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2016 (11) TMI 389 - AT - Income TaxCarry forward of business loss denied - rectification of mistake - Held that - in the case on hand, the assessee admittedly, inadvertently, did not claim set off of business losses against certain heads of income in the return of income. While processing the assessee s return of income for A.Y. 2008-09 under section 143(1) of the Act, the AO after accepting/ determining the business loss of the assessee at ₹ 5,04,26,202/-, was duty bound in accordance with law as laid down in the provisions of the Act to have allowed set off of the business loss to the extent permissible against other heads of income and carry forward of the eligible balance if any. The assessee is entitled to be allowed set off of business loss as determined by the AO in the order of assessment for A.Y. 2008-09 dated 10.12.2009, against his other eligible heads of income in accordance with law. In our view, failure on the part of the AO to apply these provisions of the Act in respect of set off of determined business losses, while passing the order of assessment, constitutes a mistake apparent from the record. We, accordingly, direct the AO to rectify the order of assessment for A.Y. 2008-09 dated 10.12.2009 by allowing the assessee set off of the business losses of ₹ 5,04,26,202/- against other eligible heads of income in accordance with the law. - Decided in favour of assessee
Issues Involved:
1. Set-off of business loss against other heads of income. 2. Rectification under section 154 of the Income Tax Act, 1961. Issue 1: Set-off of Business Loss Against Other Heads of Income The assessee filed a return of income for A.Y. 2008-09 declaring an income of ?1,22,09,311 and claimed a carry forward of business loss amounting to ?5,04,26,202. The income breakup included salary income, business loss, short-term capital gains, long-term capital gains, income from other sources, and income from house property. The assessee did not set off the business loss against current year's income from other heads but carried it forward to the subsequent year. The return was processed under section 143(1) of the Income Tax Act, 1961, and the income was determined at ?1,23,19,310. The assessee later sought rectification under section 154, claiming that the business loss should have been set off against other heads of income. The Assessing Officer (AO) rejected the rectification application, stating no mistake was apparent on record as the assessee did not initially claim the set-off in the return. Issue 2: Rectification Under Section 154 of the Income Tax Act, 1961 The assessee appealed to the CIT(A), who upheld the AO's decision, stating that the AO could only make adjustments for arithmetical errors or incorrect claims apparent from the return. Not claiming the set-off of business loss was neither an arithmetical error nor an incorrect claim. Therefore, no mistake was apparent from the records under section 154. The assessee then appealed to the Tribunal, arguing that section 154 permits rectification of mistakes apparent on the face of the record. The assessee contended that the business loss should be set off against other heads of income, and this rectification would not require long drawn discussions or debates. The Tribunal considered the facts and found that the AO, after accepting the business loss, should have set it off against other permissible heads of income. The Tribunal noted that the proceedings under the Act are not adversarial, and the authorities should not take advantage of the assessee's mistakes. The Tribunal cited CBDT Circular No. 14 of 1955, which emphasizes that officers should assist taxpayers in claiming legitimate reliefs. The Tribunal concluded that the failure to apply the provisions of the Act regarding the set-off of determined business losses constituted a mistake apparent from the record. The Tribunal directed the AO to rectify the order of assessment by allowing the set-off of the business losses against other eligible heads of income in accordance with the law. Conclusion The assessee's appeal was allowed, and the AO was directed to rectify the assessment order for A.Y. 2008-09 by allowing the set-off of the business losses against other eligible heads of income. The order was pronounced in the open court on 23rd September 2016.
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