Loading judgment…
Facts
The Revenue appealed the deletion of disallowance of current year losses amounting to Rs. 2,30,50,824/- made by the Assessing Officer (AO). The assessee had opted for taxation under Section 115BAA of the Income Tax Act. The AO disallowed the set-off of these losses, arguing that they were not eligible for set-off under Section 115BAA due to certain deductions. The Commissioner of Income Tax (Appeals) deleted this disallowance.
Held
The Tribunal noted that the assessee failed to provide a detailed calculation to substantiate that the business losses were derived without claiming any ineligible deductions under Section 115BAA(2)(i). The Tribunal also noted the CIT(A) had concurred with the assessee without sufficient evidence of production before the AO. In the interest of justice, the issue was remitted back to the AO for limited verification.
Key Issues
Whether the current year losses set off by the assessee are allowable under Section 115BAA when the assessee failed to substantiate the derivation of such losses without claiming ineligible deductions.
Sections Cited
115BAA, 143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘E’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA
ORDER PER AMITABH SHUKLA, AM,
This appeal filed by the Revenue and the Cross Objection filed by the assessee are against order dated 06.01.2025 of the National Faceless Appeal Co No.119/Del/2025 Centre/Learned Commissioner of Income Tax (Appeals), New Delhi, [hereinafter referred to as ‘ld. CIT(A)] arising out of assessment order dated 25.12.2023 passed u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 pertaining to Assessment Year 2021-22. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
At the outset, the ld. Counsel for the assessee submitted that it wishes to withdraw its cross objections filed by CO No.119/Del/2025. Accordingly, the impugned Cross Objection filed by the assessee is dismissed as withdrawn.
“1. Whether on the facts of the case and in law, the Ld. CIT(A), has erred in deleting the disallowance on account of setoff of current year losses amounting to Rs.2,30,50,824/- without appreciating the fact that the assessee failed to substantiate its claim as per requirement of section 115BAA of the Act.”
The ld. DR submitted that it is contesting the decision of ld. CIT(A) in deleting the disallowance made by the ld. AO on account of set off of current year losses. The ld. Sr. DR invited our attention to following factual matrix of the case as available in the impugned assessment order on pages 3 and 4, extracted herein below:-
Page 2 of 7
“…..During the course of the ongoing assessment proceedings, the assessee was requested to furnish details of losses of current year to be setoff of Rs. 2,30,50,824/- in the year under consideration. In this regard the assessee was requested to justify its claim in the light of the fact that the assessee was not eligible for the same after opting for taxation u/s 115BAA of the Act. However, the assessee failed to make any submission in response, therefore, vide notice dated 15.12.2023 the assessee was requested to show cause as to why the current year losses of Rs. 2,30,50,824/- be disallowed and added back to its total income for the year under consideration. In this regard the assesse has submitted that the losses of Rs.2,30,50,824/- determined from business are without taking benefit/effect of the deductions as specified in clause (i) of sub- section (2) of Section 115BAA of the act and the same should be allowed to be set-off even the company opted for taxation u/s 115BAA of the act. “In this regard the relevant provisions of the Income Tax Act, 1961(“Act”) is reproduced below: Section 115BAA : Tax on income of certain domestic companies. Quote (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAB, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall, at the option of such person, be computed at the rate of twenty-two per cent, if the conditions contained in sub-section (2) are satisfied: Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years. (2) For the purposes of sub-section (1), the total income of the company shall be computed, Page 3 of 7
(i) without any deduction under the provisions of section 10AA or clause (iia) of subsection (1) of section 32 or section 32AD or section 33AB or section 33ABA or subclause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A other than the provisions of section 80JJAA or section 80M; (ii) without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); (iii) without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and (iv) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.” Here it is important to state that clause (ii) of section 115BAA(2) clearly states that the loss of any previous year shall not be allowed if such loss is attributable to any of the deductions referred to in clause (i) of 115BAA(2). In the present case the assessee company has not submitted detailed calculation as to how the loss of Rs.2,30,50,824/- determined from business has been derived. The assessee company has failed to substantiate that the loss of previous years amounting to Rs.2,30,50,824/- has been calculated without claiming any deduction under the provisions of section 10AA or clause (iia) of sub section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub clause (ii) or sub-clause (iia) or subclause (iii) of sub-section (1) or sub- section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A other than the provisions of section 80JJAA or section 80M in previous year(s). Thus the assesse company has failed to prove that the loss of Rs.2,30,50,824/- is allowable as per provisions 115BAA(2)(ii). In light of the above discussion, the carried forward loss amounting to Rs.2,30,50,824/- is hereby disallowed….”
Page 4 of 7
The ld. DR further invited our attention to the pages 15 and 16 of the impugned appellate order. The ld. Sr. DR Ms. Ankush Kalra, fiercely contested that the details produced by the assessee before the ld. CIT(A) and during the present proceedings were not available before the AO for consideration. It was accordingly requested that the matter be remitted back to the ld. AO for re- adjudication.
We have heard rival submission in the light of material placed on record. We have noted that the ld. AO has recorded a finding about non-compliance by the assessee in providing him requested details. We have also noted that the ld. CIT(A) has merely concurred with the views of the assessee regarding having provided the material details to the ld. AO during assessment proceedings without placing on records any evidence of their production before the ld. AO. Be that as it may be in the interest of justice, we deem it appropriate to remit the issue to the file of the ld. AO for limited verification of the assessee’s claim of loss in the light of details referred by ld. CIT(A) on pages 15 and 16 of the order. Accordingly, we set-aside the order of the ld. CIT(A) on this issue of the allowance of loss. The ld. AO is directed to conduct a limited verification of the impugned details qua allowance of loss in favour of the assessee, while giving a reasonable opportunity of being heard to the assessee and by passing a speaking order in accordance with law. The assessee shall be required to cooperate and comply with the statutory notices issued by the ld. AO.
Page 5 of 7
In the result, the appeal of the Revenue is allowed for statistical purposes and Cross Objection of the assessee is dismissed as withdrawn.
Order pronounced in the open court on 07th January, 2026.
Sd/- Sd/- [SATBEER SINGH GODARA] [AMITABH SHUKLA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07.01.2026 Shekhar Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi,
Page 6 of 7