2021 (6) TMI 251 - AT - Income Tax

Revision petition u/s. 264 - disallowance of carry forward of loss to subsequent years - non acceptance of return filed by the assessee - HELD THAT - AO had passed an order dated 31.12.2009 without mentioning the section under which such order is passed by him and also by summarily disallowing the loss and also suggesting some disallowances on without prejudice basis. In the said order, the ld AO had categorically stated that the e-return filed by the assessee is non-est and invalid. AO had also categorically stated that the proceedings initiated by issuing notice u/s 143(2) of the Act were dropped by him. Hence all the disallowances suggested by him in the said order, even on without prejudice basis, will have no legs to stand. Admittedly, this so called assessment order was passed by the ld AO without issuing notice of demand u/s 156 of the Act, which is also a statutory notice and a statutory document to be enclosed along with the assessment order. Hence it could be safely concluded that the ld AO by committing multiple mistakes in a single so called assessment order, had passed a wholly unsustainable and illegal order. CIT while disposing of the 264 petition of the assessee, had clearly directed the ld. AO to treat the return filed by the assessee originally as a valid return - AO while giving effect to the proceedings of the ld. CIT should not have travelled beyond the directions given by the ld. CIT. The ld. AO should have simply treated the return filed by the assessee originally and accepted the same without resorting to make any disallowances thereon. Even if he resorts to make any disallowance, the ld AO ought to have issued fresh notices u/s 143(2) and 142(1) of the Act duly show causing the assessee with regard to those specific issues. Instead of doing so, the ld AO had merely repeated the same disallowances as was proposed by him originally by him, on without prejudice basis, in the illegal and unsustainable so called assessment order passed without mentioning any section. The said disallowances were even made by the ld. AO without giving any show-cause notice to the assessee expressing his mind to make such disallowances. Hence, the said disallowances made without issuing show-cause notice deserves to be deleted on that count also. We direct the ld AO to delete all the disallowances and accept the return filed by the assessee bank in toto and allow the benefit of carry forward of loss to subsequent years. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against order passed by CIT(A) for A.Y. 2007-08, Validity of return filed by assessee, Disallowances made by AO, Failure to issue statutory notices, Treatment of return as invalid, Disallowances on without prejudice basis, Appealability of orders, Direction by CIT to treat return as valid, Compliance with CIT's directions, Annulment of assessment.

Analysis:
The appeal was filed against the order passed by CIT(A) for the assessment year 2007-08. The assessee had electronically filed its return of income, but the AO found it invalid due to lack of signature by the authorized signatory. Consequently, the AO treated the return as invalid, disallowed carry forward of losses, and proposed various disallowances. The CIT(A) dismissed the appeal as not maintainable under Section 246A. The assessee then filed a revision petition under Section 264 before the CIT, who directed the AO to treat the return as valid. Subsequently, the AO passed an order giving effect to the CIT's directions but still made disallowances as originally proposed, leading to another appeal by the assessee.

The Tribunal observed that the AO's initial order was passed without mentioning the section, treating the return as non-est, and making disallowances without proper notices. The CIT's direction to treat the return as valid was not fully complied with by the AO, who should have accepted the return without additional disallowances. The Tribunal noted that the AO failed to issue fresh notices for disallowances and made them without show-cause notices, rendering them invalid. The Tribunal also considered the argument regarding non-issuance of statutory notices, although not raised as a ground of appeal, and directed the AO to delete all disallowances, accept the return, and allow the carry forward of losses.

In conclusion, the Tribunal allowed the assessee's appeal, directing the AO to delete all disallowances, accept the return, and permit the carry forward of losses to subsequent years. The decision was pronounced on 31/05/2021.