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TMI Blog2024 (7) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... 995 (9) TMI 2 - SUPREME COURT] , then there would be a considerable quantum of carried forward unabsorbed depreciation to merit a comfortable setting off of the income under consideration. It is felt that the Pr. CIT giving directions for revision u/s 263 of the Act merely for the sake of carrying out inquiries is an exercise in futility which deserves to be avoided. Considering this the order u/s 263 of the Act is hereby quashed. Appeal filed by the assessee is allowed. - Sri Rajpal Yadav, Vice-President And Sri Sanjay Awasthi, Accountant Member For the Assessee : N.S. Saini, A/R Priyanka Salarpuria, A/R. For the Department : Subhendu Datta, CIT D/R. ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER: In this case it is seen that the assessee filed a return of income for AY 2019-20 on 06.12.2019 at NIL income. The said return was processed u/s 143(1) of the Income Tax Act, 1961 (in short the 'Act') on 25.02.2020 on the returned income itself. It is observed that in the instant case a search was carried out on 03.01.2019 and assessment order for the instant assessment year was passed u/s 143(3) of the Act on 22.04.2021, accepting the returned income. It is observed that subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht forward loss of Rs. 1,70,69,680/- was required to be denied as per the extant provisions of the Act. 1.2. The appellant filed detailed responses to the show cause notice but it is seen that ld. Pr. CIT proceeded to issue an order u/s 263 of the Act to the Assessing Officer (hereinafter referred to as ld. 'AO') for verifying the allowability of carry forward losses and depreciation. It is pertinent to mention that ld. Pr. CIT has emphasized on Explanation-2 to Section 263(1) of the Act throughout this exercise as under: Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 3[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, (a) the order is passed without making inquiries or verification which should have been made; (b) ; (c) ; or (d) ] The above amendment was inserted by the Finance Act, 2015 w.e.f. 1-6-2015 2. Before us, the ld. A/R has by and large reiterated the contentions raised before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re covered by s. 79, in our opinion, s. 79 itself gives the answer. Section 79 contemplates that no loss incurred in any year prior to the previous year can be carried forward if the other conditions of s. 79 are satisfied. This s. 79 forms part of Chap. VI and it is connected with the carry forward and set off of losses which are provided for in s. 72 onwards. Moreover, s. 32(2) which deals with depreciation allowances and carrying forward of unabsorbed depreciation allowance and s. 33(2) which deals with the carrying forward of development rebate which, has not been absorbed in the preceding assessment year, deal with certain allowances being made while computing the total income from profits and gains from business. These are allowances which are being permitted to the assessee and it is very difficult to say that a depreciation allowance is incurred or development rebate is incurred in view of the language of s. 32 and s. 33. It must be held that depreciation is allowed and development rebate is allowed if the conditions of the relevant sections are satisfied but they are not incurred by the assessee. Therefore, by the use of the words loss incurred and the reference to the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d losses of Rs. 5,36,66,368/-. As narrated in the assessment order, the AO found that there was change in the pattern of shareholders having more than 51 % of the voting power on the last day of previous year in which the loss was incurred in which the appellant wanted set off of he brought forward loss. As observed by the AO, as per provisions of Sec.79 of the Act: the brought forward loss could not be set off. The brought forward loss was denied for set off accordingly. 5.1. At the appellate stage, the AR of the appellant discussed the issue and also filed written submission. It was submitted that that the AO did not properly appreciate the provisions of sec. 79. The AR drew my attention to section 79 which is as under: Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year unless - (a) On the last day of the previous year the shares of the company carrying not less than fifty one percent of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Subhulaxmi Mills Ltd. 249 ITR 795 (SC). In view of this, the AO is directed to allow the set off after due verification in this regard based on material facts. This ground is allowed statistically. 8. We notice herein as well that assessee's shareholders to the extent of 51% of its stake i.e M/s. XL Enterprises and M/s. Neon Health Care had admittedly held 27.34% and 47.73% of its stake in preceding assessment year and 26.02% and 53.87% in the impugned assessment year; respectively. Coupled with this, the CIT(A) has also held that hon'ble apex court's decision (supra) settled the law long back that section 79 of the Act does not apply on brought forward losses on account of depreciation. We therefore affirm the CIT(A)'s findings for this latter issue as well. 3.1. There is considerable merit in the appellant s contention that for the AY 2019-20 assessee company has a profit of 2,01,53,806/- which is required to be set off against the business loss of AY 2018-19 of Rs. 27,84,126/- and also the remaining quantum of profits from business to the tune of Rs. 1,73,69,680/- deserves to be set off against brought forward unabsorbed depreciation from AY 2013-14 to AY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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