Case Law Details
DCIT Vs Oasis Textiles Ltd. (ITAT Ahmedabad)
There is no dispute to the fact that the petition filed before the settlement commission disclosing an income of Rs.1,46,50,000/-was rejected. Once the petition got rejected, the only recourse available with the revenue to consider such amount disclosed in the settlement petition as the income under normal computation of income.
Indeed, the assessee disclosed the income declared in the settlement commission but has given the set off of the brought forward losses/unabsorbed depreciation against such income which eventually make the taxable income at Rs. Nil. Once income has been determined under normal computation of income then it implies that all the other provision including the provision of setting off loss/unabsorbed depreciation will equally be applicable as per the law. In other words, the assessee is entitled set off the brought forward losses/ unabsorbed depreciation against the income subject to the provisions of law.
It is also important to note that the assessee has filed the return of income belatedly for the year under consideration but there is no prohibition to adjust the brought forward losses against the income declared belatedly in the return of income under the provision of section 139(3) of the Act. At the time of hearing, the ld. DR has not brought anything on record contrary to the findings of the ld. CIT-A. In view of above, we do not find any infirmity in the order of the Ld.CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-4, Ahmedabad dated 30/07/2018 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as “the Act”), relevant to the Assessment Year 2004-2005.
2. The Revenue has raised the following grounds of appeal:
1. The Ld.CIT(A) has erred in law and on facts in allowing the assessee to set off the unabsorbed business loss or depreciation from out of the total income assessed when no such provision exists for allowing set off of brought forward losses against additional income offered before Hon’ble ITSC.
2. The Ld CIT(A) has erred in law on facts in allowing to set off the unabsorbed business loss or depreciation from out of the total income assessed for AY 2003-04 and AY 2005-06 without appreciating the fact that the assessee had filed belated returns u/s 139(1) of the act in these years and hence, no set-off of losses was allowable in accordance with section 80 of the act.
3. On the facts and circumstances of the case, Ld CIT(A) ought to have upheld the order of the Assessing Officer.
4. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Officer be restored
3. At the outset, we note that the appeal was instituted by the Revenue way back in the year 2018 and thereafter it has been listed on several occasion for hearing. When the matter was called for hearing, none appeared on behalf of the assessee, therefore, we decided to proceed with the matter after hearing the Ld. DR for the revenue.
4. The only issue raised by the Revenue is that the Ld.CIT(A), erred in allowing set off of the unabsorbed business loss/depreciation against the income determined by the AO.
5. The facts in brief are that the assessee in the present case is a limited company and has disclosed an income of Rs. 1,46,50,000/- only in the settlement petition which was rejected vide order dated 17/12/2007. Once the petition filed before the settlement commission was rejected, the AO proceeded to make the addition of Rs. 1,46,50,000/- as income of the assessee. As such, the AO vide letter dated 17/03/2016 sought an explanation about disclosure of the undisclosed income admitted before the settlement commission. The assessee vide letter dated 21/03/2016, submitted that all the details relating to the undisclosed income admitted before the settlement commission were furnished in the revised computation of income. The assessee again attached the revised computation of income before the AO during the assessment proceedings. However, it was contended by the assessee that even after making the addition of 1,46,50,000/- to the total income, the same will get set off against brought forward losses of the earlier years. However, the AO disagreed with the contention of the assessee by observing as under:
The provisions of Sub-section 1A to ID of Section 245C of the Act clearly provides that there is no room for allowing set-off of brought forward business loss or unabsorbed depreciation/investment allowance. In view of the above, the assessee’s submission in this respect is rejected. [The income of Rs. 1,46,50,000/- offered by the assessee before the Handle Settlement Commission, hence the assessee’s claim for carried forwarded and setoff of business loss is not in accordance with the provisions of section 72 of the I.T. Act and hence the same is rejected. As the assessee has disclosed an amount of Rs.1,46,50,000/- being undisclosed income of A.Y.2004-05 before the Hon’ble Settlement Commission, the same is, therefore, added to the total income of the assessee as undisclosed income.
7. Accordingly, the amount of Rs.1,46,50,000/- is added to the total income of the assessee.
6. Aggrieved assessee preferred an appeal before the Ld. CIT(A), who allowed the ground of appeal of the assessee by observing as under:
5.2.3 From the above provision of section 245HA of the Act it is clear that although AO is entitled to use all the material and other information disclosed before the ITSC or any evidence gathered by the ITSC or any other authority on the direction orf ITSC but the provisions nowhere stipulated that the brought forward losses will not be allowed to be set off against the additional income offered by the applicant if such application is not allowed to proceeded with by the 1TSC. As per the provisions of the section 245C(1A) to (1D) the additional tax payable shall be calculated as per the
provisions of section 245(18} and (1C). In case an assessee has not furnished any return of income then tax shall be calculated on the income which is offered before the ITSC. In case the return has been furnished the additional tax shall be the difference of the tax on aggregate of the total income returned and the tax payable on the income returned in the ROI filed. The ITSC in this case have not admitted the application because appellant has not paid the requisite amount of additional tax. Once the application is abated the AO becomes entitled to use that information in the assessment as per the provisions of section 245HA(3) of the Act. In this case, AO has used the information which is the amount of additional income offered by the appellant in the SOF before the ITSC. In other words AO can add the amount of additional income offered before ITSC however, in case after making such addition the income is still a loss or appellant has unabsorbed business loss or depreciation loss which is otherwise allowable to the appellant to be set off as per the provisions of the Act the same cannot be denied. No such provision exist in section 245HA or in section 245C of the Act. Hence, in view of this clear legal position action of AO in not allowing the set off of brought forward loses including the brought forward depreciation loses is bereft of ‘any legal sanction and the appeal of the appellant on this issue deserves to be allowed. Accordingly, AO is directed to allow set off of carry forward of brought forward losses including the depreciation loss from out of the total income returned/assessed as increased by the additional income disclosed in the SOF. Accordingly Ground No. 2 of all the appeals is allowed.
7. Being aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.
8. The Ld. DR before us reiterated the findings contained in the assessment
9. We have heard the Ld. DR and perused the materials available on record. There is no dispute to the fact that the petition filed before the settlement commission disclosing an income of Rs.1,46,50,000/-was rejected. Once the petition got rejected, the only recourse available with the revenue to consider such amount disclosed in the settlement petition as the income under normal computation of income.
9.1 Indeed, the assessee disclosed the income declared in the settlement commission but has given the set off of the brought forward losses/unabsorbed depreciation against such income which eventually make the taxable income at Rs. Nil. Once income has been determined under normal computation of income then it implies that all the other provision including the provision of setting off loss/unabsorbed depreciation will equally be applicable as per the law. In other words, the assessee is entitled set off the brought forward losses/ unabsorbed depreciation against the income subject to the provisions of law.
9.2 It is also important to note that the assessee has filed the return of income belatedly for the year under consideration but there is no prohibition to adjust the brought forward losses against the income declared belatedly in the return of income under the provision of section 139(3) of the Act. At the time of hearing, the ld. DR has not brought anything on record contrary to the findings of the ld. CIT-A. In view of above, we do not find any infirmity in the order of the Ld.CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed.
10. In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the Court on 21/04/2023 at Ahmedabad.
