Lakhani International vs Deputy Commissioner Of Income Tax

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 04.02.2025, for Assessment Year 2014-15.

Ms. Aditi Gupta, appearing on behalf of the assessee submits that the assessee a partnership firm engaged in manufacturing of corrugated and inner boxes. Admittedly, the assessee has not filed its return of income for A.Y. 2014-15, as the assessee had no taxable income. In fact the assessee had business loss of Rs.1,42,05,768. Based on information available with the Department, that the assessee has earned interest income of Rs.26,55,530/- during F.Y. 2013–14, the case was reopened u/s.147 of the Income Tax Act,1961(hereinafter referred to as ‘the Act’). Notice u/s.148 of the Act was issued on 27.03.2021. The Assessing Officer (AO) completed the assessment u/s 147 r.w.s. 144 and 144B of the Act, adding interest income of Rs.26,55,530/- under the head, “Income from Other Sources”. Against the said assessment order, the assessee filed an appeal before the CIT(A), contending that the interest income was already credited in the Profit & Loss account and that the AO failed to consider the Audited Financials of the assessee. After credit of the interest in P & L account, there is net loss of Rs.1,35,82,533.64/-. The CIT(A) acknowledged that the interest income was part of the P&L account and that the assessee had incurred a net loss. However, the CIT(A) held that since no return was filed within the due date, the set-off of business loss against interest income u/s. 71 of the Act was not allowable.

Shri Manoj Kumar, representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submitted that for claiming set off of business losses u/s. 71 of the Act, the assessee should have filed return of income u/s.139(1) of the Act.

Both sides heard, orders of the authorities below examined. The grievance of assessee in present appeal is against the addition of Rs.26,55,530/- in respect of interest income received during the relevant period. It is an undisputed fact that no return of income was filed by the assessee u/s. 139 of the Act or even in response to notice issued u/s. 148 of the Act for the impugned assessment year. The assessee is a partnership firm, there is no immunity to the assessee from filing income tax return in the case of business loss. Though, financials results of the assessee indicate that during the relevant period the assessee has suffered business loss but the accounts of assessee were not subjected to verification in the absence of any return of income. Therefore, we find no infirmity in the impugned order. Hence, the same is upheld. Consequently, ground no. 1 to 3 of appeal are dismissed.

In ground no. 4 of appeal, the assessee has claimed that benefit of TDS Rs.2,55,553/- deducted on interest income of Rs.26,55,530/- was not allowed by the AO. The ground no. 4 of appeal is restored to the AO to examine the fact if TDS credit is not already allowed, the same be allowed to the assessee in accordance with law.

Ground no. 5, 6 and 7 of appeal are general in nature. Hence require no separate adjudication.

In the result, appeal of the assessee is partly allowed for statistical purpose.