GARWARE SYNTHETICS LIMITED,THANE vs. DCIT, CIRCLE-15(1)(2), MUMBAI

The CIT(A)/ AO erred in not allowing the set off of brought\nforward losses of previous years without assigning any reason\nfor the same.\n3.\nThe above grounds/sub grounds of appeal are without\nprejudice to each other.”\n3.\nThe relevant facts in brief are that the Assessee has filed return of\nincome for the Assessment Year 2018-2019 declaring loss of\nINR.4,39,074/ which was selected for regular scrutiny. During the\nassessment proceedings, the Assessing Officer observed that the\nAssessee had claimed deduction of INR.43,68,932/- under Section\n40(a)(ia) of the Act in respect of the expenses incurred in the\n Assessment Year 2009-2010.\n4.\nThe Assessing Officer rejected the above claim of deduction under\nSection 40(a)(ia) of the Act doubting the genuineness of the\nexpenses. Further, while computing the tax liability, the Assessing\nOfficer failed to adjust the brought forward losses of\nINR.15,36,210/- and unabsorbed depreciation of INR.1,96,309/-.\n5.\nBeing aggrieved, the Assessee carried both the issues in appeal\nbefore the CIT(A). Vide order, dated 08/08/2024, the CIT(A)\ndismissed the appeal preferred by the Assessee.\n6.\nNow, being aggrieved, the Assessee has preferred the present\nappeal before the Tribunal on the grounds reproduced in paragraph\n2 above.\n7.\nWe have considered the rival submissions and perused the material\non record.\n8.\nOn perusal of the Assessment Order, the reason given by the\nAssessing Officer for disallowing deduction of INR.43,68,932/-\nclaimed by the Assessee under Section 40(a)(i) of the Act was that\nthe Assessee was getting the benefit of claiming deduction of\nINR.43,68,932/- on making payment of INR.90,000/- towards Tax\nDeducted at Source (TDS) and penal interest. The Assessing Officer\ndid not doubt the factum of payment of TDS amount. During the\nappellate proceedings before the CIT(A), the Assessee had\nsubmitted the break-up of the disallowances made under Section\n40(a)(ia) of the Act during various assessment years and the\ndeduction claimed in respect of the amounts so disallowed in the\nsubsequent assessment years on payment of TDS amount. It was\nalso explained that the deduction of INR.43,68,932/- claimed by the\nAssessee during the Assessment Year 2018-2019 pertained to the\nfollowing expenses incurred during the Assessment Year 2009-2010\nand disallowed under Section 40(a)(ia) of the Act in the return of\nincome:\nParticulars\nAY in which expenses\nincurred\nDeduction claimed\nu/s.40(a)(ia)\nAmount of TDS\nducted and paid\nWages & Allowances\n2009-2010\n40,29,695\n83,012\nWatch & Ward\n2009-2010\n68,000\n1,401\nExpenses\n2009-2010\n2,62,225\n5,402\nFreight & Forwarding\n2009-2010\n9,000\n185\nFreight Inward\n2009-2010\n43,68,920\n90,000\nTotal\nFurther, the Assessee had also placed before the CIT(A) supporting\ndocuments to establish the claim for deduction for the above\nexpenses. A copy of the submission along with supporting\ndocuments (running into around 371 pages) has been placed before\nus as part of the paper-book filed by the Assessee. Bare perusal of\nthe aforesaid written submission, dated 02/08/2024, shows that the\nAssessee had supported claim for deduction of expenses by\nfurnishing TDS challans, audited financials, ledger accounts, petty\ncash book, supporting payment vouchers etc. However, without\ntaking the same into consideration, the CIT(A) rejected the ground\nraised by the Assessee challenging the disallowance of\nINR.43,68,932/-. Even the ground raised by the Assessee seeking\nset off of the brought forward losses and unabsorbed depreciation\nwas not adjudicated by the CIT(A). Therefore, order, dated\n08/08/2024, passed by the CIT(A) is set aside. During the course of\nhearing it was contended on behalf of the Revenue that the\ndocuments furnished by the Assessee before the CIT(A) require\nverification as the same were not before the Assessing Officer.\nAccordingly, we deem it appropriate to remand the issues raised in\nappeal before the CIT(A) back to the file of the Assessing Officer\nwith the directions to adjudicate the same after taking into\nconsideration the submissions, dated 02/08/2024, and supporting\ndocuments/details filed by the Assessee before the CIT(A) along with\nother material forming part of the assessment record as per law\nafter granting the Assessee a reasonable opportunity of being heard.\nThus, in terms of the aforesaid the disallowance of INR.43,68,932/-\nmade by the Assessing Officer is set aside and Ground No. 1 to 1.3\nraised by the Assessee are allowed for statistical purposes. Since the\nGround raised by the Assessee pertaining to set off of unabsorbed\ndepreciation and brought forward losses was not adjudicated by the\nCIT(A) and the Assessing Officer denied Assessee's claim while\ncomputing tax liability, we deemed it appropriate to remand the\npertaining to set off of unabsorbed depreciation and brought forward\nlosses back to the file of the Assessing Officer for denovo\nadjudication. Accordingly, Ground Nos.2 to 2.1 raised by the\nAssessee are also allowed for statistical purposes. Since we have\nremanded the issues back to the file of the Assessing Officer, all the\nrights and contentions of the Assessee are left open.\n9.\nBefore parting we would like to observe that we are not in\nagreement with the approach adopted by the Assessing Officer while\npassing the Assessment Order, dated 12/02/2021, and therefore the\nAssessing Officer is directed not to reject the deduction of\nINR.43,68,932/- claimed by the Assessee merely on the ground that\nthe Assessee is claiming deduction of INR.43,68,932/- on making\npayment of TDS amount of INR.90,000/-. We note that in the\npresent case, the Assessee had paid the penal interest for delay in\ndeposit of the aforesaid TDS amount and has furnished copy of the\nrelevant challans. The aforesaid fact has not been disputed by the\nRevenue. The provisions contained in Section 40(a)(ia) of the Act\nread with proviso thereto permit an Assessee to claim deduction for\nexpenses disallowed under Section 40(a)(ia) of the Act as deduction\nwhile computing income of the previous year in which tax has been\npaid. Since the Assessee has paid taxes during the relevant\nprevious year the claim for deduction of INR.43,68,932/- made by\nthe Assessee requires consideration. The Assessing Officer is\ndirected to verify the claim in term of our directions in paragraph 8\nabove.\n10.\nIn result, in terms of paragraph 8 and 9 above, the present appeal\npreferred by the Assessee is allowed for statistical purposes.\nOrder pronounced on 07.04.2025.\nSd/-\n(Om Prakash Kant)\nAccountant Member\nमुंबई Mumbai; दिनांक Dated :07.04.2025\nMilan, LDC\nSd/-\n(Rahul Chaudhary)\nJudicial Member\nआदेश की प्रतिलिपि अग्रेषित/