 143(3) of the I.T.Act on 30.03.2017 is erroneous and prejudicial to the interest of the revenue for the reason that the Assessing Officer had allowed set off loss against income declared under the head `income from other sources’ [the assessee had claimed set off of business loss (Rs.13,34,494)] and house property loss (Rs.5,15,439) against Rs.30,00,000 declared by the assessee as `income from other sources’. The assessee contended that the Assessing Officer has rightly allowed set off of income from other sources against other heads of income because up to assessment year 2016-2017 there was no prohibition on set off of losses. It was contended that the amendment to section 115BBE of the I.T.Act restricting the set off of any loss was inserted by the Finance Act, 2016 with effect from 01.04.2017 only, hence, not applicable to the concerned assessment year 2015-2016.
5. The CIT, however, rejected the contentions raised by the assessee and set aside the assessment order u/s 143(3) of the I.T.Act dated 30.03.2017 as erroneous and prejudicial to the interest of the revenue. The CIT directed the Assessing Officer to make additions u/s 68 of the I.T.Act by applying special rates as per section 115BB of the I.T.Act without granting any set off of losses. The relevant finding of the CIT reads as follow:-
“Under section 68 of the Income Tax Act, where any sum is found credited in the books of the assessee maintained for any previous year, and the assessee could not furnish satisfactory explanation about the source of such credits, the sum so credited was to be charged to income tax as the income of the assessee of that previous year. Here, the income of Rs.30,00,000/- offered by assessee under the head “income from other sources” is the sum found credited to his accounts for which the assessee had failed to furnish details about its source. Under section 115BBE amount assessed u/s 68 should be taxed at the rate of 30% without allowing any expenditure or allowance under any provisions of the Income Tax Act, 1961. Hence, the income offered Rs.30,00,000/-should have been taxed u/s 115BBE without allowing set off of income from other sources against income from business and income from house property. Hence, the order of the Assessing officer is erroneous and prejudicial to the interest of the revenue as the source for the amount offered under the head `other sources’ has not been furnished at the time of assessment.”
6. Aggrieved by the order passed by the CIT u/s 263 of the I.T.Act, the assessee has preferred this appeal before the Tribunal. The learned Counsel for the assessee submitted that the issue in question is squarely covered in favour of the assessee by the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. v. CIT [(2019) 419 ITR 322 (Ker.)]. The learned Departmental Representative strongly supported the order passed by the CIT u/s 263 of the I.T.Act.
7. We have heard the rival submissions and perused the material on record. The Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra) had categorically held that amendment which prohibits / restricts the set off of losses against `income from other sources’ was inserted by the Finance Act, 2016 with effect from 01.04.2017 only i.e. assessment year 2017-2018 onwards. In view of the judgment of the Hon’ble High Court, we hold that there is no prohibition of set off of loss against income declared under the head income from `other sources’ for the relevant assessment year. Hence, the assessment order dated 30.03.2017 is not erroneous and prejudicial to the interest of revenue. Accordingly, we hold that the order passed by the CIT u/s 263 of the I.T.Act is invalid in view of the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra). It is ordered accordingly.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 09th day of March, 2020.
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