2017 (9) TMI 111 - AT - Income Tax

Rectification of mistake u/s 154 - income from other sources cannot be set off from brought forward losses and the same was not allowable - assessee filed NIL return of income - Held that - The brought forward losses of depreciation of earlier years can be set off from the income from other sources, the assessee has shown other income of ₹ 12,184,164/- as stated under different heads. The assessee has justified before the Ld. CIT(A) regarding lease rent income of ₹ 10,718,878/- and misc. Income of ₹ 456,688/- reasons for showing under the head other income of the balance sheet which cannot be controverted by the Ld.DR, unabsorbed depreciation and carry forward of losses is governed u/s 32(2) and S.72(2) of the Act. Order of Ld. CIT(A) does not require any interference with regard to carry forward and setting off unabsorbed depreciation of earlier years, the assessee had rightly claimed for setting off the unabsorbed depreciation from the income from other sources. We uphold the order of Ld. CIT(A) and passing of order u/s 154 by the A.O. is not justified because there is no mistake apparent on record. Therefore we dismiss the appeal of the Revenue.

Summary

Issues:
- Appeal against order of Ld. CIT(A) regarding setting off unabsorbed depreciation against income from other sources.
- Validity of order u/s 154 of the Act disallowing set off of brought forward losses.

Analysis:
1. Issue 1: Setting off unabsorbed depreciation against income from other sources
- The appellant Revenue challenged the order of Ld. CIT(A) allowing the assessee to set off unabsorbed depreciation against income from other sources for A.Y. 2005-06.
- The AO reopened the assessment u/s 154 disallowing the set off, contending that income from other sources cannot be set off against brought forward losses.
- The Ld. CIT(A) considered detailed submissions and case laws, including Uttam Air Products (P) Ltd. v DCIT, Sain Processing & Weaving Mills v ACIT, and Escorts Electronics Ltd. v CIT, supporting the set off of unabsorbed depreciation against income from other sources.
- The Ld. CIT(A) found no rectifiable mistake u/s 154 and upheld the assessee's claim for setting off unabsorbed depreciation against income from other sources.
- The Tribunal concurred with the Ld. CIT(A), citing legal provisions and judicial pronouncements, and dismissed the appeal of the Revenue, upholding the order allowing the set off.

2. Issue 2: Validity of order u/s 154 disallowing set off of brought forward losses
- The appellant Revenue contended that the AO rightly reopened the assessment u/s 154 due to apparent mistake in showing other income under different heads, disallowing the set off of brought forward losses.
- The Ld. CIT(A) and the assessee argued that the set off was justified under provisions of the Act and supported by case laws.
- After considering submissions and case laws, the Tribunal found that the AO's order u/s 154 was not justified as there was no mistake apparent on record.
- The Tribunal upheld the order of Ld. CIT(A) allowing the set off of brought forward losses against income from other sources, dismissing the appeal of the Revenue.

In conclusion, the Tribunal upheld the order of Ld. CIT(A) allowing the assessee to set off unabsorbed depreciation against income from other sources and dismissed the appeal of the Revenue challenging the validity of the order u/s 154 disallowing the set off of brought forward losses. The judgment highlighted the legal provisions, case laws, and detailed analysis supporting the decision, emphasizing the correctness of the Ld. CIT(A)'s order and the lack of a rectifiable mistake in the AO's assessment u/s 154.