Tikona Trust Vs Asst. Director of Income Tax (ITAT Mumbai)
ITAT Mumbai held as books of accounts of assessee are not need to be audited, hence return of income has to be filed on or before 31st July. As return filed beyond time limit, disallowance of set off of brought forward loss sustained.
Facts- The assessee has claimed set off of losses of earlier years against current year business income. However, the AO/CPC noticed that the returns of income of the earlier years have been filed beyond the time prescribed u/s 139(1) of the Act. Further, the loss, even if it is eligible to be carried forward, could be carried forward only for eight succeeding assessment years. Hence the CPC did not allow set off of brought forward losses.
CIT(A) confirmed the action of AO/CPC. Being aggrieved, the present appeal is filed.
The main contention of assessee is that the due date for it should be taken as 30th September, since its accounts are required to be audited as per trust deed.
Conclusion- We notice that the ld CIT(A) has given clear finding that the accounts of the assessee are not required to be audited under the Income tax Act or under any other law.
Before us also the assessee failed to bring to our notice any specific provision under any law which mandates that the assessee’s books of account need to be audited. Therefore, we agree with the view taken by Ld CIT(A) that the assessee has to file its ROI on or before 31st July as per the clause (c) of Explanation 2 of section 139(1) of the Act. We note that the assessee is not required to audit its books as per the Income Tax Act or under any other law and therefore clause (a)(ii) of section 139(1) of the Act is not attracted to the assessee’s case. Therefore, the action of the Ld.CIT(A) in confirming the action of CPC/AO cannot be faulted. So we confirm the action of the Ld.CIT(A) on this issue.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This is an appeal preferred by the assessee against order of the Ld. CIT(A)/NFAC dated 14.03.2022 for A.Y. 2018-19.
2. The grounds of appeal raised by the assessee Trust are as under:-
1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the Total Income of the Appellant at Rs. 1,17,04,178/-.
2. On the facts and in the circumstances of the case and in law the learned CIT (A) erred in not allowing the set off of brought forward losses of the previous eight years claimed by the Appellant.
3. On the facts and in the circumstances of the case the Id. CIT (A), National Faceless Assessment Centre, erred in confirming the disallowance of loss of Rs. 1,17,04,178/- claimed by the Appellant.
4. On the facts and in the circumstances of the case the Id CIT (A), National Faceless Assessment Centre, erred in appreciating the fact that as per the Intimation for the A.Y. 2017–18 the loss of Rs.61,11,994/- was already determined by the CPC as allowable loss. Hence, the Appellant was entitled to set off of the same.
4.1 On the facts and in the circumstances of the case the Learned CIT(A), National Faceless Assessment Centre, erred in appreciating the fact that it was not open for CPC to disallow the set off of loss already determined in the intimation for A.Y. 2017–18 without following the due procedure as per law. It was beyond the powers of CPC to ignore the brought forward loss of Rs. 61,11,994/- already computed by the CPC as per the intimation for the A.Y. 2017–18 and not to allow the set off thereof.
5. On the facts and in the circumstances of the case the Ld.CIT(A),National Faceless Assessment Centre, erred in appreciating the fact that the Returns of Income filed by the Appellant were within the time limit as per Section 139(1), since the accounts of the Appellant were required to be audited as per the amended Trust Deed.
6. Without prejudice, On the facts and in the circumstances of the case the Id. CIT(A), National Faceless Assessment Centre. erred in appreciating the fact that write back of loan is not cessation of liability and not chargeable to tax u/s 41, Hence, the Appellant is not liable to pay any tax on the same.
7. On the facts and in the circumstances of the case and in law the learned Assessing Officer – CPC erred in charging interest U/s. 234B and 234C of the Income Tax Act, 1961.
8. The Appellant craves leave to add, amend, delete, alter, modify or substitute any or all the above ground(s) of appeals.
3. The main grievance of the assessee against the action of the Ld. CIT(A) in confirming the action of the AO/CPC not allowing set-off of brought forward business losses against current year business income.
4. In the alternative, the assessee has raised a contention in ground no.6 that the write back of loan is not a cessation of trading liability and hence not chargeable to tax u/s 41(1)of the Act. Accordingly it is contended that the amount of loan written back and credited to the Profit and Loss account should be excluded from the total income.
5. Brief facts of the appeal is that the assessee trust is “private trust” and during the year under consideration (AY 2018-19) it had filed return of income on 31st August 2018 showing income from business and profession at Rs.1,17,04,178/-. Since the assessee had brought forward losses of the earlier years, it claimed set off the losses of earlier years against current year’s income and accordingly, the gross total income of the assessee was claimed to be Rs. Nil.
6. However, the AO/CPC noticed that the returns of income of the earlier years have been filed beyond the time prescribed u/s 139(1) of the Act. It is pertinent to note that, as per the provisions of sec.139(3), if any person has sustained loss in any previous year and claims that the loss or any part thereof should be carried forward under various provisions of the Act, then he may furnish the return of loss within the time allowed u/s 139(1)of the Act, meaning thereby, if the returns of income of earlier years were not filed within the due date prescribed u/s 139(1) of the Act, the loss of earlier years cannot be carried forward and set off against subsequent year’s income. The CPC took the due date for filing return of income by the assessee as 31st July as per clause (c)of Explanation 2 to sec. 139(1) of the Act. It is also pertinent to note that the due date of 31st July, was extended by the Central Government in some of the years by notification due to certain unavoidable circumstances. However, the assessee had not filed its return of income within the due date prescribed under clause (c) of Explanation 2 to sec. 139(1) or even within extended period in any of the earlier years. Further, the loss, even if it is eligible to be carried forward, could be carried forward only for eight succeeding assessment years. Hence the CPC did not allow set off of brought forward losses.
Accordingly, it determined the total income of the assessee at Rs. 1,17,04,178/-. The due date considered by CPC and the date of filing of return of income of earlier eight years have been tabulated as under by Ld CIT(A):-
