AAK SOUTH EAST INDIA PRIVATE LIMITED,HYDERABAD vs. DCIT, CIRCLE-1(1), HYDERABAD

Assessee company while filing the return of income for the Assessment Year 2018-19, by mistake failed to make a claim in the column number 49 of the return of income, though infact there were unabsorbed depreciation of Rs.26,01,14,355/- and brought forward business losses of Rs.155,05,24,343/- as on the date. Because of this lapse on the part of the assessee, the CPC while processing the return of income under section 143(1) of the Income Tax Act, 1961 (“the Act”) though allowed unabsorbed depreciation for the purpose of regular assessment, but did not allow the same for the purpose of section 115JB of the Act.

When the assessee preferred grievance petition dated 21/09/2020 and also application under section 154 of the Act, the grievance is not redressed. Hence, the assessee preferred the appeal before the learned CIT(A) to allow the unabsorbed depreciation for the purpose of arriving the book profit under section 115JB of the Act also. Learned CIT(A) dismiss the appeal stating that accepting the request of the assessee will result in reducing the income less than the return of income and such a course is not permissible in an appeal.

Hence, this appeal by the assessee. Learned AR contended that though the learned CIT(A) convinced himself that it is only due to sheer mistake the assessee failed to seek the deduction of unabsorbed depreciation, but did not grant the relief on the ground that the determined income cannot be less than the returned income, but the learned CIT(A) failed to notice that not allowing the unabsorbed depreciation would result in collecting more tax than authorized by law, and therefore, the learned CIT(A) should have directed the assessing officer to allow unabsorbed depreciation.

Per contra, learned DR placed reliance on the orders of the authorities below and submitted that there is no mistake of the learned Assessing Officer in this matter, therefore, no question of rectification of any mistake will arise.

We have gone through the records in the light of the submissions made either side. Relevant portion of the impugned order would throw light on the issue in controversy. It reads,- 6.2.2. It may be an omission on part of the appellant but not one that can be sought to be remedied by an appeal. This is not a case of failure on part of the AO so as to allow relief by directing the AO to allow set off of unabsorbed depreciation not reported I the appropriate columns of the ITR. In the era of electronic filing of the return of income, any deduction is captured by the system only if reported in the appropriate column. In the instant case the same has not been done resulting in reporting a higher income by the appellant. Any alteration as requested by the appellant would have the effect of reducing the income to that less than returned income which cannot be done by way of appeal.

It is therefore clear that for non reporting of the unabsorbed depreciation in appropriate columns in the ITR, the set off was disallowed. It is submitted on behalf of the assessee that the facts are on record and could be verified from Schedule CFL of the return of the earlier year and also Schedule UD of the return. Assessee admits non reporting of the unabsorbed depreciation in appropriate column, but pleads that it is only a sheer mistake. It is also further stated that the entitlement of the assessee for this claim is evidenced by record.

In these circumstances, we are of the considered opinion that when there is sufficient material on record to verify the allowability of set off of unabsorbed depreciation, it should have been verified and allowed at the first appeal stage, but, it was not done because it would end up in assessed income being less than the returned income. But at the same time, if such claim is not allowed, it would also result in more tax than authorized by law.

We, therefore, set aside the impugned order and direct the learned Assessing Officer to verify the claim of the assessee with the available material on record and if it is found correct, allow the same. Grounds are answered accordingly.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 20th day of September, 2024.