1999 (11) TMI 116 - AT - Income Tax

Summary

Issues involved:
1. Whether the AO was justified in denying the benefit of carry forward of loss to the assessee under section 154 of the Income Tax Act.

Comprehensive analysis:
1. The Revenue contended that the Deputy Commissioner of Income Tax (Appeals) erred in holding that the Assessing Officer (AO) was not justified in denying the benefit of carry forward of loss to the assessee under section 154(1) of the Act. The Revenue relied on a judgment of the Calcutta High Court to support its argument.
2. The counsel for the assessee supported the order of the Deputy Commissioner of Income Tax (Appeals) and explained that the original assessment determined the total income of the assessee, which included a share of profit from a firm. This share income was later reduced to nil through an order under section 154 in the case of the firm. The assessee then applied for an amendment under section 154 to reflect the reduced share income in their assessment. The AO noted that the original return was not filed within the time allowed under section 139(1), leading to a dispute over the entitlement to carry forward losses. The Deputy Commissioner of Income Tax (Appeals) held that the AO, while acting under section 154, cannot decide on the validity of the original return or the carry forward of losses. The AO's order under section 154 was deemed invalid, and the benefit of carry forward of loss was held to be available to the assessee.
3. The Tribunal examined the provisions of section 80, which were amended in 1987, affecting the carry forward and set off of losses. The Tribunal agreed with the Deputy Commissioner of Income Tax (Appeals) that the issue of carry forward/set off of share from loss in a firm was debatable and fell outside the scope of section 154. The Tribunal found no merit in the Revenue's appeal and dismissed it.

In conclusion, the Tribunal upheld the Deputy Commissioner of Income Tax (Appeals)'s decision, ruling that the AO was not justified in denying the benefit of carry forward of loss to the assessee under section 154 of the Income Tax Act. The appeal by the Revenue was dismissed.