2018 (1) TMI 1301 - AT - Income Tax

Brought forward business loss to be set off with the income of current year - power of the Income Tax Appellate Tribunal u/s 254 - Held that - As from the assessment order for the assessment year 2009-10 framed in the hands of the assessee u/s 143(3) of the Act dated 22.12.2011 wherein the Ld. AO categorically had mentioned the business loss as being eligible to be carried forward for future adjustment. Hence, it is very clear that the assessee has got assessed business loss of assessment year 2009-10 which is eligible to be set off against future business income in accordance with provision of section 72 of the Act. Even though the assessee has not made this claim either in its original return of income or in the revised return of income, it is incumbent on the part of the Ld. CIT(A) to direct the Ld. AO to consider the legitimate claim of set off of brought forward business loss so as to determine the true and correct income of the assessee. The appellate authority could entertain fresh claim made by the assessee even though the same had not been made by way of a valid return. Accordingly, we hold that the Ld. CIT(A) ought to have considered the legitimate claim of set off of brought forward loss of assessment year 2009-10

Summary

Issues:
- Whether the Assessing Officer was justified in not allowing the set off of brought forward business loss of the assessee for the Assessment Year 2010-11?

Analysis:
The appeal in question arose from the order of the Learned Commissioner of Income Tax (Appeals) concerning the Assessment Year 2010-11. The sole issue to be determined was whether the Ld. CIT(A) was correct in not considering the brought forward business loss of the assessee for the previous assessment year. The assessee had not claimed the benefit of set off brought forward losses for the Assessment Year 2009-10 in the return filed for the year 2010-11. The Assessing Officer did not allow the set off of brought forward losses for 2009-10 while determining the total income for 2010-11. The Ld. CIT(A) upheld this decision citing the assessee's failure to claim the set off in the original or revised return. The Ld. CIT(A) relied on the decision of the Hon'ble Supreme Court in Goetze India vs. CIT and denied the set off. The assessee contended that the business loss of the previous year was eligible to be carried forward for future adjustment as per section 72 of the Income Tax Act. The appellate tribunal held that the Ld. CIT(A) should have directed the Assessing Officer to consider the legitimate claim of set off of brought forward business loss, even though not claimed in the return, to determine the true income of the assessee. The tribunal allowed the appeal on this ground.

Furthermore, the tribunal noted that the decision of the Hon'ble Supreme Court in Goetze India is limited to the assessing authority and does not restrict the power of the Income Tax Appellate Tribunal under section 254 of the Act to entertain fresh claims made by the assessee. The tribunal emphasized that the appellate authority could consider new claims even if not included in a valid return. Therefore, the tribunal concluded that the Ld. CIT(A) should have considered the legitimate claim of set off of brought forward loss for the previous year in the sum of ?79,97,483. Consequently, the grounds raised by the assessee were allowed.

The tribunal dismissed ground no. 3 as it was not pressed by the assessee during the hearing. Grounds 4 and 5, being general in nature, did not require specific adjudication. Ultimately, the tribunal partly allowed the appeal of the assessee, emphasizing the importance of considering legitimate claims for set off of brought forward losses to determine the correct income of the assessee.