2019 (5) TMI 749 - AT - Income Tax

Assessment u/s 153A - benefit of carry forward of losses against additional income offered in its return filed pursuant to search u/s 153A - loss also claimed in returns filed u/s 139(1) - HELD THAT - We also observe that the claim of the assessee for earlier years loss, which is inclusive of the loss of the preceding AY has been duly allowed by the AO and the same has not been disputed by Ld. CIT(A). This further strengthens our conclusion that the current years losses were not shown in the acknowledgement generated for returns filed u/s 153A were due to some inadvertent technical error, and in no manner ought to have been considered as additional income declared by the assessee pursuant to the search operations carried out in the group. Assessee had attended the proceedings under the bonafide belief that the losses as claimed (which was same in both returns filed u/s 139(1) and 153(A) were duly being assessed by the AO, and this intention of the AO to treat the current year loss of the assessee as its additional income was never intimated during the assessment proceeding. Rather it was noticed only when the assessment order was received, thus no opportunity was ever granted to explain the issue during the course of assessment proceedings before AO. In the instant case, assessee has claimed the business loss and carried forward the loss in the original return of income filed u/s 139(1) and again in the return filed in response to notice issued u/s 153A, however due to some error the claim was not properly appearing in the acknowledgment of return generated and for such genuine error the assessee should not be penalized. No merits in the orders so passed by the lower authorities regarding declaration of additional income by the assessee, accordingly, we direct the A.O. to allow the benefit of carry forward of losses as claimed in all the assessment years involved.- Decided in favour of assessee.

Summary

Issues:
Appeals against CIT(A) orders for AYs 2008-09 to 2013-14 under IT Act, 1961 - Additional income declared under sec 153A - Carry forward of losses disputed.

Analysis:
The appeals were filed against the CIT(A) orders for multiple assessment years regarding the declaration of additional income by the assessee under section 153A of the Income Tax Act, 1961. The grievance of the assessee was that the CIT(A) erred in upholding the declaration of additional income without considering the technical error in the return filed under section 153A. The assessee claimed that the current year loss was inadvertently not reflected in the acknowledgment due to a software error, and therefore, should not be treated as additional income. The ITAT consolidated the appeals for all assessment years due to the common issue.

The CIT(A) rejected the carry forward of current year losses, alleging that the two returns filed were not identical and that the assessee did not raise the issue before the AO. The CIT(A) also speculated that the assessee might have intentionally not claimed the current year loss. However, the ITAT observed that the assessee had not declared any additional income in response to the search, and no incriminating material was found during the search. The AO wrongly assessed the current year income as NIL without considering the detailed return filed under section 153A.

The ITAT noted that the current year losses were duly filled in the ITR but were not reflected in the acknowledgment due to a technical error. The claim for earlier years' losses, including the preceding assessment year, was allowed by the AO, indicating that the current year losses were not intended to be shown as additional income. The ITAT emphasized that the assessee believed the losses were being assessed correctly and was not informed by the AO about treating them as additional income during the assessment proceedings.

In conclusion, the ITAT found no merit in the lower authorities' decision regarding the declaration of additional income. The ITAT directed the AO to allow the benefit of carry forward of losses claimed by the assessee in all the assessment years involved. The ITAT set aside the orders of the lower authorities and allowed all the appeals filed by the different assesses for the respective assessment years.