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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA Nos. 919 to 921 /Ahd/2016 Assessment Year 2007-08 to 2009-10
M/s. Kosa Construction, The ITO, 217-A, Gajanand Ward-1(2)(3), Complex, Opp. Tube Vs Vadodara Company, Old Padra (Respondent) Road, Vadodara-390020 PAN: AABFK6704A (Appellant)
Revenue by: Shri Lalit P. Jain, Sr. D.R. Assessee by: Shri Anil R. Shah & Ms. Kinjal R. Shah, ARs. Date of hearing : 13-12-2018 Date of pronouncement : 28-01-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
These three appeals filed by assessee for A.Y. 2007-08 to 2009-10, arise from order of the CIT(A)-5, Baroda dated 21-12-2015, in proceedings under section 143(3) r.w.s. 147of the Income Tax Act, 1961; in short “the Act” 2. As the facts and issues involved in three appeals are similar, so, we take ITA No. 919/Ahd/2016 for assessment year 2007-08 as the lead case and its findings will be applicable to the other two appeal i.e. ITA Nos. 920
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& 921/Ahd/2016 for assessment year 2008-09 to 2009-10 for the sake of convenience.
The assessee has raised following grounds of appeal:- ITA No. 919/Ahd/2016 “On Point of Law 1. The CIT(A) has erred both in Law and in fact the confirming the Reopening of Assessment and order passed by the Assessing Officer u/s.143 r.w.s.147 of the Act and it is submitted that since no income had escaped assessment or under assessed Reopening u/s.147 is bad in Law and Void. 2. (a) Without prejudice, it is submitted by your Appellant that the Reopening has been done after expiry of four years and that your Appellant had not failed to disclosed in material or information necessary for Assessment u/s.l43(3)oftheAct. (b) Further it is submitted that there is no live link between Reasons for Reopening recorded and facts of the case and therefore also order u/s. 143(3) r.w.s 147 is bad in Law and Void. On Merits: (a) It is submitted by your Appellant that in Computing Total Income while passing order u/s. 143(3) the AO had given effect to order u/s. 154, payment u/s.40(a)(ia) u/s. 139(5) and the Final Income was correctly worked. (b) Your Appellant further submits that the Total Income was correctly worked out by the Assessing Officer in his order u/s. 143(3) and there was no error in giving set off of carried forward Business Loss/Depreciation and therefore the order of Reassessment be vacated. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly.”
All the grounds of appeal are connected to the common issue based on similar facts therefore these are adjudicated together as under:- The brief fact of the case is that the assessee has filed return of income for assessment year 2006-07 on 30th December, 2016 and declared loss of Rs. 16,88,228/- consisting of business loss of Rs. 13,49,317 and the unabsorbed depreciation of Rs. 3,38,911/-. The assessment u/s. 143(3) of the act for assessment year 2006-07 was finalized on 30th December, 2008. In the assessment an addition of Rs. 5,58,715/- was made and losses of the assessee was reduced to Rs. 11,29,510/-. The ld. CIT(A) has deleted the aforesaid addition, therefore, the losses for assessment year 2006-07 was allowed at Rs. 16,88,228/- as claimed in the original return of income .
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Thereafter the assssee has furnished return of income for assessment year 2007-08 on 30th October, 2007 and declared total income at Rs. 3,98,150/- after setting off of losses of Rs 16,88,228/- relating to assessment year 2006-07. Subsequently the assessee has filed revised return of income on 9th July, 2008 and declared total income at Rs. nil after setting off of business losses of Rs. 24,86,379/- relating to assessment year 2006-07. In the revised return of income filed for the assessment year 2007-08 the assessee has shown total brought forward business losses for assessment year 2006-07 at Rs. 1,05,16,191/- and unabsorbed depreciation at Rs. 3,38,909/-. The order u/s. 143(3) for assessment year 2007-08 was finalized by the assessing officer on 30th December, 2009 and an addition of Rs. 1 lac was made and assessee’s losses was reduced to Rs. 4,37,285/-. Thereafter, assessing officer has passed order u/s. 154 of the act for assessment year 2007-08 on 26th Nov, 2010 and allowed the setting off of brought forward losses of Rs. 25,86,387/- pertaining to the assessment year 2006-07. Subsequently the assessing officer observed that in the assessment year 2006-07 the assessee was allowed to carry forward business loss of Rs. 13,49,317/- and unabsorbed depreciation of Rs. 3,38,911/- as against the carry forward losses of Rs. 1,05,16,191/- claimed in the revised return of income. Thereafter, the assessing officer stated that assessee’s claim of excess brought forward losses in the revised return of income was not assessable and held that assessee had failed to disclose fully and truly the material facts relevant for the original assessment year 2007-08 therefore the case of the assesse was reopened by issuing of notice u/s. 148 of the act on 28th Jan, 2014. The assessee filed revised return in response to notice u/s. 148 wherein income of Rs. 25,86,379/- was set off against brought forward business losses of Rs.
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70,78,123/. Thereafter, the assessing officer has finalized the reassessment u/s 143(30 r.w.s. 147 of the act on 30.12.2014 and held that the business losses of Rs. 57,28,806/- (Rs. 70,78,123 - Rs. 13,49,317) not claimed in the original return of income was not allowed to be carried forward and set off in the subsequent assessment year.
Aggrieved assesse has filed appeal before the ld. CIT(A). The ld. CIT(A) has sustained the disallowance made by the assessing officer. Relevant part of decision of ld. CIT(A) is reproduced as under:- “6.3 The issue under dispute has its origins in A.Y. 2006-07, where the assessee had declared loss of Rs. 16,88,228/- in its Return of Income filed on 30.12.2006, where the assessee had declared business loss of Rs. 13,49,317/- and unabsorbed depreciation of Rs. 3,38,911/-. In the meantime, the assessee also filed a Revised Return of Income for A.Y. 2006-07 on 26.12.2007, declaring loss of Rs. 1,05,16,191/-, after considering disallowance of Rs. 91,66,874/-u/s 40(a)(ia) in A.Y. 2005-06. The case was selected for scrutiny and order u/s 143(3) was passed on 30.12.2008 (after considering the Revised Return, filed almost an year earlier), determining total loss at Rs. 11,29,510/-, after addition of Rs. 5,58,715/-. It is noted from the order u/s 143(3), which was passed after considering the Revised Return of Income that the Assessing Officer had allowed carry forward of loss of Rs. 11,29,510/- to subsequent years. The assessee filed an appeal against order u/s 143(3) dated 30.12.2008 only contesting the addition of Rs. 5,58,715/- before CIT(A) and did not file any appeal against Assessing Officer's order allowing carry forward of loss of Rs. 11,29,510/-. In the appeal against the addition of Rs. 5,58,715/-, CIT(A) decided the issue in favour of the assessee in CAB/II-439/08-09 dated 29.11.2010 and the Assessing Officer gave effect to the appeal order vide his order dated 31.01.2011 and finally allowed the assessee to carry forward losses of Rs. 16,88,228/-.”
We have heard the rival contentions and perused the material on record carefully. It is noticed that assessment for assessment year 20005-06 was completed u/s. 143(3) on 6-12-2017 and addition of Rs. 91,66,874/- was made u/s. 40(a)(ia) of the act on the ground that the TDS was paid after the specified date. Since the TDS was deposited in the subsequent year for which the assessee was eligible for the deduction of the said expenditure in subsequent year, therefore, the assessee has revised its return of income for assessment year 2006-07 and claimed the expenditure incurred in assessment
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year 2005-06 on which the TDS was paid in assessment year 2006-07. The asssssee has declared return loss of Rs. 16,88,228/- for assessment year 2006-07. However in view of the disallowance made by the assessing officer u/s. 143(3) for assessment year 2005-06, the assessee has filed revised return of income for assessment year 2006-07 and declared loss of Rs. 1,05,16,911/- after considering the disallowance of Rs. 91,66,874/- u/s. 40(a)(ia) in assessment year 2005-06. Accordingly, the returned loss was increased from Rs. 16,88,288/- to Rs. 1,05,16,191/- and unabsorbed depreciation of Rs. 3,38,911/- for assessment year 2006-07. The assessee has also filed appeal before the ld. CIT(A) against the order of the assessing officer for assessment year 2005-06 and the ld. CIT has reduced the disallowance to Rs. 27,28,806/- against disallowance amount of Rs. 91,66,874/- u/s. 40(a)(ia) for assessment year 2005-06. An order u/s. 143(3) of the act for the assessment year 2006-07 was passed on 30-12-2008 determining total loss at Rs. 11,29,510/- after addition of Rs. 5,58,715/- . The assessing officer had allowed carry forward loss of Rs. 11,29,510/- to subsequent years. The assessee has filed appeal against addition of Rs. 5,58,715/- made by the assessing officer before the ld. CIT(A) for assessment year 2006-07 and he ld. CIT(A) has deleted the addition of Rs. 55,8715/- and the assessing officer in his appeal effect giving order has allowed the assessee to carry forward losses of Rs. 16,88,228/-. It is observed that the assessing officer had allowed the claim of carry forward losses as claimed in the original return of income however inadvertently the assessing officer has not considered the claim of carry forward of losses of the assessee according to the revised return of income of filed within the stipulated time. It is noticed that neither the assessing officer has challenged
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the validity of the revised return of income filed for assessment year 2006- 07 nor pointed out any defect in the revised return of income. The assessee has filed its return of income for the assessment year 2007-08 on 30-10- 2007. In the revised return of income for assessment year 2007-08, total brought forward business losses for the assessment year 2006-07 was claimed at Rs. 1,05,16,191/- and unabsorbed depreciation at Rs. 3,38,909/-. The assessment for assessment year 2007-08 was completed u/s. 143(3) and an addition of Rs. 1,00,000/- was made and the assessee’s loss reduced to Rs. 4,37,285/-. To rectify the mistake apparent from record the assessing officer has duly passed an order u/s. 154 of the act of the assessment year 2007-08 and assessee was allowed to carry forward the business loss of Rs. 39,333030/- and unabsorbed depreciation loss of Rs. 338911/- in relation to assessment year 2006-07. However, vide the impugned order u/s. 143(3) r.w.s. 147 of the act dated 31/12/2014 for assessment year 2007-08 the assessing officer has held that the claim of the assessee of carried forward and set off of the losses was not allowed. We have also gone through the provision of section 147 of the act reproduced as under:- "147. If the [Assessing] Officer [has reason to believe ] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153, referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts 1 necessary for his assessment, for that assessment year. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily 1 amount to disclosure within the meaning of the foregoing proviso.
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Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.] In the light of the above facts and provisions of section 147 of the act , we find that the assessing officer has failed to substantiate that how there was escapement of income after expiry of 4 years as there was no failure on the part of the assessee to disclose any material or information necessary for assessment 143(3) of the act. We did not find any substance in the decision of ld. CIT(A) holding without any reason that the order passed u/s. 154 by the assessing officer on 26-11-2010 allowing carry forward of loss was not sustainable in law. We observe that the assessing officer has completed the assessment for the assessment year 2005-06 on 06-12-2007 and addition to income was made at Rs. 91,66,874/- under section 40(a)(ia) of the act as the amount of TDS was paid after the specified due date. Therefore, the assessee has filed the revised return of income for the assessment year 2006- 07 within the stipulated time claiming increased amount of losses, however, the assessing officer inadvertently determined the claim of losses while passing order u/s. 143(3) for the assessment year 2006-07 on the basis of the original return of income filed by the assessee. When the matter was brought to the notice of the assesssee as elaborated above he has rectified the
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apparent error by passing order u/s. 154 of the act in the assessment year 2007-08 vide which the claim of the losses of the assessee was allowed. The assessing officer has rectified the mistake u/s. 154 of the act and correctly allowed the claim of set off of carried forward business/depreciation, therefore, we are not inclined with the unjustified finding of the ld. CIT(A). Considering he above facts and circumstances, we allow the ground of appeal of the assessee for assessment years 2007-08 to assessment year 2008-09 . In the result, all the grounds appeal of the assessee are allowed.
In the combined result, all the three appeals filed by the assessee are allowed. Order pronounced in the open court on 28-01-2019
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 28/01/2019 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद