2015 (9) TMI 1745 - AT - Income Tax

Claim of earlier years losses to be brought forward for set off - denial of claim as assessee had not claimed in its return of income - HELD THAT - Income tax legislation is welfare legislation. Even in case of any doubt, the benefit has to accrue to the assessee. The assessee or the taxpayers contribute to the development of our economy and the Act helps to guide them and not to penalize them. In the present case, it is a fact on record that the assessee has filed its return of income in due time and whatever relief and rectification that were claimed by the assessee was a bonafide one. There was a technical fault because of which, the legal claim of the assessee should not be denied. The legal claim still remains good. Therefore, in our view, the order of the ld CIT(A) directing the AO to modify the order u/s.154 and allow proper relief to the assessee stands good and proper. Hence, we reject Ground No.1 of appeal filed by the revenue. Violation of Rule 46A of ITAT Rules - As noted that in the appeal against the order u/s.154 of the Act before the ld CIT(A), no additional evidence was produced by the assessee. At the outset, the Bench has asked the ld D.R to demonstrate the violation of provisions of Rule 46A of I.T.Rules which was mentioned in the ground of appeal. Nothing specific was pointed out by him. In such situation, it is not justifiable to allege that there was any infringement of Rule 46A of I.T.Rules. Therefore, in our view, there was no violation of Rule 46A of I.T.Rules, as agitated by the revenue in Ground No.2. Hence, we dismiss this ground.

Summary

Issues:
1. Allowance of earlier years' losses to be brought forward for set off
2. Violation of Rule 46A of ITAT Rules

Issue 1: Allowance of earlier years' losses to be brought forward for set off:
The case involved an appeal challenging the order of the ld CIT(A) regarding the allowance of earlier years' losses to be brought forward for set off against the current year's income. The assessee company had initially processed its return under section 143(1) with a total income of Rs. 3,06,42,500. Subsequently, the assessee identified a mistake in the return and filed a rectification petition under section 154, stating that there were significant losses from earlier years to be set off against the current year's income. The Assessing Officer noted that the assessee had not explicitly claimed the brought forward losses in the returns filed for the relevant assessment years, which led to the rejection of the rectification petition under section 154. The ld CIT(A), however, considered various aspects, including the genuine nature of the accumulated losses, technical errors in the return filing process, and the spirit of judicial opinions, to direct the AO to modify the order under section 154 and grant relief to the assessee. The ITAT upheld the ld CIT(A)'s decision, emphasizing that the income tax legislation is a welfare legislation, and any doubt should benefit the assessee, especially when the claim is bonafide and supported by genuine circumstances.

Issue 2: Violation of Rule 46A of ITAT Rules:
The second issue raised in the appeal pertained to the alleged violation of Rule 46A of ITAT Rules, which requires that any additional evidence presented before the ld CIT(A) must allow an opportunity for the AO to provide views on such evidence. In this case, the revenue contended that there was a breach of Rule 46A. However, upon examination, it was found that no additional evidence was submitted by the assessee during the appeal against the order under section 154. The ITAT observed that the revenue failed to demonstrate any specific violation of Rule 46A, leading to the dismissal of this ground of appeal. Consequently, the ITAT dismissed the appeal of the revenue and the cross objection of the assessee, as the order of the ld CIT(A) regarding the allowance of earlier years' losses for set off was upheld, rendering the cross objection infructuous.