2007 (1) TMI 204 - AT - Income Tax

Summary

Issues:
1. Allowance of business loss to be carried forward.
2. Disallowance of prior period expenses of Rs. 6 lakhs.
3. Disallowance of expenses pertaining to prior period amounting to Rs. 2,49,953.

Issue 1 - Allowance of Business Loss to be Carried Forward:
The appeal challenged the order of the Commissioner of Income-tax (Appeals) regarding the business loss for the assessment year 1998-99. The primary issue was whether the Assessing Officer was justified in not allowing the business loss to be carried forward due to the return of loss being filed after the due date. The assessee filed the return of income on 30-11-1998, within the prescribed due date, but without the required audit reports. The Assessing Officer issued a deficiency letter, and the assessee filed a revised return on 5-3-1999 with the necessary documents. The CIT (Appeals) upheld the Assessing Officer's decision but directed the allowance of depreciation. The Tribunal analyzed the provisions of section 139(3) and 139(9) of the Income-tax Act, emphasizing the discretion of the Assessing Officer to grant additional time for rectifying defects in the return. As the Assessing Officer did not respond to the application for extension, the Tribunal held that the revised return filed on 5-3-1999 was valid. Therefore, it directed the Assessing Officer to allow the carry forward of the determined loss for future set-off, overturning the order of the CIT (Appeals).

Issue 2 - Disallowance of Prior Period Expenses of Rs. 6 lakhs:
The assessee raised a ground regarding the disallowance of prior period expenses of Rs. 6 lakhs. The Tribunal noted that the assessee did not press this ground, leading to its dismissal as not pressed.

Issue 3 - Disallowance of Expenses Pertaining to Prior Period of Rs. 2,49,953:
The Tribunal considered the disallowance of expenses amounting to Rs. 2,49,953 pertaining to the prior period. The assessee argued that the Assessing Officer disallowed the expenses without proper verification. The Tribunal observed that there was no discussion in the Assessing Officer's order regarding the disallowance. It directed the issue to be reconsidered by the Assessing Officer, with a requirement to provide a reasonable opportunity for the assessee to be heard and present evidence. The Tribunal set aside the order of the CIT (Appeals) on this issue, allowing ground No. 4 for statistical purposes.

In conclusion, the Tribunal partly allowed the assessee's appeal for statistical purposes, addressing the issues related to the business loss carry forward and the disallowance of prior period expenses.