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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
These four appeals by the assessee for the assessment years 2003-04, 2004-05, 2005-06 and 2006-07 are directed against the order of Commissioner of Income Tax (Appeals)-7, Pune dated 10-08-2017, common for the impugned assessment years.
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Since, the issue raised in all these appeals are arising from same set of facts and similar grounds have been raised by the assessee in these assessment years, these appeals are taken up together for adjudication and are being disposed of vide this common order.
Since, in all these appeals the facts are identical, for the sake of convenience the facts are extracted from the appeal in ITA No. 2396/PUN/2017 for the assessment year 2003-04.
ITA No. 2396/PUN/2017 (A.Y. 2003-04) Facts of the case
The issue raised in the appeal has its genesis in assessment year 2002-03. The assessee is a State Government Undertaking engaged in providing warehouse facilities in the State of Maharashtra. The assessee filed its return of income for the assessment year 2002-03 declaring Nil income. The assessment was completed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) vide order dated 31-05-2005 and the total income was assessed at Rs.5,90,35,236/-. In the assessment order income from warehousing and fumigation Rs.5,41,41,410/- was allowed as exempt u/s. 10(29) of the Act. The remaining business income of Rs.2,93,93,316/- along with the income from other sources Rs.2,96,41,920/- aggregating to Rs.5,90,35,236/- was assessed to tax. The assessee claimed the entire business income as exempt u/s. 10(29) of the Act.
2.1 Aggrieved against the assessment order dated 31-01-2005, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) allowed partial relief to the
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assessee by allowing benefit of unabsorbed depreciation of earlier years. Still aggrieved, the assessee carried the matter in second appeal before the Tribunal. The Tribunal set aside the assessment and restored the issue raised in grounds of appeal back to the file of Assessing Officer with a directions to recompute disallowance u/s. 14A r.w. Rule 8D. The Assessing Officer while giving effect to the order of Tribunal recomputed the total income, as a result there was net business loss of Rs.13,00,25,239/-. The Assessing Officer vide order dated 14-12-2009 passed u/s. 143(3) r.w.s. 254 held that the business loss is allowed to be carried forward.
2.2 Thereafter, the Commissioner of Income Tax invoked the provisions of section 263 of the Act and vide order dated 26-03-2012 cancelled the assessment order holding it to be erroneous and prejudicial to the interest of revenue. Aggrieved against the revision order, the assessee filed appeal before the Tribunal in ITA No. 1140/PUN/2012. The Tribunal vide order dated 25-08-2014 set aside the order of Commissioner of Income Tax passed u/s. 263 of the Act. The Assessing Officer in proceedings to give effect to the order of Tribunal, vide order dated 11-11-2014 for assessment year 2002-03 restored the business losses of the assessee at Rs.13,00,25,239/-. Thus, in effect the assessment order dated 14-12-2009 passed u/s. 143(3) r.w.s. 254 was restored.
2.3 Thereafter, the assessee filed application u/s. 154 of the Act for the assessment years 2003-04 to 2006-07 to allow the benefit of carry forward of business loss determined by Assessing Officer in consequent to the directions of Tribunal in assessment year 2002-03. The said application of assessee was rejected by the Assessing Officer. Aggrieved against the order
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dated 20-08-2015 passed u/s. 154 of the act, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authority vide order dated 10-08-2017, common for the assessment years 2003-04 to 2006-07 dismissed all the appeals of assessee on the ground that the assessee has not claimed set off of brought forward business loss in the return of income and hence, at the belated stage the same cannot be allowed to the assessee. Against these findings of Commissioner of Income Tax (Appeals) the assessee is in appeal before the Tribunal for the impugned assessment years.
Submissions of Assessee
Shri R.G. Nahar appearing on behalf of the assessee reiterating his contentions made before the Commissioner of Income Tax (Appeals) submitted that the Assessing Officer passed the order dated 11-11-2014 giving effect to the order of Tribunal in ITA No. 1140/PUN/2012 dated 25-08-2014 setting aside the revision order passed u/s. 263 of the Act. Thus, the assessment for assessment year 2002-03 attained finality after the aforesaid order of Tribunal. Till that time the assessee was not clear about the status of business loss determined by the Assessing Officer for the assessment year 2002-03 vide order dated 14-12-2009 passed u/s. 143(3) r.w.s. 254 of the Act. Moreover, by the time the Assessing Officer passed the aforesaid order for assessment year 2002-03, the assessee had already filed its return of income for the assessment years under appeal (i.e. assessment years 2003-04 to 2006-07). Hence, there was no occasion for the assessee to claim set off of brought forward losses in the return of income. The ld. AR further submitted that the provisions of section 153(3) clearly states that the time limit as set out in sub-section (1) and sub- section (2) for the completion of assessment, reassessment and
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recomputation would not apply where the fresh assessment is made in pursuance to the order u/s. 254 or section 263 or section 264 of the Act.
3.1 The ld. AR further contended that the provisions of section 71 merely states that where the assessee in the computation of income under any head of income other than capital gain has loss and the assessee has no income under the head capital gains he shall subject to the provisions of Chapter VI be entitled to set off of loss against his income, if any assessable for that assessment year under any other head. In section 72 it is provided that the assessee shall be eligible for claiming set off of carried forward losses other than speculation losses from the income. It is not the requirement of section 71 or 72 that the losses must be claimed in the return of income. The ld. AR further argued that in the original return of income for the assessment year 2002-03 the assessee had declared total income as „Nil‟. Thus, there was no question of claiming set off of loss in subsequent assessment years. The issue of carried forward of business loss emanated from computation of loss by the Assessing Officer in consequence to the order of Tribunal. At the time of filing return of income for the subsequent assessment years i.e. assessment years 2003-04 to 2006-07 it was not within the knowledge of assessee about business loss determined by the Assessing Officer in assessment year 2002-03. Hence, the same was not claimed in the return of income.
Submissions of Department
On the other hand Shri Ashok Babu representing the Department vehemently defended the impugned order. The ld. DR submitted that the assessee has admitted the fact that in the return of income for assessment years 2003-04 to 2006-07 the assessee had not claimed set off of brought
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forward business loss. Without claiming the same in the return of income the Assessing Officer cannot accept the claim of assessee. The assessee cannot by merely filing rectification petition u/s. 154 claim set off of brought forward losses without claiming the same in return of income.
Findings of the Tribunal
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The factual matrix of case has already been explained in para 2 above. The same are not in dispute. The solitary issue that emerges for adjudication in this appeal is; Whether the business loss arrived at by the Assessing Officer while giving effect to the order of Tribunal can be carried forward and benefit of set off against the business income in the subsequent assessment years can be allowed to assessee in the absence of such claim in the return of income? It is an undisputed position that the assessee in the return of income for the assessment years 2003-04 to 2006-07 has not claimed set off of brought forward business loss. The loss determined by the Assessing Officer in the assessment year 2002-03 is consequent to the directions of Tribunal in an appeal by the assessee for assessment year 2002-03. The Assessing Officer passed the order u/s. 143(3) r.w.s. 254 on 14-12-2009 computing business loss of Rs.13,00,25,239/- eligible to be carried forward. By the time the assessee had already filed return of income for the impugned assessment years and hence the assessee had no occasion to claim set off of brought forward business loss from assessment year 2002-03 in the return of income. It is a clear case of supervening impossibility.
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Here it would be relevant to refer to the provisions of section 153 of the Act. The provisions of section 153 lays down time limit for completion of assessment, reassessment and recomputation. The sub-section (1) sets the time limit for completing the assessment u/s. 143/144. The sub- section (2) specifies the time limit for completion of assessment u/s. 147. The provisions of sub-section (3) of section 153 deals with the situation where fresh assessments are made in pursuance to the orders by revisional/appellate authorities. The provisions of sub-section (3) as they were applicable to the assessment year under appeal are reproduced here- in-below : “(3) The provisions of sub-sections (1), (1A), (1B) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-section (2A), be completed at any time— (i) [***] (ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263, or 264 [or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act ; (iii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147.”
Thus, the time limit specified in sub-section (1) and sub-section (2) to section 153 does not apply to the orders passed for giving effect to the order of revisional/appellate authorities.
Where as a consequence to the order of Appellate Authority, the assessee has received relief which has the cascading effect on subsequent assessment years, the Assessing Officer is duty bound to give effect to the said order in later affected assessment. We do not find merit in the observations of Commissioner of Income Tax (Appeals) that in the absence
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of claim of set off of brought forward business loss in the return of income the same cannot be allowed to the assessee. The Commissioner of Income Tax (Appeals) while making such observations has failed to consider the fact that the assessee in its return of income had declared Nil income, the business loss determined by the Assessing Officer was consequent to the order passed while giving effect to the order of Tribunal.
Be that as it may, since the assessee has raised the claim before appellate authority, the same should have been considered by Commissioner of Income Tax (Appeals) instead of rejecting the same at threshold. The Hon‟ble Bombay High Court in the case of Commissioner of Income Tax Vs. Pruthvi Brokers & Shareholders P. Ltd. reported as 349 ITR 336 has held the assessee is entitled to raise additional grounds not merely in terms of legal submissions but also additional claims to wit claims not made in the return filed by it.
Thus, in view of the facts of the case and the provisions of the Act, we hold that the assessee is eligible for claiming the benefit of set off of brought forward business loss in the impugned assessment years. Accordingly, the impugned order is set aside and the appeal of assessee is allowed.
ITA Nos. 2397 to 2399/PUN/2017 (A.Ys. 2004-05 to 2006-07)
Both the sides are unanimous in stating that the facts and the grounds of appeal raised in ITA Nos. 2397 to 2399/PUN/2017 are identical to the grounds raised in ITA No. 2396/PUN/2017. Thus, in view of the fact that the issue in all the appeals is identical and is arising from same set of facts the findings given by us while adjudicating the appeal in ITA No.
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2396/PUN/2017 would mutatis mutandis apply to the appeals in ITA Nos. 2397 to 2399/PUN/2017, as well. Accordingly, the appeals of assessee are allowed in the same terms.
In the result, all the appeals of assessee are allowed.
Order pronounced on Monday, the 03rd day of June, 2019.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 03rd June, 2019 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-7, Pune 3. 4. The Pr. Commissioner of Income Tax-6, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ऩुणे / DR, ITAT, “A” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune