2022 (11) TMI 313 - AT - Income Tax

Additional grounds in terms of additional claims not made in return filed - Set-off of brought forward business losses of previous year as against income of next assessment year - assessee does not claim the same in the return of income - HELD THAT - In our considered view, even though the assessing officer may not be permitted to allow the assessee s legitimate claim for set-off of brought forward business losses, in the event the assessee does not claim the same in the return of income, however, the appellate authorities are vested with the authority to allow such claim of the assessee, in case the same is tenable in law. In the case of Pruthvi Brokers Shareholders 2012 (7) TMI 158 - BOMBAY HIGH COURT held that an assessee is entitled to raise before appellate authorities additional grounds in terms of additional claims not made in return filed by it. The Karnataka High Court in the case of Karnataka State Co-operative Federation Ltd. 2021 (3) TMI 694 - KARNATAKA HIGH COURT held that assessee's fresh claim before appellate authority is entertainable even when same is not claimed in original return of income nor assessee has filed revised return of income to make such claim. The Bombay High Court in the case of B. G. Shirke Construction Technology (P.) Ltd. 2017 (3) TMI 879 - BOMBAY HIGH COURT has held that an assessee is entitled to make a claim before Tribunal which was not raised before Assessing Officer at time of filing return of income or by filing a revised return of income. In view of the consistent position taken by the various Courts on this issue, in the interest of justice, we are restoring the file to the AO with the direction to verify the assessee s claim of set-off of brought forward business losses of assessment year 2016-17 against income of assessment year 2017-18, and if the claim is legally tenable, to allow for such set-off. Appeal of the assessee is allowed.

Summary

Issues involved:
Appeal against order of National Faceless Appeal Centre regarding assessment year 2017-18. Grounds of appeal include set-off of brought forward business loss, charging of interest under various sections, raising of demand, and penalty notice under IT Act.

Analysis:

Issue 1: Set-off of brought forward business loss
The assessee filed an appeal against the order of the CIT(A) dismissing the claim for set-off of brought forward business losses of the assessment year 2016-17. The CIT(A) observed that the appellant did not make any claim for set-off in the return of income for the assessment year 2017-18. The CIT(A) also noted that there was no mention of the brought forward business loss in the assessment order for the year in question. The appellant argued that the Department had determined the brought forward business loss for the previous year and requested the set-off. The ITAT considered legal precedents allowing appellants to raise additional claims before appellate authorities, even if not in the original return. Citing relevant judgments, the ITAT held that the appellate authorities have the power to entertain such claims if the facts are on record. Consequently, the ITAT directed the AO to verify the claim and allow the set-off if legally tenable, thereby allowing the appeal.

Issue 2: Charging of interest under various sections
The assessee raised grounds against the charging of interest under sections 234A, 234B, and 234C of the IT Act. The CIT(A) disposed of these grounds along with the appeal on the set-off issue. However, the ITAT did not provide a separate analysis or ruling on these specific grounds in the judgment.

Issue 3: Raising of demand and penalty notice
The appellant also challenged the raising of a demand and the issuance of a penalty notice under section 274 read with section 270A of the IT Act. The CIT(A) did not address these grounds separately in the order, and the ITAT did not provide detailed analysis or ruling on these issues in the judgment.

In conclusion, the ITAT allowed the appeal of the assessee concerning the set-off of brought forward business losses by directing the AO to verify the claim and allow the set-off if legally tenable. The judgment did not delve into the other grounds raised by the appellant regarding interest, demand, and penalty notice.