FA, 2020 amendment increasing...
The assessee filed a return of income claiming losses. Assessment Officer (AO) made additions by rejecting books of accounts during the review. On appeal, ITAT remanded the matter back to the file of AO for framing assessment de novo. During the pendency of remanded proceedings, the assessee claimed a set-off of unabsorbed business losses pertaining to a said year in subsequent years.
AO declined the assessee’s claim to set off on the grounds that the assessment of the year in which such loss was suffered was still pending.The assessee contended that the scheme of the Income-tax Act does not visualize any action of declining set off, on the part of AO, till the assessment is finalized.
No matter how desirable such a provision could theoretically be justified, it does not exist in the law. The action of AO in declining the set-off of the losses carried forward was thus without the authority of law and must be vacated.
On the other hand, revenue contended that in case the assessee could set off this loss in the subsequent years, the assessee will become eligible for a refund of taxes. Consequently, legitimate interests of income would be prejudiced by permitting such refunds.
Thus, revenue urges us to defer a decision on this matter till the time the remanded assessment is finalized. On appeal, Mumbai ITAT held that the assessee’s claim for set-off of losses, if otherwise admissible, could not be denied on the mere fact that the assessment for the year in which such loss was suffered is pending.
Accordingly, AO was directed to allow the assessee’s claim for set-off of brought forward losses. It was also directed that these directions should not be construed as direction for refunds, If found admissible as a result of income calculated after such set-off, for the simple reason that an appeal will have to be made by AO as to whether a refund of taxes is permissible in such a situation in the light of the first proviso to Section 240.
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