Income Tax Appellate Tribunal - Chandigarh
M/S Star Board Industries , Jagadhri vs Pr. Cit, Panchkula on 29 January, 2020
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, "बी " च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, 'B', CHANDIGARH
ी एन. के. सैनी, उपा य एवं ी संजय गग , या यक सद य
BEFORE SHRI N.K. SAINI, VICE PRE SIDENT &
SHRI SANJAY GARG, JUDICIAL ME MBER
आयकरअपीलसं./ITA No. 668/ C H D / 2 0 1 9
नधा रण वष / Assessment Year : 2014-15
M/s Star Ply Board Ltd, Vs. The PCIT,
Gauri Shankar Link Road, बनाम Panchkula
Jagadhri, Yamunanagar
थायीले खासं . / PAN NO: AACCS8011L
अपीलाथ$/ Appellant &'यथ$/ Respondent
&
आयकरअपीलसं./ITA No. 669/ C H D / 2 0 1 9
नधा रण वष / Assessment Year : 2014-15
M/s Star Board Industries, Vs. The PCIT,
Village Sugh, Amdalpur Road, बनाम Panchkula
Jagadhri, Yamunanagar
थायीले खासं . / PAN NO: ACLFS6154J
अपीलाथ$/ Appellant &'यथ$/ Respondent
नधा (रतीक*ओरसे/Assessee by : Shri Tej Mohan Singh, Advocate
राज वक*ओरसे/ Revenue by : Shri G. S Phani Kishore, CIT DR
सन
ु वाईक*तार.ख/Date of Hearing : 22.01.2020
उदघोषणाक*तार.ख/Date of Pronouncement : 01.2020
आदे श/ Order
Per Sanjay Garg, Judicial Member:
The captioned appeals have been preferred by the assessees, who are sister concerns, against the separate orders dated 07.03.2019 of the Pr. Commissioner of Income Tax, Panchkula [hereinafter referred to as ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 2 'PCIT'] agitating the action of the Ld. PCIT in passing the impugned orders u/s 263 of the I.T. Act exercising his revision jurisdiction and thereby setting aside the orders of the Assessing Officer.
2. Since the facts and issue involved in both the appeals are identical, hence, these have been heard together and are being disposed of by this common order. ITA No. 668/Chd/2019 is taken as a lead case for narration of facts.
ITA No. 668/Chd/2019
3. Brief facts of the case are that survey action u/s 133A of the Income Tax Act, 1961 (in short 'the Act') was conducted at the premises of the assessee on 14.3.2014 and during the course of survey, several discrepancies were noticed and confronted to the assessee but the assessee could not explain the source of investments viz. the excess cash found, excess stock, unaccounted advances given for purchase of land and advances received from customers not recorded in the books of account. The assessee, therefore, surrendered additional income of Rs. 95,00,000/- during the course of survey action. The assessee in the return of income declared an income of Rs. 95,32,760/- which included the surrendered amount of Rs. 95 lacs. The Assessing Officer made further disallowance of interest expenditure at Rs. 16,988/- and assessed the total income of the assessee at Rs. 95,49,750/-. Thereafter, the Ld. PCIT noted from the assessment records that the assessee had declared the returned income at Rs. 95,32,760/-, which included an ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 3 interest income of Rs. 60,193/-. He, therefore, noted that the assessee declared the total income of Rs. 94,72,567/- after setting apart the interest income of Rs. 60,193/-, however, the assessee had declared the additional income of Rs. 95 lacs during survey action. He noted that the assessee's declared / returned income was short / less by Rs. 27,433/-. The Ld. PCIT, therefore, observed that the Assessing Officer had accepted the returned income of Rs. 95,32,760/- including the interest income of Rs. 60,193/- and worked out the tax liability by adopting / calculating the normal tax rates applicable for the relevant assessment year, whereas, the entire additional income surrendered during the course of survey amounting to Rs. 95 lacs was required to be taxed @ 30% as per the provisions of section 115BBE of the Act, without allowing any deduction in respect of any expenditure or allowance under any provisions of the I.T. Act, 1961. He, therefore, held that the order of the Assessing Officer was erroneous and prejudicial to the interest of Revenue. The Ld. PCIT, therefore, invoking his jurisdiction u/s 263 of the Act and after giving opportunity to the assessee to explain the above, held the order of the Assessing Officer as erroneous in so far as it was prejudicial to the interest of Revenue. He, accordingly set aside the same with the direction to the Assessing Officer to make the assessment afresh after considering the issue as discussed by him in the impugned order.
ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 4
4. Being aggrieved by the above order of the PCIT, the assessee has come in appeal before us. The Ld. Counsel for the assessee, at the outset, has invited our attention to the written submissions filed before the Ld. PCIT, wherein, the assessee has submitted that against the current year business income / loss, assessee had claimed current year depreciation amounting to Rs. 7,39,275/-. That after claim of the aforesaid depreciation, net resultant income of the assessee was at a loss of Rs. 27,433/-. That as per the provisions of section 115BBE of the Act, as applicable for the assessment year under consideration i.e. assessment year 2014-15, there was no bar in setting off of the loss against the declared / surrendered income. That the assessee accordingly set off the business loss of Rs. 27,433/- against the declared / surrendered income of Rs. 95 lacs and returned the remaining amount as taxable income of the assessee wherein the Assessing Officer made the addition of Rs. 16,988/- assessing the total income at Rs. 85,49,750/-.
5. The Ld. Counsel for the assessee has further submitted that the Ld. PCIT has reproduced some part of the written arguments in the impugned order passed u/s 263 of the Act, however, part of the written submissions explaining the aforesaid facts have been skipped by the PCIT. The Ld. counsel in this respect has relied upon the paper book pages 27 to 31, which is a copy of the reply submitted by the assessee to the notice u/s 263(1) of the Act. The relevant part of the submissions of the assessee in this respect is reproduced as under;-
ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 5 "Further, it is submitted that as per profit and loss submitted & produced before the Ld AO at the time of assessment, copy of which is also enclosed as per Annexure - II, If we go through the contents of the profit & loss account submitted during the assessment proceedings, in the credit side of profit and loss account, the assessee has shown the amount surrendered amounting to Rs. 95,00,000/- during the course of survey and offered for Tax. While arriving at the net profit, the assessee has claimed set off of current year depreciation amounting to Rs.
7,39,275/-against the income surrender during the course of survey amounting to Rs. 95,00,000/-. In this concern, your attention is invited to the provision of section 71, wherein it is clearly mentioned that as per provision of the Act, Inter head set off of business loss is allowed under section 71 against all other income except income from salary. Same head adjustment of business loss against other business income is allowed under section 70 of the Act.
As per the above said provision of the Act, the depreciation is allowed to be set off against the income of other head even after the insertion of section 115 BBE that any income assessed under section 68 to 69D will be taxed under section 115BBE and not under regular provision of the Act w.e.f A.Y. 2013-14. Further section 115BBE has got amended w.e.f A.Y. 2017-18 that set off of loss will not be allowed to the assessee under any provision of the Act in computing his income. Therefore, it is clear that w.e.f A.Y. 2017-18, any type of loss will not be allowed as deduction and set off against the income and the amendment is not retrospective in nature."
6. The Ld. DR, on the other hand, has relied on the findings of the Ld. PCIT and has submitted that the Assessing Officer has not discussed ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 6 about the special provisions of section 115BBE in the assessment order and that the Ld. PCIT has rightly noted that the order of the Assessing Officer was erroneous in so far as it was prejudicial to the interest of Revenue.
7. We have heard the rival contentions of the Ld. Authorized Representatives of both the parties and have gone through the record. A perusal of the copy of the Income Tax Acknowledgment along with computation of profit & loss account of the assessee reveal that after claiming depreciation of Rs. 11,88,982/-, assessee had claimed the loss of Rs. 4,16,944/-. The assessee thereafter added the amount of Rs. 95 lacs surrendered income and after setting off of the loss of Rs. 4,16,944/-, the assessee declared net profit at Rs. 90,083,055/-. However, while computing the income as per the provisions of the Income Tax Act, the assessee added back the depreciation claimed of Rs. 11,88,982/- and thereafter claimed deduction of depreciation at Rs. 7,39,275/- (as admissible as per Income Tax Act) and after adding the interest income of Rs. 60,193/-, the total income was declared at Rs. 95,32,760/-.
8. Now the question is that as to whether the assessee was eligible to claim set off of loss of the current year from the business as against the declared / surrendered income of Rs. 95 lacs?. The issue has been settled by the various decisions of the Tribunal and even by the CBDT Circular No. 11 of 2019 dated 19.6.2019, wherein, it has been provided that even ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 7 if the said income is treated as an income assessed u/s 68 of the Act, still the assessee is entitled to set off of the said income against the business loss. The contents of the said CBDT Circular No.11/2010 are reproduced 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 19th of June, 2019 Subject: Clarification regarding non-allowability of set-off of losses against the deemed income under section 115BBE of the Income-tax Act, 1961 prior to assessment-year 2017-18-reg.
With effect from 01.04.2017, sub-section (2) of section 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 respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing 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 prior 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 losses against the additions made under Section 115BBE(1) of the Act have not been allowed.
As the amendment inserting the words 'or set off of any loss' is applicable with effect from 1st of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing 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 20th January, 2017 which contains Explanatory notes to the 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 against income referred to in ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 8 section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016.
4. Thus keeping the legislative intent behind amendment 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 Finance 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 the Act till the assessment year 2016-17.
5. The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly.
6.Hindi version to follow. Sd/-
RajarajeswawR.) Under Secretary (ITA.II), CBDT"
9. Since the assessment year involved in the present case is assessment year 2014-15 and whereas the amended provisions of section 115BBE(2) are applicable from 1.4.2017, hence, the assessee as per the above reproduced Board Circular was entitled for set off of loss against surrendered income. In view of this, there is no merit in the action of the Ld. PCIT in making the impugned addition and not allowing the set off of income.
So far as the observation of the Ld. PCIT that the Assessing Officer has computed the income as per the normal provisions of the Act, whereas, as per the provisions of section 115BBE of the Act, the Assessing Officer should have calculated the tax @ 30% of the declared ITA No. 668 & 669-Chd-2019- Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 9 income is concerned, we find that the assessee being a company has already paid the tax @ 30%.
10. In view of the above, the order of the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue, therefore, the PCIT has wrongly exercised the jurisdiction u/s 263 of the Act and the action of the Ld. PCIT in setting aside the assessment order cannot be held to be justified. The impugned order passed by the Ld. PCIT u/s 263 of the Act is, therefore, quashed.
ITA No. 669/Chd/2019 :
11. The facts and issue involved in ITA No.669/Chd/2019 are identical to that of in ITA No.668/Chd/2019, therefore, our findings given above will mutatis-mutandis apply to this appeal and the order of the Ld. PCIT u/s 263 of the Act is accordingly set aside in this appeal also.
In the result, both the appeals of the assessees are allowed. Order pronounced in the Open Court on 29.01.2020.
Sd/- Sd/-
(एन. के. सैनी / N.K. SAINI) (संजय गग / SANJAY GARG)
उपा"य# /Vice President या$यकसद%य/ Judicial Member
Dated : 29.01.2020
"आर.के."
ITA No. 668 & 669-Chd-2019-
Star Ply Board Ltd and Star Industries Ltd., Yamunanagar 10 आदे शक*& त3ल4पअ5े4षत/ Copy of the order forwarded to :
1. अपीलाथ$/ The Appellant
2. &'यथ$/ The Respondent
3. आयकरआयु6त/ CIT
4. आयकरआयु6त (अपील)/ The CIT(A)
5. 4वभागीय& त न8ध, आयकरअपील.यआ8धकरण, च:डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायकपंजीकार/ Assistant Registrar