DCIT 12(3)(1), MUMBAI vs. M/S KISMET EXPORTS AND INVESTMENTS PVT LTD, MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

1. “On the facts and in the circumstances of the case, the Ld. CIT (A) erred in deleting the disallowance made by the AO of claim of set off of brought forward losses of Rs.2,35,20,032/- which ought to have been set off in the previous year i.e. A.Y.2011-12.” A.Y.2012-13 2, “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the AO amounting to Rs. 2,35,20,032/- without appreciating the facts that the ITAT Order for A.Y.2011-12 which was relied by the Ld. CIT (A) in deleting addition is not accepted by the department and an appeal before Hon'ble Bombay High Court against the order of Hon'ble ITAT is pending for disposal. 3. “The appellant prays that the order of the Ld. CIT(A) on the grounds be set aside and that of the Assessing Officer be restored”. 4, “The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”

3. The brief facts of the case are that the assessee filed its return of income on 26.09.2012 declaring total income to the tune of Rs.2,74,63,110/- under normal provision and book profit of Rs.7,87,27,987/-. The case was selected for scrutiny. Thereafter, the assessment was completed u/s 143(3) r.w.s 147 of the I. T. Act, 1961 on 19.03.2015 determining assessed income to the tune of Rs.6,81,77,530/- after allowing set off of brought forward business loss of Rs.2,35,20,032/- and determining book profit of Rs.8,24,66,366/-. On verification of the case record, it was seen that there was no business loss for A.Y.2011-12 to be carried forward to subsequent year as the total income for that year was Rs.11,49,38,630/- pursuant to order passed u/s 143(3) dated 10.03.2014. Accordingly, the set off of the losses of Rs.2,35,20,032/- was a mistake evident from record, notice u/s 154 was issued which was served upon the assessee. After the reply of the assessee, the prejudicial loss to the tune of Rs.2,35,20,032/- was disallowed and added to the income of the assessee. A.Y.2012-13 The total income of the assessee was assessed to the tune of Rs.9,16,97,560/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee but the revenue was not satisfied, therefore, the revenue has filed the present appeal before us.

“5.1 I have considered the rival contentions. in the return of income for the AY 2011-12 (the immediately preceding assessment year), the appellant declared short term capital loss of Rs. 1,15,72,618/- and long term capital gain of Rs. 9,27,67,400/- in its return of income. In assessment order passed for AY 2011-12, the AO treated the short term capital loss and long term capital gain as loss/income under the head “Profits and gains of business or profession”. In the return of income (AY 2011-12) the appellant had shown income of Rs. 2,38,59,771/- under the head “Profits and gains of business or profession”. The AO made certain disallowances amounting to Rs. 62,06,752/- and also treated net gain of Rs. 8,41,94,782/- shown under the head “Capital gains” as income assessable under the head “Profits and gains of business or profession”.

5.2 As per the assessment order for AY 2011-12 passed u/s. 143(3) dated 10.03.2014, the appellant's total income was Rs. 11,49,38,630/-. The book profit u/s. 115JB was Rs. 2,01,16,731/-. In para 12 of that assessment order, the AO mentioned that tax payable u/s. 115JB was Rs. 2,01,16,731/- whereas tax liability under normal provision was Rs. 43,05,324/-. In the assessment order the AO did not set off the brought forward losses against the total income of the current year.

ITA No. 474/Mum/2021 A.Y.2012-13 5.3. Subsequently, the ITAT order dated 08.02.2019 in appeal No. for AY 2011-12 confirmed the disallowance made u/s. 14A. However, the Hon’ble ITAT allowed the ground No. 1 of the appellant in which the appellant contended that the income shown as capital gain was wrongly assessed under the head “Profits and gains of business or Profession”.

5.4 I find that in the assessment order dtd. 10.03.2014 for FY 2011- 12, the AO did not mention how much of the brought forward losses were set off against the income for the current year. Therefore, strictly speaking, the AO was not justified in holding that the losses brought forward as at 01.04.2010 had been set off against the current income under "profits and gains of business or profession" for the AY 2011- 12 also find that the order passed by the Hon’ble ITAT for AY 2011- 12 has bearing on the issue before me. Under the facts and circumstances of the case, I direct AO to ascertain the losses brought forward as at 01.04.2011 after as on giving effect to the order of the ITAT for the AY 2011-12 and thereafter give the benefit of brought forward losses, if any, to the appellant as per law.”

ISSUE NO.2

Order pronounced in the open court on 31/01/2022