2023 (12) TMI 505 - HC - Income Tax

B/F losses not allowed to be carry forward - Tribunal allowed the appeal and directed the AO to expunge the concluding remark brought forward loss is not allowed to be carry forward - Tribunal for expunging the remark was that the AO was only required to notify the assessee about the amount of loss, as computed by him for the relevant AY and held that the question of whether the loss, incurred in any year, could be carried forward to the following year, and set off against the profits had to be decided by the AO who would deal with the assessment concerning the subsequent year. HELD THAT - Section 79 of the Act prohibits carry forward and set off of losses that occurred in a period before the previous year, when in a previous year, there has been a change of shareholding unless the case fits in any of the provisos referred to therein. Tribunal, in sum, concluded that it was not within the remit of the AO, dealing with the AY in issue, to make an observation concerning an aspect that would fall within the jurisdiction of the AO, when the aspect concerning carry forward and set off losses would come to the fore A textual reading of Section 79 makes it evident that it does not empower an AO, who exercises jurisdiction qua a particular AY, to place limitations on the adjudicatory powers of the AO who would be called upon to deal with the matter in subsequent years. A perusal of Section 79 of the Act would show that unabsorbed depreciation and capital losses do not fall within its scope and ambit. There is, in our opinion, no practical efficacy in the assessee carrying forward business losses, unabsorbed depreciation, and capital losses unless there is a possibility of setting off those losses in the future, albeit subject to the provisions of the Act. These are the aspects, in our opinion, that the concerned AO would examine in the relevant AY in which such set off is claimed. Mere fact that the Tribunal has expunged the impugned observations, in our view, cannot impact the stand of the appellant/revenue.

Summary

Issues:
The judgment concerns an application for condonation of delay in filing an appeal and the appeal itself regarding the carry forward of losses in Assessment Year 2014-15.

Application for Condonation of Delay:
An application was filed by the appellant seeking condonation of a 152-day delay in filing the appeal. The court, intending to deal with the appeal on merits, condoned the delay and disposed of the application.

Appeal Regarding Carry Forward of Losses:
The appeal focused on challenging an order passed by the Income Tax Appellate Tribunal regarding the legality of an observation made in the assessment order. The Tribunal had directed the Assessing Officer to expunge a remark related to the carry forward of losses. The appellant/revenue contended that the Tribunal's view was unsustainable due to a change in shareholding, but the court upheld the Tribunal's decision.

Legal Analysis:
The court examined Section 79 of the Income-tax Act, 1961, which prohibits carry forward and set off of losses in cases of certain companies with a change in shareholding. The court agreed with the Tribunal's interpretation that the Assessing Officer's jurisdiction does not extend to placing limitations on future assessments regarding loss carry forwards.

Precedent and Conclusion:
The court referred to a Supreme Court judgment emphasizing that the decision on carrying forward losses to subsequent years rests with the Assessing Officer of those years. Additionally, the court highlighted the importance of considering unabsorbed depreciation and capital losses separately from business losses. Ultimately, the court found no grounds for interference with the Tribunal's order and closed the appeal, stating that no substantial question of law arose for consideration.