2023 (5) TMI 479 - AT - Income Tax

Settlement of case - Set off the unabsorbed business loss or depreciation from out of the total income assessed when no such provision exists for allowing set off of brought forward losses against additional income offered before Hon'ble ITSC - filing of belated return - HELD THAT - Once the petition got rejected, the only recourse available with the revenue to consider such amount disclosed in the settlement petition as the income under normal computation of income. Indeed, the assessee disclosed the income declared in the settlement commission but has given the set off of the brought forward losses/unabsorbed depreciation against such income which eventually make the taxable income at Rs. Nil. Once income has been determined under normal computation of income then it implies that all the other provision including the provision of setting off loss/unabsorbed depreciation will equally be applicable as per the law. In other words, the assessee is entitled set off the brought forward losses/ unabsorbed depreciation against the income subject to the provisions of law. It is also important to note that the assessee has filed the return of income belatedly for the year under consideration but there is no prohibition to adjust the brought forward losses against the income declared belatedly in the return of income under the provision of section 139(3) - DR has not brought anything on record contrary to the findings of the ld. CIT-A. In view of above, we do not find any infirmity in the order of the CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed.

Summary

Issues:
The judgment involves the following Issues:
- Whether the set off of unabsorbed business loss or depreciation against the total income assessed is permissible when no provision exists for such set off against additional income offered before the Income Tax Settlement Commission (ITSC).
- Whether the set off of unabsorbed business loss or depreciation from the total income assessed for certain assessment years is allowable when belated returns were filed in those years.
- Whether the order of the Assessing Officer should have been upheld by the Commissioner of Income Tax (Appeals).

Issue 1: Set off of Unabsorbed Business Loss/Depreciation Against Assessed Income

The Revenue contended that the Commissioner of Income Tax (Appeals) erred in allowing the set off of unabsorbed business loss/depreciation against the income determined by the Assessing Officer (AO). The AO added an income amount after the settlement petition by the assessee was rejected. The assessee claimed that this added income should be set off against brought forward losses, but the AO disagreed citing provisions of the Income Tax Act. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee, stating that the AO's action was not legally sanctioned and directed the set off of carry forward losses including depreciation loss from the total income assessed. The Revenue appealed against this decision.

Issue 2: Belated Return and Set Off of Losses

The Revenue argued that the belatedly filed returns for certain assessment years should not allow the set off of unabsorbed business loss or depreciation against the total income assessed. The Commissioner of Income Tax (Appeals) found that there was no legal prohibition to adjust the brought forward losses against the belatedly declared income under the provisions of the Income Tax Act. The Revenue's appeal was dismissed based on this finding.

Conclusion:
The Appellate Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner of Income Tax (Appeals) regarding the set off of unabsorbed business loss or depreciation against the total income assessed, even when no provision existed for such set off against additional income offered before the ITSC. Additionally, the Tribunal found no legal prohibition against adjusting brought forward losses against belatedly declared income, resulting in the dismissal of the Revenue's appeal.