SALIENT TRADERS P.LTD,MUMBAI vs. ITO WD 11(1)(3), MUMBAI

These appeals in 331/Mum/2018 for A.Y.2013-14 & 2014-15 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-18 in appeal No.CIT(A)-18/IT- 261/ITO-11(1)(3)/2016-17 dated 28/09/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 25/11/2016 by the ld. Income Tax Officer – 11(1)(3), Mumbai (hereinafter referred to as ld. AO). Since

The assessee had raised several grounds. The short issue that arises for our consideration is as to whether the ld. CIT(A) was justified in not allowing the carry forward of losses of earlier years in the facts and circumstances of the case.

The brief facts of this issue are that the assessee company is engaged in the business of real estate development i.e. land development, building and construction and re-development of properties. The assessee company filed its return for the A.Y.2013-14 on 05/10/2013 declaring total income at Rs. Nil after set off of brought forward losses as under:- Sr. Assessment Set Off & Carry Forward Loss Amount in No. Years (Rs.) B/F Loss Set-Off in C/F Loss Cy 1 2011-12 2,38,599 2,38,599 0 2 2012-13 7,59,52,387 11,45,236 7,48,07,151 Total 7,61,90,986 13,83,835 7,48,07,151 3.1. The assessee company paid income tax u/s.115JB of the Act of book profits in the sum of Rs.10,66,371/-. The ld. AO did not allow the set off of brought forward losses of A.Y.2012-13 with the income of A.Y.2013-14 on the ground that in assessment framed for A.Y.2012-13, the books of accounts were rejected by the ld. AO u/s.145(3) and the income of the assessee was estimated at 8% of turnover. Accordingly, the 331/Mum/2018 M/s. Salient Traders Pvt. Ltd. total income of the assessee for A.Y.2012-13 was determined at Rs.3,60,34,820/-. Based on this, the ld. AO concluded that there was no loss available with the assessee for A.Y.2012-13 either to be set off with the income of A.Y.2013-14 or to be carried forward to subsequent years. The Ld. AO also denied carry forward of losses on the ground that assessee has violated provisions of Section 79 of the Income Tax Act, in view of the change in shareholding. This action of ld. AO was upheld by the ld. CIT(A).

Aggrieved, the assessee is in appeal before us.

We have heard rival submissions. The ld. AR placed on record the copy of the order of the ld. CIT(A) for A.Y.2012-13 in appeal No. CIT(A)- 18/IT-183/ACIT-1(1)(2)/15-16 dated 30/01/2017 wherein the action of the ld. AO in rejecting the books of accounts u/s.145(3) was dismissed and the addition made at 8% of turnover in the sum of Rs.3,60,34,816/- was directed to be deleted. In other words, the ld. CIT(A) directed the ld. AO to accept the loss claimed by the assessee in the return for A.Y.2012- 13. Against this appellate order, there was no appeal preferred by the revenue to the Tribunal for A.Y.2012-13. The ld. AR also placed on record, the copy of the order dated 28/09/2017 passed by the ld. AO giving effect to the CIT(A)’s order wherein he had categorically stated that a sum of Rs.7,59,52,387/-, being the loss of A.Y.2012-13 is allowed to be carried forward to subsequent years. In view of the aforesaid orders of the ld. AO and ld. CIT(A) supra, we hold that the basic ground on which the revenue had denied the benefit of carry forward losses to the assessee stands dismissed and accordingly, we direct the ld. AO to allow the benefit of carry forward losses in the sum of Rs. 7,59,52,387/- for A.Y.2012-13 to subsequent years. There is no question of estimating any addition to net profit in view of the above for A.Yrs.2013-14 and 2014-15.

In the result, both the appeals of the assessee are allowed.