DCIT CENT CIR 7(1) , MUMBAI vs. SHRI MANOJ KUMAR BABULAL PUNAMIYA, MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

Shri Manoj Kumar Babulal Punamiya

3.1. We have heard the rival submissions and perused the materials available on record. In the instant case, the original assessment was completed u/s 143(3) of the Act on 31.3.14 wherein the brought forward loss of Rs 66,44,338/- was allowed by the ld. AO to be set off against current year’s income. This was admittedly granted by the ld. AO based on the Schedule ‘CFL’ of the return of income containing the details of carry forward of losses. Later the ld. AO observed that on verification of records for Asst Years 2009-10 and 2010-11, the business income of the assessee was assessed at Rs 942,05,34,829/- and Rs 198,83,73,570/- respectively under scrutiny assessment. Thus, there was no loss

Shri Manoj Kumar Babulal Punamiya available to the assessee for set off and carry forward. In view of this, the set off of brought forward of loss of Rs 66,44,338/- was sought to be withdrawn in the reopened proceedings by the ld. AO after due recording of reasons to this effect.

3.2. The assessee pleaded that the additions made in the hands of the assessee for Asst Years 2009-10 and 2010-11 were only on protective basis and hence the brought forward losses could not be set off against the business income assessed on protective basis.

3.3. The ld. CIT(A) observed that there was no new information or material that had cropped up in the file of the ld. AO having a live link which would enable the ld. AO to form a reasonable belief that income of the assessee had escaped assessment. Moreover, since the reopening was made beyond 4 years from the end of the relevant assessment year, the proviso to section 147 of the Act would come into operation, wherein the ld. AO had to establish the failure on the part of the assessee to make full and true disclosure of income in the original assessment proceedings. The ld. CIT(A) observed that all the details were duly disclosed by the assessee in the return under the column Schedule ‘CFL’ and hence there was no failure on the part of the assessee to make full and true disclosure of particulars of income. Based on these observations, the ld. CIT(A) quashed the reassessment as void abinitio. This is challenged by the revenue before us.

3.4. We find that the scrutiny assessments for Asst Years 2009-10 and 2010-11 were framed after the filing of income tax returns by the assessee for the Asst Year 2011-12 i.e the year under consideration. Hence assessee may be right in claiming the set off of brought forward

Shri Manoj Kumar Babulal Punamiya losses against current year’s income and carrying forward the remaining loss to subsequent years. But once the income has been determined at a higher figure in a scrutiny assessment, be it on either substantive or protective basis, the ld. AO is duty bound to set off the loss with the assessed income first and after such set off, if there is no loss left out, then he has to pass an order withdrawing the benefit of carry forward of loss. Obviously, the scrutiny assessment orders of Asst Years 2009-10 and 2010-11 becomes a tangible material available with the ld. AO to come to the conclusion that income of the assessee for the Asst Year 2011-12 had escaped assessment. Moreover, when a protective addition has been made, only the recovery proceedings are to be kept in abeyance. It does not stop the ld. AO from proceeding with the application of other legal provisions of the Act such as – adjusting the brought forward losses with the assessed income and allowing the loss remaining , if any, to be carried forward to subsequent years. Hence we are not in agreement with the arguments advanced by the ld. AR in this regard.

3.5. Moreover, the additions were made on substantive basis for the Asst Years 2009-10 and 2010-11 in the hands of some other assessee. The ld.AR stated that against those substantive additions, that assessee had preferred appeals before the ld. CIT(A) and the same are pending disposal by the ld. CIT(A) as on date. This is a statement made by the ld. CIT(A) from the Bar. We hold that though there may not be apparent failure on the part of the assessee in making full and true disclosure of facts at the time of filing of return, there was certainly failure on the part of the assessee in not bringing to the knowledge of the ld. AO during the course of scrutiny assessment proceedings of Asst Year 2011-12, about the assessments of Asst Years 2009-10 and 2010-11 getting completed

Shri Manoj Kumar Babulal Punamiya with huge positive income in the hands of the assessee, though on protective basis. Atleast, the ld. AO suo moto should have brought to the attention of the ld. AO in the course of original scrutiny assessment proceedings for the Asst Year 2011-12 that though he has claimed set off of brought forward loss, but the same would not be eligible in the absence of the said loss. Hence we hold that there was failure on the part of the assessee to make full and true disclosure of facts that are material for the completion of original assessment. Moreover, the reopening has been done in the instant case to address the mistake of fact – rectifying the mistake of allowing wrong set off of brought forward losses which was not available with the assessee company in Asst Year 2011-12. Hence the ratio laid down by the Hon’ble Supreme Court in the case of PVS Beedies reported in 237 ITR 13 (SC) would squarely come to the rescue of the revenue in the instant case.

3.6. In view of the above, we hold that the reopening has been done properly in the instant case and the ld. CIT(A) ought not to have quashed the reassessment as void abinitio. Accordingly, the Grounds raised by the revenue challenging the quashing of reassessment by the ld. CIT(A) are allowed.

Shri Manoj Kumar Babulal Punamiya adjudication of the issue on merits and also tag this appeal with the appeals of the assessee where substantive additions were made , so that a cogent and cohesive decision could be taken in this regard. This, in our considered opinion, would meet the ends of justice for both the parties. Accordingly, the ground raised by the revenue on merits is allowed for statistical purposes.

Order pronounced on 15/07/2022 by way of proper mentioning in the notice board.