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Facts
The assessee claimed set-off of brought-forward business losses and unabsorbed depreciation for AY 2018-19. The AO completed assessment under section 143(3) without discussing this claim, and the CIT(A) also failed to adjudicate it on first appeal.
Held
The Tribunal held that the right to carry forward losses and depreciation is a statutory entitlement and the AO should have recognized and given effect to it. However, the lower authorities failed to undertake this exercise properly.
Key Issues
Whether the Assessing Officer and CIT(A) erred in not granting the set-off of brought-forward business losses and unabsorbed depreciation.
Sections Cited
143(3), 143(2), 143(1), 142(1), 32(2), 72
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal is directed against the order dated 14/02/2025 passed by the National Faceless Appeal Centre (NFAC), Delhi, arising out of the assessment framed under section 143(3) of the Income-tax Act, 1961 (“the Act”) for A.Y. 2018-19.
The grievance of the assessee is confined to one issue only, namely that the learned Assessing Officer as well as the learned CIT(A) failed to grant the due set-off of brought- forward business losses and unabsorbed depreciation of earlier years, despite the assessee having specifically claimed the same.
The brief facts relevant for this issue are that the assessee e-filed its return of income for A.Y. 2018-19 on 01/09/2018 declaring a total income of ₹18,69,20,250 under the regular provisions of the Act. In this return, it claimed brought-forward business losses of ₹10,24,26,929 and reported Nil for unabsorbed depreciation. The case was thereafter selected for scrutiny by notice dated 22/09/2019 under section 143(2). In the meantime, the return was processed under section 143(1) on 25/01/2020, wherein the claim of brought-forward business losses was not disturbed. During scrutiny, the learned Assessing Officer issued notice dated 26/11/2020 under section 142(1). In response, the assessee, vide submission dated 04/12/2020, explained that after the disposal of appellate proceedings for earlier years, the correct figures of carry-forward stood revised to ₹14,56,33,431 towards business losses and ₹27,82,21,395 towards unabsorbed depreciation. Accordingly, it was submitted that the entire income of the year was liable to be set off against such brought-forward losses and depreciation, resulting in Nil taxable income.
The assessment, however, was completed under section 143(3) on 03/03/2021 without any discussion or finding on this claim. In the first appeal, though the assessee specifically raised this issue in Ground No. 7, the learned CIT(A) did not adjudicate the same.
Before us, the learned counsel has placed on record a detailed, year-wise reconciliation chart showing the availability and utilisation of brought-forward business losses and unabsorbed depreciation across the relevant assessment years, after giving effect to earlier appellate orders and adjustments. This tabulation, it was urged, clearly demonstrates that sufficient brought-forward losses and depreciation were available for set-off against the income of the present year.
The learned counsel, drawing our attention to the reconciliation and computation statement placed on record, submitted that the assessee has in fact accumulated substantial brought-forward business losses and unabsorbed depreciation from earlier years, duly crystallised upon disposal of appellate proceedings. These, he contended, are available in law for set-off against the income of the year under consideration. If the figures as demonstrated in the reconciliation are duly considered, the taxable income for A.Y. 2018-19 would stand reduced to Nil.
On the other hand, Ld. DR submitted that matter may be restored to the file of AO to verify the claim from the records.
We have given our thoughtful consideration to the submission advanced and have perused the material on record and detail chart furnished by the assessee. The said tabulation not only reconciles the figures with appellate effects of earlier years, but also maps the precise quantum of set-off of brought-forward losses and unabsorbed depreciation against the income computed in successive years. For ease of reference, the figures as compiled by the assessee may be summarised as under:
Assessment Income Head as Income under Set off of Nature of Balance Year per various heads brought brought brought computation forward forward losses forward losses losses 2016-17 Business Income 26,76,85,550 26,76,85,550 Business loss 14,85,40,341 Short Term 1,24,684 1,24,684 Unabsorbed 27,90,34,567 Capital Gain depreciation 2017-18 Business Income 29,06,910 29,06,910 Business loss 14,56,33,431 Short Term 8,13,172 8,13,172 Unabsorbed Capital Gain depreciation 27,82,21,395 2018-19 Business Income 28,11,23,058 14,56,33,431 Business loss 13,54,89,627 Unabsorbed depreciation
From the above reconciliation, it emerges that in A.Y. 2016- 17, the assessee’s business income and short-term capital gain stood absorbed against accumulated business losses and unabsorbed depreciation. Likewise, in A.Y. 2017-18, the entirety of the income returned was neutralised by available carry-forward figures. Coming to the year under appeal, A.Y. 2018-19, the assessee has demonstrated availability of business loss of ₹14,56,33,431 which was set off against its business income of ₹28,11,23,058, leaving a balance taxable business income of ₹13,54,89,627. Further, the short-term capital gains of ₹18,65,534 and income from other sources of ₹63,58,590 have also been claimed to be adjustable against the pool of unabsorbed depreciation, leaving thereafter a balance of unabsorbed depreciation still available to the assessee for future years.
In principle, it is a well-settled proposition that the right to carry forward business losses and unabsorbed depreciation, once determined in earlier years, partakes the character of a statutory entitlement. The Assessing Officer, in every subsequent year, is bound to recognise and give effect to such carry-forward in the manner contemplated under sections 32(2) and 72 of the Act. In the present case, however, we find that this exercise has not been undertaken by the lower authorities in a speaking manner. Given that the computation of such carry-forward involves arithmetical Laqshya Media Ltd. verification with reference to appellate orders and effect-giving computations, we consider it expedient in the interest of justice to restore this matter to the file of the Assessing Officer. He shall verify the figures of brought-forward business losses and unabsorbed depreciation as placed on record, grant the admissible set-off against the income of A.Y. 2018-19, and determine the correct taxable income for the year, with consequential carry-forward of any balance losses or depreciation strictly in accordance with law. 11. We make it clear that the assessee shall be afforded adequate opportunity to substantiate its claim with supporting records, and the Assessing Officer shall decide the issue by a reasoned and speaking order. 12. In the result, the appeal of the assessee is allowed for statistical purposes in the terms indicated above. Order pronounced on 4th September, 2025.