2019 (6) TMI 657 - AT - Income Tax

Benefit of set off of brought forward business loss - application u/s. 154 - Whether the business loss arrived at by AO while giving effect to the order of Tribunal can be carried forward and benefit of set off against the business income in the subsequent assessment years can be allowed to assessee in the absence of such claim in the return of income? - HELD THAT - Where as a consequence to the order of Appellate Authority the assessee has received relief which has the cascading effect on subsequent assessment years the Assessing Officer is duty bound to give effect to the said order in later affected assessment. We do not find merit in the observations of CIT(A) that in the absence of claim of set off of brought forward business loss in the return of income the same cannot be allowed to the assessee. The CIT(A) while making such observations has failed to consider the fact that the assessee in its return of income had declared Nil income the business loss determined by the Assessing Officer was consequent to the order passed while giving effect to the order of Tribunal. Since the assessee has raised the claim before appellate authority the same should have been considered by CIT(A) instead of rejecting the same at threshold. The Hon ble Bombay High Court in the case of In the case of CIT Vs. Pruthvi Brokers Shareholders P. Ltd. 2012 (7) TMI 158 - BOMBAY HIGH COURT has held the assessee is entitled to raise additional grounds not merely in terms of legal submissions but also additional claims to wit claims not made in the return filed by it. We hold that the assessee is eligible for claiming the benefit of set off of brought forward business loss in the impugned assessment years. - Decided in favour of assessee.

Summary

Issues:
- Whether the business loss determined by the Assessing Officer can be carried forward and set off against business income in subsequent assessment years without being claimed in the return of income?

Analysis:
1. Facts of the Case (ITA No. 2396/PUN/2017 - A.Y. 2003-04): The issue arises from the assessment year 2002-03 where the assessee, a State Government Undertaking, declared Nil income but had business income assessed at ?5,90,35,236. The assessee claimed the entire business income as exempt u/s. 10(29) of the Act. Subsequent appeals and orders led to a business loss of ?13,00,25,239 for the year 2002-03. The assessee later sought to carry forward this loss for the assessment years 2003-04 to 2006-07, but the claim was rejected by the Assessing Officer and Commissioner of Income Tax (Appeals).

2. Submissions of Assessee: The assessee argued that at the time of filing returns for the subsequent assessment years, they were unaware of the business loss determined for 2002-03. They cited provisions of the Act to support their claim that the time limit for assessment completion does not apply in cases of fresh assessments due to orders by revisional/appellate authorities.

3. Submissions of Department: The Department contended that since the assessee did not claim the set off of brought forward business loss in the return of income, the claim cannot be accepted. They emphasized the need for claims to be made in the return of income to be considered valid.

4. Findings of the Tribunal: The Tribunal examined the provisions of section 153 of the Act regarding time limits for assessments and fresh assessments due to orders by appellate authorities. It noted that the business loss arose as a consequence of Tribunal directions for the year 2002-03. The Tribunal held that the assessee, despite not claiming the set off in the return of income, was eligible for the benefit of carrying forward the business loss and set off against business income in subsequent years due to supervening impossibility and the cascading effect of appellate orders.

5. Conclusion: The Tribunal allowed the appeal of the assessee, setting aside the impugned order and granting the benefit of set off of brought forward business loss for the assessment years in question. The judgment in ITA No. 2396/PUN/2017 was applied mutatis mutandis to ITA Nos. 2397 to 2399/PUN/2017, resulting in all the appeals of the assessee being allowed.

This comprehensive analysis delves into the legal intricacies of the judgment, highlighting the key arguments, provisions of the Act, and the Tribunal's findings to resolve the issue at hand effectively.