Burda Druck India Pvt. Ltd. vs ACIT

This appeal by the assessee is preferred against the order of the CIT(A)-33, New Delhi dated 26.12.2018 pertaining to A.Y. 2014-15.

The grievance of the assessee read as under :-

That the learned Commissioner of Income Tax (Appeals) erred in law as well as on facts while not permitting the assessee to carry forward accumulated business losses of the earlier years.

That the learned Commissioner of Income Tax (Appeals) erred in law as well as on facts while not permitting the assessee to carry forward unabsorbed depreciation of the earlier years by disregarding the law as well as the judgment of Honourable Supreme Court in the case of CIT V. Shri Subhulaxmi Mills Ltd. [201] 119 Taxman 281.

The assessee craves leave to add/ alter any of the grounds of appeal before or at the time of hearing.

The root cause for the aforesaid grievance of the assessee is following observations of the AO :–

“In view of the above facts and details/ information furnished by the assessee, the income is computed as under :-

The total Income is computed as under :-

Business Income as per return Rs.17,56,64,494/-

Assessed at loss of Rs.17,56,64,490/-. B/F losses is not allowed to be carry forward as per para 3, 4, & 5. Give credit for TDS, advance tax and regular taxes paid after verification. Interest u/s.234A, B, C, & D is being charged, as applicable. Issue Demand notice u/s. 156 of the I. T. Act 1961 alongwith challan. Issue penalty notice u/s. 271 (1) (c) separately.”

Before us the Counsel for the assessee vehemently stated that the correct year for consideration of the issue of eligibility of set off brought forward business loss against business income is the year in which such set off is claimed and, therefore, findings given for the earlier years is no consequence. It is the say of the Counsel that since no set off of brought forward losses has been claimed during the year under consideration the closing observations of the AO are uncalled for and deserve to be expunged.

Per contra the DR strongly supported the observations of the AO and the findings of the CIT(A) thereon.

We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that while concluding assessment the AO declared that the loss computed is not allowed to be carried forward. In our considered opinion all that the AO is required is to notify the assessee the amount of loss as computed by him. Whether the loss in any year may be carried forward to the following year and set off against the profits has to be determined by the AO who deals with the assessment of the subsequent year. It is for the ITO 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. For this proposition we place strong reliance on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Manmohan Das 59 ITR 699 wherein:-

“It was held by the Hon'ble Supreme Court that it is for the Assessing Officer dealing with the assessment in the subsequent year who has to determine whether the loss of the previous year may be set off against the profits of that assessment year. The Hon'ble Supreme Court further held that a decision recorded by the Assessing 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 ratio of the decision of the Hon’ble Supreme Court in the case of CIT Vs. Manmohan Das (supra) applied squarely to the facts of the assessee’s case.”

In the light of aforementioned discussion and respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of Manmohan Das (supra). We have no hesitation in directing the AO to expunge the concluding remark “brought forward loss is not allowed to be carry forward as per para 3,4 and 5”.

In the result, the appeal of the assessee is allowed.