Case Law Details
Mahaluxmi Food Industries Vs ITO (ITAT Chandigarh)
Introduction: In a landmark ruling, the ITAT Chandigarh adjudicated in favour of the appellant, Mahaluxmi Food Industries, in a case against the Income Tax Officer (ITO). The dispute revolved around the disallowance of carry forward losses against the appellant’s surrendered business income under Section 115BBE(2) of the Income Tax Act, 1961.
Analysis: In the case, the appellant challenged the Assessing Officer’s (AO) decision of rejecting the carry forward losses against the surrendered business income. The appellant argued that the AO didn’t make any addition under sections 68/69/69A/69B/69C/69D of the Income Tax Act and, therefore, there was no ground for disallowance.
The ITAT, considering the arguments and the relevant provisions of the law, found merit in the appellant’s claim. The tribunal noted that the AO had changed the nature of the income and applied the provisions of Section 1 15BBE(2) to disallow the set off of loss against surrendered income in the proceedings carried out under Section 154 of the Act.
It was highlighted that the amendment to Section 115BBE was introduced vide Finance Act, 2016 effective from 01.04.2017, and the case at hand related to A.Y. 2013-14. Furthermore, the tribunal cited CBDT Circular No.11 of 2019, which clarified that an assessee could claim set off of loss against income determined under Section 115BBE of the Act until the assessment year 2016-17.
In view of this, the action of the lower authorities in denying the set off of losses to the assessee cannot be held to be justified and accordingly, the AO is directed to allow the assessee set off of losses in respect of income determined u/s 115BBE of the Act.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The present appeal has been preferred by the assessee against the order dated 21.10.2022 of the Commissioner of Income Tax (Appeals) NFAC, Delhi [in short ‘CIT(A)’] pertaining to 2013-14 assessment year.
2. The assessee in this appeal has agitated the action of the Assessing Officer (in short ‘the AO’) in disallowing the carry forward losses by way of invoking the provisions of Section 115BBE(2) of the Income Tax Act,1961 ( in short ‘the Act’) against the surrendered business income of the assessee.
3. At the outset, ld. AR has invited my attention to the impugned assessment order to submit that the AO did not make any addition u/s 68/69/69A/69B/69C/69D of the Income Tax Act, therefore, there was no question of disallowance of set off of losses against the surrendered business income and infact the AO did not disallow the loss while completing the assessment u/s 143(3) of the Act. However, in subsequent proceedings carried out u/s 154 of the Act, the AO treated the surrendered business income during the survey action as unexplained income of the assessee and applied the provisions of Section 115BBE(2) to disallow the set off of loss against surrendered income. The ld. counsel has firstly submitted that the AO was not justified in changing the nature of the income and thereby assessing it u/s 68/69/69A of the Income Tax Act in the proceedings carried out u/s 154 of the Act. He has further submitted that even the assessment year involved is A.Y. 2013-14 and that the amendment to the provisions of Section 115BBE have been introduced vide Finance Act, 2016 w.e.f. 01.04.2017, whereby, the set off of loss has been denied in respect of an income assessed u/s 68/69/69A/69b/69C/69D of the Act. He has relied upon CBDT Circular No.11 of 2019 dated 19.06.2019 whereby the CBDT has clarified that since the term ‘set off of any loss’ was inserted only vide Finance Act, 2016 w.e.f. 01.04.2017, therefore, an assessee would be entitled to claim set off of loss against income determined u/s 115BBE of the Act till the assessment year 2016-17.
4. The ld. DR has fairly admitted that case of the assessee is covered by the aforesaid CBDT Circular as the Assessment Year involved is Assessment Year 2013-14. In view of this, the action of the lower authorities in denying the set off of losses to the assessee cannot be held to be justified and accordingly, the AO is directed to allow the assessee set off of losses in respect of income determined u/s 115BBE of the Act.
5. In the result, appeal stands allowed.
6. Order pronounced in the Open Court on 1st June, 2023.
