2022 (12) TMI 1481 - AT - Income Tax

Carry forward accumulated business losses of the earlier years - correct year for consideration of the issue of eligibility of set off brought forward business loss against business income - HELD THAT - The undisputed fact is that while concluding assessment the AO declared that the loss computed is not allowed to be carried forward. In our considered opinion all that the AO is required is to notify the assessee the amount of loss as computed by him. Whether the loss in any year may be carried forward to the following year and set off against the profits has to be determined by the AO who deals with the assessment of the subsequent year. It is for the ITO dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. As relying on the case of Manmohan Das 1965 (11) TMI 33 - SUPREME COURT no hesitation in directing the AO to expunge the concluding remark brought forward loss is not allowed to be carry forward . Appeal of the assessee is allowed.

Summary

Issues:
1. Disallowance of carrying forward accumulated business losses of earlier years.
2. Disallowance of carrying forward unabsorbed depreciation of earlier years.

Analysis:

1. The appeal was against the CIT(A)'s order regarding the A.Y. 2014-15. The assessee challenged the disallowance of carrying forward accumulated business losses of earlier years. The AO had computed the total income and disallowed the carry forward of losses. The Counsel for the assessee argued that the eligibility of set off brought forward business loss against business income should be considered in the year the set off is claimed. The Tribunal held that the AO's role is to notify the amount of loss, and the decision on carrying forward losses to subsequent years is determined by the AO of those years. Citing the case of CIT Vs. Manmohan Das, the Tribunal emphasized that the AO's decision on not allowing the carry forward of losses is not binding on the assessee. Therefore, the Tribunal directed the AO to expunge the remark disallowing the carry forward of losses.

2. The second issue was the disallowance of carrying forward unabsorbed depreciation of earlier years. The assessee contended that the AO's observations were unwarranted as no set off of brought forward losses was claimed in the year under consideration. The DR supported the AO's observations. The Tribunal held that the decision on allowing the set off of losses against profits of subsequent years lies with the AO of those years. Relying on legal precedent, the Tribunal emphasized that the AO's conclusion on disallowing the carry forward of losses does not bind the assessee. Consequently, the Tribunal allowed the appeal of the assessee, directing the AO to remove the remark disallowing the carry forward of unabsorbed depreciation.

In conclusion, the Tribunal ruled in favor of the assessee on both issues, emphasizing that the AO's decision on disallowing the carry forward of losses is not conclusive and does not prevent the assessee from claiming such carry forwards in subsequent years.