2015 (11) TMI 2 - AT - Income Tax

Revision u/s 263 - AO allowed brought forward business loss and unabsorbed depreciation - Held that - On the first issue, we find that as per the assessment order for assessment year 2008-09 dated 14/07/2011 available on record, the assessed income is positive income of ₹ 1777.24 lac. The present year is the very next year after assessment year 2008-09 and when there is positive taxable income in assessment year 2008-09, there cannot be any brought forward business loss or unabsorbed depreciation for set off in assessment year 2009-10 until and unless the addition made in assessment year 2008-09 is deleted by appellate authorities resulting into loss in that ear and such deletion of the addition in that year is accepted by the Department. The assessment order in the present year is dated 21/11/2011, which is after less than 11 months of the order passed by the Assessing Officer in assessment year 2008-09 and nothing has been brought on record to show that the positive income assessed by the Assessing Officer in assessment year 2008-09 was converted into loss in turn resulting into availability of any brought forward business loss or unabsorbed depreciation in the present year. Hence, the assessment order is clearly erroneous as well as prejudicial to the interest of Revenue on this issue because the Assessing Officer has allowed brought forward business loss and unabsorbed depreciation. Loss on investment - we find that although enquiry was raised by the Assessing Officer in respect of loss on investment but as per reply furnished by the assessee, it comes out that such loss is in respect of sale of investment and therefore the Assessing Officer was required to make enquiry as to whether such loss is eligible for set off against business income. Hence, on this issue, there is lack of enquiry as well as lack of application of mind by the Assessing Officer resulting into assessment order being erroneous as well as prejudicial to the interest of Revenue. Subsidy reserve fund - there is no enquiry by the Assessing Officer and therefore, there is lack of enquiry by the Assessing Officer resulting into assessment order being erroneous as well as prejudicial to the interest of Revenue. Amortization of Government securities - although there was enquiry by the Assessing Officer but no detail was furnished by the assessee before the Assessing Officer and hence, the Assessing Officer should have applied his mind to decide as to whether this claim of the assessee regarding amortization of Government securities at ₹ 99,32,984/- is allowable or not but there is no such mention in the assessment order passed by the Assessing Officer and therefore, on this issue, there is no application of mind by the Assessing Officer and hence, the assessment order is erroneous as well as prejudicial to the interest of Revenue on this issue. Thus the assessment order is erroneous as well as prejudicial to the interest of Revenue and therefore, no interference is called for in the order of learned CIT. - Decided against assessee.

Summary

Issues:
1. Erroneous and prejudicial assessment order challenged under section 263 for AY 2009-2010.

Detailed Analysis:

Issue 1: Brought forward business loss and unabsorbed depreciation
The appellant challenged the order under section 263, arguing that the assessment order was erroneous and unjustified. The CIT pointed out discrepancies in the assessment, specifically regarding the claimed brought forward business loss and unabsorbed depreciation. The CIT highlighted that there was no such loss or depreciation in the previous assessment year. The Tribunal found that without a loss in the prior year, there could not be any brought forward loss or depreciation for set off in the current year. The Tribunal concluded that the assessment order was indeed erroneous and prejudicial to the Revenue's interest due to the incorrect allowance of these claims.

Issue 2: Loss on sale of investment
The CIT raised concerns about a claimed loss on the sale of investments, noting that it was a capital loss against sales of bonds. The Tribunal observed that the Assessing Officer failed to enquire whether this loss could be set off against business income. This lack of enquiry and application of mind rendered the assessment order erroneous and prejudicial to the Revenue.

Issue 3: Increase in liability and provisions
The CIT highlighted discrepancies in the increase of liability and provisions as per the balance sheet and profit & loss account. The Tribunal noted that there was no detailed explanation provided for certain debits, indicating an attempt to avoid the attention of the tax department. The lack of enquiry by the Assessing Officer on this issue rendered the assessment order erroneous and prejudicial to the Revenue.

Issue 4: Amortization of Government securities
The CIT pointed out that the appellant claimed amortization of Government securities without providing required details. The Tribunal found that the Assessing Officer did not apply his mind to decide the allowability of this claim, indicating an error in the assessment order. The lack of application of mind on this issue rendered the assessment order prejudicial to the Revenue.

In conclusion, the Tribunal upheld the CIT's order under section 263, dismissing the appellant's appeal due to the identified errors and prejudicial impact on Revenue's interest. The detailed analysis of each issue supported the decision to maintain the CIT's order.