2022 (7) TMI 745 - AT - Income Tax

Reopening of assessment u/s 147 - set off of brought forward of loss was sought to be withdrawn in the reopened proceedings - Addition on protective basis - assessee pleaded that the additions made in the hands of the assessee for Asst Years 2009-10 and 2010-11 were only on protective basis and hence the brought forward losses could not be set off against the business income assessed on protective basis - HELD THAT - We hold that though there may not be apparent failure on the part of the assessee in making full and true disclosure of facts at the time of filing of return, there was certainly failure on the part of the assessee in not bringing to the knowledge of the ld. AO during the course of scrutiny assessment proceedings of Asst Year 2011-12, about the assessments of Asst Years 2009-10 and 2010-11 getting completed with huge positive income in the hands of the assessee, though on protective basis. Atleast, AO suo moto should have brought to the attention of the ld. AO in the course of original scrutiny assessment proceedings for the Asst Year 2011-12 that though he has claimed set off of brought forward loss, but the same would not be eligible in the absence of the said loss. Hence we hold that there was failure on the part of the assessee to make full and true disclosure of facts that are material for the completion of original assessment. Moreover, the reopening has been done in the instant case to address the mistake of fact rectifying the mistake of allowing wrong set off of brought forward losses which was not available with the assessee company in Asst Year 2011-12. Hence the ratio laid down in the case of PVS Beedies 1997 (10) TMI 5 - SUPREME COURT would squarely come to the rescue of the revenue in the instant case. We hold that the reopening has been done properly in the instant case and the ld. CIT(A) ought not to have quashed the reassessment as void abinitio. Accordingly, the Grounds raised by the revenue challenging the quashing of reassessment by the ld. CIT(A) are allowed. Appeals against the substantive additions framed in the hands of some other assessee are pending disposal before the ld. CIT(A) - We find that the ld. CIT(A) had not adjudicated the issue of set off brought forward losses against the current year s income and further allowing the remaining loss to be carried forward, ON MERITS. We find that no opinion is given by the ld. CIT(A) on merits of the issue in dispute before us. Hence we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of ld. CIT(A) for denovo adjudication of the issue on merits and also tag this appeal with the appeals of the assessee where substantive additions were made , so that a cogent and cohesive decision could be taken in this regard. This, in our considered opinion, would meet the ends of justice for both the parties. Accordingly, the ground raised by the revenue on merits is allowed for statistical purposes.

Summary

Issues:
1. Challenge to quashing of reassessment proceedings by the ld. CIT(A).
2. Adjudication of set off brought forward losses against current year's income and carrying forward remaining losses.

Issue 1: Challenge to quashing of reassessment proceedings by the ld. CIT(A):
The appeal in ITA No.1550/Mum/2021 for A.Y.2011-12 pertains to the quashing of reassessment proceedings by the ld. CIT(A). The ld. AO sought to withdraw the set off of brought forward loss of Rs 66,44,338/- as there was no loss available to the assessee for set off and carry forward. The ld. CIT(A) quashed the reassessment as void abinitio, citing lack of failure on the part of the assessee to disclose income details. However, the ITAT held that the scrutiny assessments of Asst Years 2009-10 and 2010-11, where higher incomes were determined, provided tangible material for the reassessment. The ITAT disagreed with the ld. CIT(A) and allowed the revenue's grounds challenging the quashing of reassessment.

Issue 2: Adjudication of set off brought forward losses against current year's income and carrying forward remaining losses:
The ITAT noted that the ld. CIT(A) did not provide an opinion on the merits of the issue regarding the set off of brought forward losses against the current year's income. As a result, the ITAT remanded this issue back to the ld. CIT(A) for a denovo adjudication on merits. The ITAT also directed the tagging of this appeal with the pending appeals of the assessee where substantive additions were made. This approach aimed at ensuring a comprehensive and cohesive decision on the issue, meeting the ends of justice for both parties. Consequently, the revenue's ground on merits was allowed for statistical purposes.

In conclusion, the Appellate Tribunal ITAT Mumbai, in the cited judgment, addressed the challenges related to the quashing of reassessment proceedings and the adjudication of set off brought forward losses against current year's income. The ITAT upheld the reopening of the reassessment and remanded the issue of set off for denovo adjudication, emphasizing a fair and just decision-making process.