An income tax survey was done at the business premises of the assessee under which certain discrepancies were found. The assesee surrendered a certain sum and later on showed nil income declaring a loss. The case was selected for scrutiny and the AO accepted the return after examining the requisite information. The Principal Commissioner assessed the same and observed that the nature of the additional income was nowhere specified. He concluded that the income offered could not be classified as business revenues subject to tax under section 115BBE of the Act in the absence of any inquiry and information provided by the assessee, and he set aside the Assessing Officer’s judgement in favour of issuing a new order in conformity with the law. The same was appeal by the assessee.

The tribunal held that the tax impact was nil regardless of the head under which the income was listed. As a result, the order passed by the AO could not be held erroneous or prejudicial to the interests of the revenue. Furthermore, the tribunal held that the show-cause notice issued was subsequent to the CBDT’s circular which stated that the term “or set off of any loss” was specifically inserted by the Finance Act, 2016, with effect from April 1, 2017, and the assessee was entitled to claim set off for a loss against income determined under section 115BBE of the Act till the assessment year 2016-17. Hence, the notice issued by the Principal Commissioner was against the CBDT circular.  (AY.2016-17)