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Facts
The assessee, Ishar Infrastructure Developers Pvt Ltd, engaged in civil construction, filed a NIL income return, claiming set-off of brought forward business losses and unabsorbed depreciation. The AO, CPC, Bengaluru, disallowed these claims and made an addition for belated GST deposit. The JCIT(A) dismissed the assessee's appeal, citing inconsistent reporting of losses and lack of year-wise breakup. The Tribunal condoned a 93-day delay in filing the appeal due to the previous counsel's medical emergency.
Held
The Tribunal condoned the delay in filing the appeal and remanded the issues of unabsorbed business losses (AY 2017-18 and 2020-21), unabsorbed depreciation, and the GST disallowance back to the Assessing Officer (AO). The AO is directed to verify the assessee's claims from existing records, allow genuine and legally permissible claims, and provide the assessee a proper opportunity of being heard, ensuring no claim is denied due to mere technical or procedural lapses. The appeal was allowed for statistical purposes.
Key Issues
Condonation of 93-day delay in filing the appeal. Disallowance of set-off of brought forward unabsorbed business losses due to incorrect reporting. Non-granting of benefit for brought forward unabsorbed depreciation. Addition for GST not deposited within the due date leading to double taxation.
Sections Cited
Section 250, Section 143(1), Section 139(1), Section 72, Section 32(2), Section 43B, Rule 34(4) of the Income Tax Appellate Tribunal Rules 1963
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: SH. MANOJ KUMAR AGGARWAL & SH. UDAYAN DASGUPTA
ORDER Per: Udayan Dasgupta, J.M.: This appeal is filed by assessee against order of Ld. JCIT (A)-1, Gurugram, passed u/s 250 of the Act 1961, dated 16.07.2024 which has emanated from the order of the AO, CPC, Bengaluru, dated 07/08/2023, passed u/s 143(1) of the Act 61.
Condonation of Delay: It is pointed out by the Registry that the appeal is filed belatedly by 93 ( ninety three ) days. The assessee has filed an application for condonation of delay along with an affidavit explaining the fact that previously the legal advisor of the assessee Mr. Ashwani Juneja had all the requisite documents in his possession for filing the appeal but on account of sudden medical emergency, was advised complete bed rest, resulting in failure to handover documents to the new counsel of the assessee Mr. V.S. Aggarwal. An affidavit in support has also been filed by the earlier counsel Mr Juneja accepting his inability to handover the papers on medical grounds. The ld. DR has no objection.
Considering the affidavit of the earlier counsel Mr. Juneja, we find that there was no wilful neglect on the part of the assessee and as such the delay of 93 ( ninety three ) days in filing the appeal is condoned and the appeal is admitted to be heard on merits.
The grounds of appeal
raised by the assessee in Form No. 36 are as under: “1. The Addl./JCIT(A) has erred on facts and law in confirming the action of DDIT CPC, Bangalore u/s 143(1) dated 07.08.2023in determining the Income at Rs. 34,63,720/- against nil income in the ITR filed u/s 139(1) on 16.09.2022 while passing the order u/s 250 of the Act dt. 16.07.2024.
2. That the Addl./JCIT(A)has erred in not allowing the set- off of unabsorbed depreciation of Rs. 1,50,49,432 as reflected in Schedule-UD of the (ITR) and unabsorbed brought forward losses amounting to Rs. 49,46,336, comprising Rs. 23,62,230 relating to AY 2017-18 and Rs. 25,84,106 relating to AY 2020- 21, as reflected in Schedule-CFL of the ITR, which were eligible for set-off as per the provisions of the Income Tax Act, 1961.
3. That Addl. JCIT(A) has erred in disallowing the carry forward of Rs. 49,46,336 by erroneously concluding that the loss of Rs. 1,34,53,214 pertains to AY 2012-13 for which the limitation period has expired. The CIT(A) failed to appreciate that the losses of Rs. 23,62,230 relating to AY 2017-18 and Rs. 25,84,106 relating to AY 2020-21 were duly filed within the prescribed time limits and are eligible for carry forward and set- off as per the provisions of Section 72 of the Income Tax Act, 1961.
4. That Addl./JCIT(A) has erred in not granting the benefit of brought forward unabsorbed depreciation amounting to Rs. 1,50,49,432, which was clearly evident from the ITR filed for the previous years. The Addl./JCIT(A)failed to appreciate that as per Section 32(2) of the Income Tax Act, 1961, there is no restriction on the indefinite carry forward and set-off of unabsorbed depreciation, and the denial of such benefit is contrary to the statutory provisions.
5. The Addl./JCIT(A) has erred on facts and law in confirming the addition of Rs. 15,549/- being the GST not deposited within the due date ignoring the fact that the same has already been added back while computing the income. Thus, there is double taxation to the extent of GST addition confirmed by CIT(A).
That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”
Brief facts emerging from record are that the assessee is a Private Limited Company, engaged in the business of civil constructions. Return of income has been filed for the year under appeal, disclosing NIL income, claiming set-off of brought forward business losses ( other than speculative losses ) amounting to Rs.1.25 crore u/s 72, and unabsorbed depreciation, brought forward claimed u/s 32(2) of the Act 61.
4.1 The AO, CPC, Bengaluru disallowed the claim of brought forward loss to be set-off against the current business income of Rs.34,48,171/-, and determined the assessed income at Rs.34.63 lakhs u/s 143(1) ignoring the provisions of section 72(3) of the Act, where by unabsorbed business losses (other than the speculative losses) are to be carried forward for the maximum period of eight assessment years, succeeding the assessment year for which the loss was first computed for the purpose of set off.
4.2 Moreover, the issues regarding non consideration of the claim of unabsorbed depreciation brought forward amounting to Rs.1,50,49,432/- and the disallowance of Rs.15,549/- on account of late deposit of GST u/s 43B has also been agitated in this appeal.
The matter carried in appeal has been has been dismissed by the Ld JCIT ( A ) in absence of any year wise breakup of losses in the return , even though he has acknowledged the carry forward of business loss of 25.84 lakhs (relating to the assessment year 2020-21only), ( para 4.2.4.1 of appellate order ), and has observed that in the return for the Asst year 2020-21, earlier years losses are not reflected , and as such the losses carried forward for the Asst year 2017-18 amounting to Rs.23.62 lakhs has not been discussed.
5.1 The relevant observation of the first appellate authority are as follows: “4.2.6.1 From the relevant part of the ITR reproduced above, it is seen that the appellant had declared a total loss of Rs. 1,25,40,285/- brought forward from preceding A.Y.s which is not only completely against the provision specified in the Act but also a false statement/claim per se. Further the way date of filing ITR has been filed selectively for A.Y. 2014-15, 2017-18 and A.Y. 2020-21, it is a deliberate attempt to portray that the loss pertains to these years. In fact as seen from the ITR of A.Y. 2020-21 there is no loss in A.Y. 2014-15 and 2017-18. Further, the appellant has again not provided any year wise break up of year wise loss in the ITR of the year under consideration, intentionally to defraud the revenue by claiming incorrect set off.
4.2.7 As is evident form the discussion above the appellant is not consistent with the claim of brought forward losses and apparently had been making false claim/statement while filing the ITR and the same needs to be examined by the jurisdictional Assessing Officer. As far as the set off of business income of Rs. 34,48,171/- for A.Y. 2022-23 is concerned, the appellant had claimed to set off this income with the loss of Rs. 1,25,40,285/- (which is not only incorrect but not explained as to which year it pertains as discussed above). Thus, I am of the view that the addition made by the AO, CPC is correct. Hence, these grounds of appeal taken by the appellant are dismissed/rejected. 4.3 Ground of appeal no.4:- In this ground of appeal, as seen from the attachment with Form 35, the appellant contended that DDIT / CPC , Bangalore has erred on facts in treating the unabsorbed depreciation carried forward as set off against current year income. 4.3.1 From the replies filed by the appellant, it is observed that the appellant is silent on this ground and has not filed any submissions regarding this. It is seen from the ground taken by the appellant that the adjustment made by the CPC is being challenged however as seen from the copy of intimation order u/s 143(1) no adjustment has been made by the CPC regarding this. Probably this explains as to why the appellant has not made any submissions on this subsequently. Since, no adjustment has been made by CPC on this count, the ground of appeal taken by the appellant is dismissed.”
6. Now the matter is in appeal before the tribunal on the ground contained in the memorandum of appeal. The Ld. AR of the assessee in course of hearing has submitted that the ld. CIT(A) was not justified in disallowing the set-off of brought forward loss , pertaining to the A.Y. 2017-18 and 2020-21, against the returned income of Rs.34.48 lakhs, for the year under consideration and for easy reference he furnished a chart to put forth his argument that the assessee is entitled to set off of losses amounting to Rs.49.46 lakhs relating to AY 2017-18 and AY 2020-21 as under:
Asst Year: Amount of Loss: Period of EIGHT Remarks : years will expire on:
AY 2012-13 31.03.2021 AO disallowed and 2013-14: 75,93,949.00 31.03.2022 Correctly
AY: 2017-18 23,62,230.00 31.03.2026 The claim of assessee is only AY 2020-21 25,84,106.00 31.03.2029 this portion 49,46,336.00 within time limit 6.1 Referring to the above table he submitted that the brought forward losses for the A.Y. 2012-13 and 2013-14 amounting to Rs.75.93 lakhs has not been allowed as the period of eight years has expired, but the loss for the A.Y. 2017-18 amounting to Rs.23.62 lakhs and loss for the A.Y. 2020-21 amounting to Rs.25.84 lakhs , whose return of income has already been filed within due time u/s 139(1) should have been allowed as per provisions of section 72 of the Act because the same is within the period of eight years.
6.2 However, he was fair enough to admit that the assessee committed an inadvertent error during the course of filing the return of income ( for the year under appeal ) , where the assessee has incorrectly mentioned the assessment year 2012- 13 as the year of origin, for the entire loss figure, which factually is not correct and this technical lapse has resulted in confusion. He further placed reliance on the Board Circular No. 14(XL-35) dated 11.04.1955, to put forth his argument that the authorities are duty bound to the tax payer and ensure that genuine claims and reliefs which the assessee is entitled to, are not denied merely on account of technical or procedural lapses.
6.3 As evidence of his claim he has furnished before us the copy of ITR-6 for the Asst year 2017-18, and referred to the schedule – CFL ( details of losses to be carried forward to future years ) to point out that the losses from business ( other than speculative loss ) is reported at Rs.23.62 lakhs ( row xi of the schedule), and similarly he referred to the copy of ITR-6 , for the Asst year 2020-21 ( row - xv ) where loss for the year is reported at 25.84 lakhs.
He further relied on the decision of the Hon’ble Delhi High court in CIT vs. 6.4 Heidrick And Struggles Inc. (H.C. Delhi) dated 25/07/2023, to submit that additions made on account of wrong reporting of income by the assessee cannot be sustained .
6.5 The Ld AR submitted that and in the instant case there has been a wrong reporting in the ITR regarding the originating year of claim of unabsorbed business loss, and this wrong reporting should not be made a ground for disallowance, when correct years and corresponding figures, are available in the schedule of the ITR filed.
6.6 He concluded his arguments on this issue by submitting that the assessee should not be denied the benefit , simply for technical lapses, which is otherwise legally allowable, and relied on the following decisions for support: Parekh Brothers vs. CIT 15 Taxman 539 (Kerala)/ 150 ITR 105 (Kerala). S & P Capital IQ (India) (P.) Ltd. vs. ACIT, 158 taxmann.com 12 (Hyd. Trib). Nehru Memorial Education Society vs. ITO (Exemp.) 161 taxmann.com 312 (Cochin Trib.).
Regarding the claim of unabsorbed depreciation brought forward amounting to Rs.1,50,49,432/- the Ld AR submitted that the first appellate authority has denied the set off observing that no adjustment was made by CPC and no submission furnished by assessee, but the very fact that the final tax demand has been raised without off - setting the unabsorbed depreciation against current years income, is very much evident from the intimation u/s 143(1) . He further submitted that the same is apparent from the contents of the ITR of previous years and as per provisions of section 32(2) of the Act , the same is to be carried forward indefinitely, without restrictions and is to be allowed to be set off against current years income. Referring to the tax demand of Rs. 5.71 lakhs, raised in intimation u/s 143(1), the Ld AR argued that this demand indicates that claim for unabsorbed depreciation has not been allowed in processing, which legally should have been allowed.
7.1 In support of his argument he relied upon the decision of the jurisdictional High court in the case of CIT v Haryana Hotels Ltd [2005] 276 ITR 521 ( Punjab and Haryana ) , where the Hon’ble court has observed that : “there is no provision under the Act which makes it mandatory for the assessee to file return for carry forward and set off of unabsorbed depreciation which is to be notified by the assessing officer as is in the case of unabsorbed business loss.”
7.2 He further referred to the decision of Mumbai ITAT in ITA No: 5996/Mum/2024 ( Asst year 2020-21 ) dated 06/01/2025 in the case of Air India Ltd vs ACIT, to argue that even in case the assessee computes depreciation incorrectly, the AO is duty bound to compute the depreciation after factually verifying the same from existing records and allow the same as per law.
7.3 He further referred to Nova Iron And Steel Ltd, 2025 (4) TMI 128-ITAT, Chandigarh, to argue that even in cases of incorrect claim the correct figure of depreciation should be worked out from the TAR, and from ITR of past years , which is available on record.
Lastly, on the ground of addition of Rs.15,549/- on account of GST not deposited within the time prescribed due date, it is submitted by the ld. AR that the said amount has already been added back by the appellant suo motu in his computation of taxable income in the return filed, as such this disallowance has resulted in double taxation which may please be deleted. He concluded by praying for deletion of all additions.
8.1 The Ld DR relied on the order of the first appellate authority and submitted that the claim of the assessee on all the issues relating to claim of set- off of brought forward business losses u/s 72(3), claim of unabsorbed depreciation u/s 32(2) , unpaid GST u/s 43B, are all to be verified from the existing records and ITR filed by the assessee, over the years , as well as from the records contained in TAR and he has no objection if the matter is remanded back to the AO for examination and verification of the claims made with respect to the assessment records of earlier years and thereafter, to decide the allowability of the claims as per provisions of law.
We have considered the materials on record and the rival submissions and we find from the copies of ITR submitted before us, the assessee does have claim of unabsorbed business losses ( other than speculative losses ) brought forward from the assessment years 2017-18 and 2020-21, being claimed within the stipulated timeline of eight assessment years , succeeding the assessment year for which the loss was first computed , which has been claimed to be set off against current years business income , but the same has been disallowed due to incorrect reporting in the returns which has flowed from an inadvertent error of quoting a wrong originating year of the loss.
9.1 As such we are of the opinion that the matter should be restored to the files of the AO to verify the returns of earlier years regarding the claim of carry forward of unabsorbed business losses for the Asst years 2017-18 and 2020-21 , and to allow the set-of such loss as per provisions of section 72(3) of the Act , being within the eight year limitation period , if the same is genuine and legally allowable, and not to deny the same merely on account of technical or procedural lapses.
9.2 Since, we have already remanded the matter to the AO , on the above ground , we also remand the issue of claim of unabsorbed depreciation allowance , with a direction to verify such claim from existing records and to adjust the same against “profit and gains chargeable for the previous year”, if the said allowance is legally allowable as per provisions of section 32(2) of the Act 61.
9.3 Regarding the disallowance u/s 43B of the Act, it is the claim of the assessee that the said amount is already added back to the total income in the computation itself in the return filed , and any further disallowance of the said amount is not warranted. The AO is directed to verify the claim of the assessee on this count and allow consequential relief.
9.4 The assessment is set aside to the AO with aforesaid directions and the assessee to be allowed proper opportunity of being heard.
9.5 In the result, the appeal of the assessee is allowed for statistical purposes.