CIT cannot revise issue which is beyond the scope of rectification

Cargo Service Centre India Pvt. Ltd. Vs. DCIT (ITAT Mumbai)

Hon^‘ble Supreme Court in the case of Manmohan Das held that Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and gains of the same business, profession or vocation has to be determined by the Income-tax Officer who deals with the assessment of the subsequent year. It is for the Income-tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the Income-tax Officer who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year is not binding on the assessee.

The very exercise of seeking a specific mention, by moving the rectification petition, about the eligibility for carrying forward of loss was thus, in a way, somewhat academic and more as a measure of abundant caution rather than the requirement of law. The rectification order was thus wholly infructuous in the eyes of the Once a loss has been disclosed in the income tax return, and such a loss has not been disturbed in the scrutiny assessment proceedings, such a loss is treated to have been accepted, and quantification thereof cannot be disturbed.

What the learned PCIT has done is to disturb this quantum of loss, but then that could have been done within two years from the end of the financial year in which the related scrutiny assessment order was passed. Clearly, that limitation was over on 31^st March 2017, whereas the present impugned order was passed on 29^th March 2019.

The quantification of loss, which is well beyond the limited scope of ^‘mistake apparent on record^‘ under section 154 and in the light of Hon^‘ble Supreme Courts judgment in the case of ITO Vs Volkart Brothers L(1971) 82 ITR 50 (SC)], could not have been disturbed in the proceedings under section 154, and what cannot be done under section 154, cannot be done under section 263 r.w.s. 154 either. Whichever way one looks at it, the impugned revision order is vitiated in law.

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