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2017 (11) TMI 1556 - HC - Income TaxDisallowance of the carry forward and set off of loss - petitioner s grievance is that the Assessing Officer did not give any opportunity to the petitioner with regard to the defective returns which has to be cured by the petitioner for the assessment year 1993-1994 and the petitioner came to know about it only when the order of the Assessing Officer giving effect to the order of the CIT(A) was passed for the assessment year 1996-1997 on 23.01.2002 - Held that - I find that there has not been an examination of the merits of the matter, rather the petitioner has been shut out on technicalities. If the petitioner s contention that they had filed Audit Report on 31.10.1995 had been verified by either for calling for them before the Assessing Officer or calling for the assessment file, the factual dispute would have been cleared and a decision could have been taken on the merits of the matter. Thus, I am of the considered view that the matters require to be re-examined by the respondent by calling for the assessment files, examining the correctness of the stand taken by the petitioner that the tax Audit Reports were filed vide their letters dated 30.10.1995 and also examine the legal issue placed by the petitioner and pass fresh orders on merits. Writ Petitions are allowed and the impugned orders are set aside and the matter is remanded to the respondent for fresh consideration to take a decision in the matter
Issues:
1. Disallowance of carry forward and set off of loss claimed by the petitioner company for the assessment years 1993-1994 and 1994-1995. 2. Allegation of lack of communication regarding defective returns by the Assessing Officer. 3. Denial of opportunity to rectify defective returns. 4. Failure to consider the merits of the case and reliance on technicalities. Analysis: Issue 1: Disallowance of carry forward and set off of loss The petitioner, a Private Limited Company, filed its return of income for the assessment year 1993-1994 without the Auditor's Report. The Assessing Officer treated the returns for 1993-1994 and 1994-1995 as defective, leading to disallowance of carry forward and set off of losses. The petitioner sought relief based on Supreme Court decisions emphasizing the relevant year for considering carry forward of loss. The respondent dismissed the revision petitions for both years, resulting in the denial of benefits under the Income Tax Act. Issue 2: Allegation of lack of communication The petitioner claimed they never received communication about the defective returns until the assessment order for 1996-1997 was passed. They asserted filing the Audit Reports before the end of the assessment year. The Assessing Officer's failure to verify this information and reliance on technicalities without examining the merits of the case led to the petitioner being shut out from availing benefits. Issue 3: Denial of opportunity to rectify defective returns The petitioner contended that they were not given an opportunity to rectify the defective returns for 1993-1994. The Assessing Officer's actions, without proper verification or consideration of the petitioner's submissions, resulted in the petitioner being prejudiced by technicalities rather than a substantive examination of the case. Issue 4: Failure to consider merits and reliance on technicalities The court found that a re-examination of the matter was necessary, emphasizing the importance of assessing the correctness of the petitioner's claims regarding the filing of Audit Reports and the entitlement to carry forward losses. The court criticized the respondent for not verifying crucial facts and directed a fresh consideration of the case on its merits, highlighting the need to avoid a remedy-less situation for the petitioner. In conclusion, the High Court allowed the Writ Petitions, set aside the impugned orders, and remanded the matter to the respondent for a fresh consideration, emphasizing the examination of merits and avoidance of technicalities in deciding the petitioner's claims under the Income Tax Act.
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