2014 (7) TMI 598 - AT - Income Tax

Revised return of loss/unabsorbed depreciation Held that - The provisions of S.139(5) make it clear that a return can be revised only if such return is furnished u/s 139(1) or in pursuance of a notice u/s 142(1), and the omission warranting the filing of the revised return must be bona fide inadvertence or mistake on the part of the assessee, and such revised return should be filed within one year from the end of the assessment year or before completion of the assessment - the assessee has filed the original return u/s 139(1) and the revised return was filed within one year from the end of the relevant assessment year - the claim of the assessee for set off of unabsorbed depreciation of AY 2007- 08 made in the revised return, omission to make claim in the original return appears to be a bona fide mistake on the part of the assessee, more so, since no material to the contrary has been brought on record by the AO - even if the assessee has not filed revised return, AO is bound to allow carried forward loss or depreciation as per the record - CIT(A) was right in directing the AO to accept the revised return and to allow set off of unabsorbed depreciation of AY 2007-08, after due verification thus, there was no infirmity in the order of the CIT(A) Decided against Revenue. Disallowance of compensation for crop loss Held that - There were negotiations with the farmers for the amount of compensation to be paid to continue the running of the factory by the assessee, the payment was made on 28.2.2008 - the liability to pay the compensation has crystalised only during the period relevant to the year even though the liability related to the earlier year as well - CIT(A) was justified in directing the AO to allow the entire amount of compensation paid in the year thus, the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues:
1. Validity of revised return for set off of unabsorbed depreciation.
2. Disallowance of compensation for crop loss.

Issue 1: Validity of revised return for set off of unabsorbed depreciation:
The appeal by the Revenue challenged the CIT(A)'s order directing the Assessing Officer to consider the revised return of loss/unabsorbed depreciation for the assessment year 2007-08 and to allow the same to be set off in the assessment year 2008-09. The assessee, a company engaged in manufacturing sponge iron, filed a revised return claiming a set off of loss of the previous assessment year. The Assessing Officer initially disallowed this claim, but the CIT(A) directed the Assessing Officer to consider the revised return for computation of total income and to verify and allow the claim for set off of unabsorbed depreciation. The Tribunal found that the revised return was validly filed within the prescribed time and that the claim for set off appeared to be a genuine mistake on the part of the assessee. The Tribunal upheld the CIT(A)'s decision, stating that even without the revised return, the Assessing Officer would have been bound to allow the carried forward loss or depreciation. Therefore, the Tribunal confirmed the CIT(A)'s order on this issue, rejecting the Revenue's grounds.

Issue 2: Disallowance of compensation for crop loss:
The second issue pertained to the disallowance of a portion of the compensation claimed by the assessee for crop loss. The Assessing Officer disallowed 50% of the claimed amount, stating it pertained to two financial years. However, the CIT(A) noted that negotiations with farmers led to the liability crystallizing during the relevant year, and the payment was made accordingly. The Tribunal agreed with the CIT(A), stating that the liability to pay the compensation arose during the relevant period, even though it related to an earlier year as well. Therefore, the Tribunal upheld the CIT(A)'s decision to allow the entire amount of compensation paid in the year under appeal, rejecting the Revenue's grounds. Consequently, the Tribunal dismissed the Revenue's appeal on this issue.

In conclusion, the Tribunal confirmed the CIT(A)'s orders on both issues, ruling in favor of the assessee and dismissing the Revenue's appeal.