2019 (8) TMI 801 - AT - Income Tax

Rectification u/s 154 - carry forward of the losses - consequential effect to be given by the AO of the reassessment order passed for the assessment year 2008-09 - HELD THAT - There was reduction in the carry forward of the losses - In any case the carry forward of losses for the assessment year 2008- 09 are to be considered only in the year when the assessee reports positive income and the said loss brought forward from the earlier years is claimed to be set off against the profit of the year in future. Accordingly, we do not find any substance or merits in the objection raised by the assessee against the impugned order passed U/s 154 of the Ac by the AO - the appeal of the assessee has no merits and deserves to be dismissed.

Issues:
1. Rectification of assessment order under Section 154 of the Income Tax Act.
2. Validity of the order passed by the Assessing Officer.
3. Consideration of limitation period for rectification under Section 154.

Analysis:
1. The appeal pertains to an order dated 03.04.2018 by the CIT(A), Ajmer, arising from an order passed under Section 154 of the Income Tax Act for the assessment year 2009-10. The primary contention raised by the assessee was that the order passed under Section 154 was erroneous as it did not consider the original assessment order under Section 143(3) for the same assessment year. The assessee challenged the order on the grounds that the CIT(A) erred in maintaining the order without appreciating the full facts and circumstances of the case. The Assessing Officer had rectified the brought forward losses for the assessment year 2008-09, resulting in a modification of the losses to be carried forward for the year under consideration. The assessee disputed the validity of this rectification order.

2. Despite the absence of representation from the assessee, the Tribunal proceeded to hear the case based on written submissions and arguments from the Revenue. The Assessing Officer's order under Section 154 was challenged by the assessee on the basis of limitation, contending that the rectification order was time-barred as it reckoned from the original assessment order under Section 143(3) dated 29.11.2011. The Revenue argued that the impugned order was a consequential one necessary to give effect to the reassessment order for the assessment year 2008-09. The Tribunal found that the rectification order was merely a consequential step following the reassessment order for the previous year and did not alter the tax liability of the assessee for the current year.

3. The Tribunal emphasized that the rectification order under Section 154 was not a decision changing the tax liability but a necessary adjustment due to the reassessment order for the preceding year. The order modified the losses to be carried forward, which would be relevant only when the assessee reports positive income in future years. The CIT(A) upheld the validity of the rectification order, considering it a valid and lawful step to rectify the excess set-off of brought forward losses pertaining to the earlier assessment year. Ultimately, the Tribunal dismissed the appeal of the assessee, concluding that the rectification order was in accordance with the provisions of law and had no merits to be overturned.

In conclusion, the Tribunal upheld the order passed under Section 154 by the Assessing Officer, ruling that it was a valid and necessary step following the reassessment order for the previous year, and did not alter the tax liability of the assessee for the current year.

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