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Income Tax Appellate Tribunal, NAGPUR
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER S.S. VISWANETHRA RAVI, JM :
This appeal by the assessee against the order dated 22-06-2018 passed by the Commissioner of Income Tax (Appeals)-III, Nagpur [‘CIT(A)’] for assessment year 2012-13.
The assessee raised two grounds of appeal amongst which the only issue emanates for our consideration is as to whether the CIT(A) justified in not allowing set off of brought forward business loss in the proceedings u/s. 153A of the Act.
2 ITA No. 208/NAG/2018, A.Y. 2012-13
We note that the assessee originally filed return of income declaring a total income of Rs.6,33,930/- u/s. 139(1) of the Act which was processed u/s. 143(1) of the Act on 18-05-2013. As matter stood thus, a search and seizure operation u/s. 132 of the Act was conducted at the office premises of the assessee on 17-11-2015. In pursuance of which a notice u/s. 153A of the Act was issued, requesting the assessee to file return of income. Accordingly, the assessee filed return of income in response to the said notice u/s. 153A of the Act declaring a total income of the assessee at Rs.5,26,173/-, wherein, the assessee claimed set off of brought forward loss of Rs.9,85,379/-. According to the AO, the assessee is not entitled to claim set off of brought forward loss in 153A proceedings as the total income declared by the assessee in such proceedings are less than the original return filed u/s. 139(1) of the Act. The CIT(A) confirmed the order of AO in denying the set off of brought forward business loss vide para 5.2 of the impugned order. Having aggrieved with the same, the assessee challenged the finding of CIT(A) and placed on record the order of ITAT, Mumbai Benches in the case of Mr. Faisal Abbas in ITA Nos. 3485 & 3487/Mum/2010 for A.Ys. 2002-03 and 2007-08 vide order dated 25-10- 2011. On perusal of the said order the ITAT, Mumbai Benches, the Co- ordinate Bench did not appreciate the contention of the Revenue in denying set off of brought forward business loss when the such loss was determined for the immediately preceding year will not be available to the assessee for set off against the current years income declared in the return of income filed u/s. 153A of the Act. For ready reference the relevant portion of the said order is reproduced hereunder : “4. The other grounds in this appeal are against the disallowance of set off of brought forward business loss. The facts apropos these grounds are that the assessee in his return u/s.153A claimed set off of business loss of Rs.1,45,021/- and speculation loss of Rs.2,50,950 against the current income. The AO did not grant the set off on the ground that the set off, which was not claimed in the original return of income, could not be allowed in the return filed in response to notice u/s.153A. Before the ld. first appellate authority also, the assessee contended that the loss was incurred by him in assessment year 2001-02 and the same ought to have been allowed. The ld.
3 ITA No. 208/NAG/2018, A.Y. 2012-13
CIT(A) echoed the assessment order by relying on a judgment in E.K. Lingamurthy & Anr. Vs. Settlement Commission (2007) 293 ITR 76 (Mad.). 5. We have heard the rival submissions and perused the relevant material on record. It is observed from the copy of return filed by the assessee for assessment year 2001-02 on 31-10-2001 that loss of Rs.27,26,360/- under the head “Profits & gains of business or profession” was declared. The said return for the year was duly filed within the time allowed u/s.139(1). We are currently dealing with assessment year 2002-03 in which the assessee has claimed set off of the brought forward business loss against the income for the current year. In our considered opinion, the authorities below were not justified in not granting the set off of the brought forward business loss for the reason that the requirement to file return within the time prescribed u/s.139(1) is for carrying forward the loss. Once loss is determined in the return file u/s.139(3), the assessee becomes eligible for set off against the income of the subsequent years irrespective of the fact whether the returns of such later years are filed u/s.139(1) or not. Sec. 80 read with sec. 139(3) requires the submission of return for loss before the due date. There is no such requirement that the subsequent years, in which the set off is claimed, must also fulfill the requirement of furnishing the returns within the time required u/s.139(1). 6. It is further important to note that sec. 153A dealing with assessment in case of search provides for the issuance of notice to the assessee in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted. Sec. 153A(1)(a) clearly provides that “the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139”. From the prescription of sec. 153A, it is apparent that the return filed in response to notice u/s.153A is treated as the return filed u/s.139. If that is the position, we are unable to appreciate as to how the loss determined for the immediately preceding year will not be available to the assessee for the set off against the current year’s income declared in the return filed u/s.153A. 7. In so far as the reliance of the ld. CIT(A) on the case of E.K. Lingamurthy (supra) is concerned, we find that the same is misplaced because this judgment has been rendered in the context of block assessment under Chapter XIVB. Section 158BA requires the assessment of “undisclosed income” as a result of search. Section 158BB(4) clearly provides that the losses brought forward etc. shall not be set off against the undisclosed income determined in the block assessment under this Chapter but may be carried forward for being set off in the regular assessment. The position is quite different in the case of assessment u/s.153A. Under the substituted mode of assessment pursuant to search, the requirement is to assess or re- assess the “total income” in respect of each assessment year falling within such six assessment years as contrary to the determination of “undisclosed income” u/s.158BC for the block period. There is no provision analogous to sec. 158BB(4) in section 153A etc. 8. In view of the foregoing reasons, we are satisfied that the assessee is entitled to set off of the brought forward business loss against the income of the current year as per law. As the composition of the total income for the current year is not available on record, we set aside the impugned order and restore the matter to the file of AO for allowing the set off of the brought forward business loss against the current year’s income as per law after allowing a reasonable opportunity of being heard to the assessee.”
4 ITA No. 208/NAG/2018, A.Y. 2012-13
In the light of the above, in the present case it was submitted, availability of business loss determined in the immediately preceding year when it is available, in our opinion, the assessee is entitled to set off such business loss with the current year income. Thus, the order of CIT(A) is set aside and the grounds raised by the assessee are allowed.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 03rd August, 2023.
Sd/- Sd/- (R.S. Syal) (S.S. Viswanethra Ravi) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; दिनाांक / Dated : 03rd August, 2023. रदव
आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : अपीलार्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The CIT(A)-III, Nagpur 4. The CIT (Central), Nagpur दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, नागपूर, 5. / DR, ITAT, Nagpur. गार्ड फ़ाइल / Guard File. 6. //सत्यादपत प्रदत// True Copy// आिेशानुसार / BY ORDER,
वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune