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TMI Blog2011 (6) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... is 1999-2000." ITA No. 836/Ahd/2009 "Your appellant being dissatisfied with the order passed under section 154 dated 11-12-2008 of the Income-tax Act by the commission of Income-tax (Appeals) - Gandhinagar, Ahmedabad presents this appeal against the same on the following amongst other grounds which are without prejudice to each other. 1. The order passed by learned CIT(A) upholding the view of learned Assessing Officer is bad in law and requires to be quashed. 1.1 The learned CIT(A) has erred in upholding the order of learned Assessing Officer for not allowing claim of carry forward business of loss computed in order under section 154 dated 10-4-2008 rectifying order giving effect to ITAT's order for the set-off in subsequent years. In the facts and circumstances of the case it is submitted that the business loss of Rs. 30,55,273 which arose after giving effect to ITAT's order ought to have been carried forward for set off in subsequent years. It is submitted that it be so held now. 2. The learned CIT(A) has erred in not allowing carry forward of loss on the ground that return is filed in response to notice under section 148 and not under section 139(3) or under section 139(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before the CIT(A) and the ITAT and finally after appellate proceedings, the income of the assessee was determined at loss Rs. 5,41,00,842. The assessee vide application under section 154 dated 27-5-2008 requested that the loss determined by the Assessing Officer should be directed to be carried forward to the subsequent year. The Assessing Officer vide his order under section 154 dated 10-7-2008 held that the loss can be carried forward only if the same is determined in pursuance to the returned filed under section 139(3). In this case as per return of income, the income declared was NIL and the loss was determined only on giving appeal effect which could not be carried forward. The assessee filed appeal before the CIT(A) who vide his order dated 11-12-2008 agreed with the Assessing Officer that the loss cannot be carried forward because the conditions section 139(3) are not fulfilled. He further stated that in this case, the assessment was reopened by issue of notice under section 148. As per the decision of the Hon'ble Apex Court in the case of CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442, section 147 is for the benefit of the Revenue and assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot claim any benefit because of initiation of proceedings under section 148. He further stated that while directing the Assessing Officer to allow claim of depreciation, the CIT(A) has referred to Explanation 5 to section 32. That the Explanation 5 to section 32 was introduced by the Finance Act, 2001 with effect from 1-4-2002. The assessment year under consideration is assessment year 1999-2000 and therefore the Explanation 5 to section 32 would not be applicable. He, therefore, submitted that the order of the CIT(A) should be reversed and that of the Assessing Officer may be restored. 7. The learned counsel for the assessee, on the other hand, stated that the assessee furnished return of income on 27-12-1999 while the due date for filing of the return for assessment year 1999-2000 was 31-12-1999. Thus, the return was duly furnished before the due date prescribed under section 139(1). The primary condition of section 139(3) is only that the return of income should be furnished under section 139(1) which is duly complied by the assessee. That the appellate proceedings are the continuation of the assessment proceedings and therefore when after the end of the appellate proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only condition is that full effect cannot be given to depreciation allowable under section 32(1) on account of there being insufficient profit. No other condition is required to be fulfilled by the assessee for carry forward of unabsorbed depreciation. Once the depreciation allowable under section 32(1) cannot be allowed or partly allowed, the unabsorbed portion of such depreciation automatically becomes the depreciation of the subsequent year. This is subject to the provisions of sections 72(2) and 73(3). Sections 72(2) and 73(3) read as under: "72(2) Where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section. 73(3). In respect of allowance on account of depreciation or capital expenditure on scientific research, the provisions of sub-section (2) of section 72 shall apply in relation to speculation business as they apply in relation to any other business." From the above two sub-sections, it is evident that these sub-sections only provide the priorities which is to be given while setting of the unabsorbed depreciation vis-a-vis business loss. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so re-established, reconstructed or revived, and- (a) it shall be set off against the profits and gains, if any, of that business or any other business carried on by him and assessable for that assessment year; and (b) if the loss cannot be wholly so set off, the amount of loss not so set off shall, in case the business so re-established, reconstructed or revived continues to be carried on by the assessee, be carried forward to the following assessment year and so on for seven assessment years immediately succeeding. (2) Where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section. (3) No loss (other than the loss referred to in the proviso to sub-section (1) of this section) shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed." From the above, it is evident that where for any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rward of the business loss. We are unable to agree with this contention of the revenue. Section 139(3) would have application only where the assessee files the return disclosing the loss either under the head "profit and gains of business or profession" or under the head "capital gains". For any assessee, who does not claim loss in the return of income, section 139(3) would not be applicable. However, where the assessee files the return disclosing the loss, then he is required to file the return as per section 139(1). In this case, first of all the assessee has not disclosed any loss in the return of income, therefore, the section 139(3) would not be applicable, and even otherwise, the only condition under section 139(3) is for filing of the return before the due date as prescribed under section 139(1). Admittedly, in this case, the assessee has filed return of income before the due date for filing of the return, therefore under section 139(3), the Revenue cannot deny the benefit of carry forward of the business loss to the assessee. We have already dealt with section 72 and held that it does not provide any pre-condition for carry forward of business loss. Section 139(3) would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of proceedings under section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words "such income" in section 147 clearly refer to the income which is chargeable to tax but has "escaped assessment" and the Income-tax Officer's jurisdiction under the section is confined only to such income which has escaped assessment. It does not extend to reconsidering generally the concluded earlier assessment. Claims which have been disallowed in the original assessment proceeding cannot be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which are relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as "escaped income". Indee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot aware, though the assessee explained that it was because of the set-off of addition in the closing stock made in the earlier years, which was given by way of increase in the opening stock. Be that as it may, it is undisputed that as against the NIL income declared by the assessee in the return, after the order of the appellate authorities, the final outcome of computation under the head "Income from the Business" is loss of Rs. 5,41,00,842. Therefore, the issue of determination of income or loss is not before us. In our opinion, the decision of the Hon'ble Apex Court in the case of Sun Engineering Works (P.) Ltd. (supra) could have relevance during the assessment/appellate proceedings. But once the order of the appellate authorities in quantum appeal have become final and the effect have been given thereto and loss is determined thereby, the same has to be carried forward to the subsequent years as per the provisions of the Income-tax Act. The revenue cannot invoke decision of Hon'ble Apex Court in Sun Engineering Works (P.) Ltd. (supra) to deny carry forward of loss finally determined, which loss is to be carried forward as per the section 72 and the only condition for carry fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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