2023 (1) TMI 568 - AT - Income Tax

Adjustment u/s 143 (1) - Reduction in Carry forward losses - violating the principles of natural justice - claim of carry forward of the loss has been reduced by an amount without being provided an opportunity to the assessee - HELD THAT - DR was asked to file copy of any notice or intimation issued by the Assessing Officer prior to adjustment to the amount of carry forward of loss by the assessee. DR expressed his inability in producing the said record. CIT(A) has also not adjudicated issue raised by the assessee in the appeal. From para seven of the written submission of the assessee also we find that this case was subsequently selected for scrutiny and order under section 143 (3) of the Act has been passed. Assessee has apprised as of the fact that the Assessing Officer has till date not responded to the rectification application filed by the assessee. Thus the grievance of the assessee has neither been attended by the Assessing Officer nor by the CIT(A). We feel it appropriate to restore the matter of amount of loss for which the assessee is eligible for carry forward to the file of the AO for avoiding multiplicity of the proceedings, because rectification proceeding of the assessee are already pending before the AO. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Addition to total income of the Appellant
2. Reduction in Carry forward losses of AY 2020-21

Issue 1: Addition to total income of the Appellant
The appeal was against the order passed by the Ld. Commissioner of income-tax(Appeals)-National Faceless Appeal Centre (NFAC), New Delhi, regarding an addition of Rs. 5,44,65,784 to the total income of the Appellant for the assessment year 2020-21. The grounds raised by the assessee challenged this addition, citing errors in the decision-making process. The Ld. CIT(A) was criticized for not appreciating the submissions made by the Appellant and misinterpreting the provisions of section 71 of the Income-tax Act. The Appellant argued that the intimation order had already allowed the set-off of income from capital gains with the loss, which was not the subject matter of dispute. The Ld. CIT(A) was accused of not considering the correct amount of loss to be carried forward. The Appellant contended that they should be eligible for a loss of Rs. 55,24,98,770 instead of the restricted amount. The Tribunal found merit in the Appellant's arguments and allowed the appeal for statistical purposes.

Issue 2: Reduction in Carry forward losses of AY 2020-21
The second issue revolved around the reduction in carry forward losses of the Appellant for the assessment year 2020-21. The Appellant declared a loss of Rs. 55,24,98,770, but the intimation order restricted the carry forward to Rs. 49,80,32,986. The Ld. CIT(A) confirmed this reduction without providing a reasonable opportunity for virtual hearing to the Appellant, leading to a violation of natural justice principles. The Ld. CIT(A) was criticized for not correctly interpreting the provisions related to the set-off of losses and for not allowing the Appellant to present their case adequately. The Tribunal noted that the law requires prior notice to the assessee before making adjustments under section 143(1) of the Act, which was not followed in this case. As the Assessing Officer had not responded to the rectification application filed by the Appellant, the Tribunal decided to restore the matter to the Assessing Officer for proper consideration, ensuring the Appellant's right to be heard. Consequently, the appeal of the assessee was allowed for statistical purposes.

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