2019 (9) TMI 92 - AT - Income Tax

Disallowance of carry forward of losses claimed by the assessee in the proceedings u/s 153A - assessee s claim of loss so filed in the return U/s 139(1) - HELD THAT - We have perused the relevant record including the returns of income filed under section 139(1) as well as returns of income filed u/s 153A and noted that the assessee has claimed the respective amounts of losses for these three assessment years in the returns of income under section 139(1) and the same amounts were also claimed in the returns of income filed u/s 153A though in the acknowledgements generated by the departmental system for the returns of income filed under section 153A the amount of loss has not been shown. In the computation of total income, this income is duly reflected and matching with the amount as shown in the return of income filed electronically. Once the amount is duly claimed in the return of income filed electronically as well as also shown in the computation of income, then merely because the same is not appearing in the acknowledgement of return of income generated by the departmental systems cannot be the reason for denial of the claim. See M/S O.K. SILK MILLS LTD., M/S OKAY PLUS BUILDERS PVT. LTD., M/S SHREE KRISHNA VATIKA BUILDWELL PVT. LTD. 2019 (5) TMI 749 - ITAT JAIPUR and M/S SHREE KRISHNA VATIKA CONSTRUCTION PVT. LTD. 2019 (8) TMI 605 - ITAT JAIPUR - Decided in favour of assessee.

Issues Involved
1. Disallowance of carry forward of losses claimed by the assessee in the proceedings under section 153A of the IT Act.

Detailed Analysis of the Judgment

Issue 1: Disallowance of Carry Forward of Losses Claimed by the Assessee in the Proceedings Under Section 153A of the IT Act

The assessee, a private limited company engaged in the business of production and trading of clothes, was subjected to a search under section 132 on 4th September 2013, as part of the JKD Group and Okay Plus Group. The assessee filed returns of income for the assessment years 2011-12 to 2013-14 under section 153A, claiming losses of ?1,23,399/-, ?7,14,169/-, and ?7,51,319/- respectively. However, the Assessing Officer (AO) disallowed the carry forward of these losses on the grounds that the losses were not shown in the acknowledgements of the returns filed under section 153A.

The assessee argued that the losses were duly claimed in the returns filed under section 139(1) and that the non-appearance of these losses in the acknowledgements generated by the department’s system was due to a technical error. The assessee contended that the losses were reflected in the computation of total income and should not be disallowed merely because of the technical error in the acknowledgements.

The Tribunal noted that the identical issue had been considered in the cases of other group concerns, such as M/s. O.K. Silk Mills Ltd. and M/s. Shree Krishna Vatika Construction Pvt. Ltd., where the Tribunal had decided in favor of the assessee. The Tribunal observed that the assessee had not declared any additional income pursuant to the search and that the losses were claimed in both the original returns filed under section 139(1) and the returns filed under section 153A.

The Tribunal found that the AO had not properly examined the complete returns of income filed under section 153A and had wrongly observed that the current year income was NIL based on the acknowledgements. The Tribunal emphasized that the losses were duly shown in the computation of income and other relevant schedules of the ITR, and the technical error in the acknowledgements should not be a reason for denying the claim.

The Tribunal also rejected the observations of the CIT(A) regarding the generation of different acknowledgements for returns filed under sections 139(1) and 153A, stating that the data in the returns were the same, and the different acknowledgements were due to the nature of the returns filed under different sections.

The Tribunal concluded that the assessee should not be penalized for the technical error in the acknowledgements and directed the AO to allow the benefit of carry forward of losses as claimed by the assessee. The Tribunal followed the reasoning given in the earlier order dated 9th May 2019, which had elaborately discussed the issue and allowed the appeals of the group concerns.

In summary, the Tribunal allowed the appeals of the assessee, setting aside the orders of the authorities below and directing the AO to allow the carry forward of losses claimed in the returns filed under section 139(1) and section 153A. The judgment underscores the importance of examining the complete returns of income and not disallowing legitimate claims due to technical errors in the acknowledgements generated by the departmental systems.

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