2021 (1) TMI 826 - AT - Income Tax

Revision u/s 263 - Error in allowing set off of loss - HELD THAT - The total loss of the assessee for A.Y. 2009-10 was determined in the assessment completed under section 143(3)/147 at ₹ 10,67,21,089/- as against the loss of ₹ 19,10,76,892/- declared by the assessee and since the entire loss so determined was already set off against the income of the assessee for A.Y. 2011-12 and 2012-13, no loss as determined in the assessment for A.Y. 2009-10 was available for set off against the income of the assessee for A.Y. 2015-16 when the assessment order under section 143(3) for A.Y. 2015-16 came to be passed by the Assessing Officer on 18.12.2017. Thus an error in the order of the Assessing Officer passed under section 143(3) in allowing the set off of loss of ₹ 3,99,13,429/- pertaining to A.Y. 2009-10 and the same being prejudicial to the interest of the Revenue, the order passed by the Assessing Officer under section 143(3) dated 18.12.2017 was liable to the revised as rightly held by the ld. Principal CIT in his impugned order passed under section 263. Working made by the ld. Principal CIT regarding the excess set off of loss pertaining to A.Y. 2009-10 alleged to be wrongly allowed by the Assessing Officer is not correct and this matter should have been left open by him to the Assessing Officer for making the working on the basis of actual loss pertaining to A.Y. 2009-10 as determined in the relevant assessment. We accordingly modify the impugned order of the ld. Principal CIT passed under section 263 to this extent. Appellate order passed by the ld. CIT (Appeals) for A.Y. 2009-10 allowing the entire claim of the assessee for depreciation and the effect given by the Assessing Officer to the said order finally determining the loss of the assessee-company for A.Y. 2009-10 on which a strong reliance was placed by assessee at the time of hearing before us, we may clarify that the Assessing Officer after having given the effect to the order of the ld. Principal CIT and determined the loss of the assessee for A.Y. 2009-10 at ₹ 19,10,76,892/-, which, inter alia, included business loss of ₹ 3,99,13,429/-, which was available for set off against the income of the assessee for A.Y. 2015-16 as claimed by the assessee, is duty bound to allow such set off by passing a consequential order. Appeal of the assessee is partly allowed.

Summary

Issues:
1. Assessment order under section 143(3) allowing set off of business loss for A.Y. 2009-10.
2. Revision proceedings initiated under section 263 by ld. Principal CIT.
3. Validity of the order passed under section 263.
4. Allowance of set off of business loss pertaining to A.Y. 2009-10 against income for A.Y. 2015-16.

Analysis:
1. The assessee, a Company engaged in I.T. Parks development, had its total income determined as NIL under section 143(3) for A.Y. 2015-16. The Assessing Officer allowed set off for unabsorbed depreciation and brought forward losses, including business loss of &8377; 3,99,13,429/- for A.Y. 2009-10. The Principal CIT found this order erroneous and prejudicial to revenue's interest as the loss for A.Y. 2009-10 was fully set off in earlier years, leading to a show-cause notice under section 263.

2. The Principal CIT, after examining the facts and submissions, concluded that the Assessing Officer wrongly allowed excess set off of loss for A.Y. 2009-10. The order under section 143(3) was set aside, directing a fresh assessment. The Tribunal, on appeal, considered the CIT's reasoning valid, emphasizing the need for accurate determination of losses and set offs to prevent revenue loss.

3. The Tribunal acknowledged the CIT(A)'s order deleting the disallowed depreciation amount, resulting in the revised loss for A.Y. 2009-10 at &8377; 19,10,76,892/-, including the business loss available for set off against A.Y. 2015-16 income. While upholding the revision under section 263, the Tribunal modified the decision regarding the alleged excess set off, directing the Assessing Officer to reevaluate the actual loss for A.Y. 2009-10 for correct set off calculations.

4. The Tribunal clarified that the Assessing Officer must allow the set off of business loss for A.Y. 2009-10 against A.Y. 2015-16 income, based on the revised loss determination. The appeal was partly allowed, highlighting the importance of accurate assessment and set off calculations to ensure fairness and prevent revenue loss.

This detailed analysis outlines the issues, the reasoning behind the revision under section 263, and the Tribunal's decision to partially allow the appeal while emphasizing the importance of accurate assessment and set off calculations.