2020 (5) TMI 21 - AT - Income Tax

Tribunal Upholds Decision: Public Corporation's Business Loss Carry Forward Limited, Validates Reopening of Assessment.

M/s Haffkine Bio Pharmaceutical Corporation Ltd. Versus DCIT Circle-7 (1) (2), Mumbai

The Tribunal dismissed the appeal filed by the Appellant, a public sector corporation, upholding the Ld. CIT(A)'s decision to deny the carry forward of ... Reopening of assessment u/s 147 - assessee has not filed its return of income for AY 2012-13 - HELD THAT:- We notice from the record that assessee is a public sector company and due to internal exigencies, assessee has filed its return of income only on serving of notice u/s 148 and there is no dispute as far as the date of filing of return of income and assessee has filed its return of income belatedly even though assessee has to declare huge loss. It is mandatory on the part of the assessee to file its loss return in order to carry forward loss. With regard to submission of Ld. AR that AO cannot initiate the proceedings u/s 147 of the Act for the reason that assessee has not filed its return of income and that reason alone cannot be proper to initiate proceedings u/s 147 by relying upon the decision in the case of General Electoral Trust vrs. ITO [2016 (8) TMI 959 - BOMBAY HIGH COURT]. As observed in the case of trust that income of the assessee is not determinable whether it has taxable income and as per the provision of section 139 assessee is obligated to file only it has taxable income and AO can collect the information u/s 133(6) - we notice that in the present case, the facts are different and as far as trust is concerned, it is obligated to file return of income only when it has taxable income, whereas in the case of a company, it is obligated to file its return of income whether it has profit earned or not and even on carry forward loss is concerned, assessee has to file its loss return within the limitation period in order to avail the benefit of carry forward loss. Case relied upon by Ld. AR is distinguishable and in our considered view, the proceedings initiated by AO u/s 147 is proper. Accordingly, the additional grounds raised by the assessee are dismissed. There is no dispute that assessee has filed its return of income belatedly and as per the provisions of the Income Tax Act, assessee cannot avail the benefit of carry forward without filing the return of income on time. We further notice that Ld. CIT(A) has already considered that the loss return filed by the assessee includes unabsorbed depreciation and business loss and he restricted the denial of carry forward loss only to the extent of actual business loss. Therefore, assessee does not have a proper case for availing the benefit of carry forward loss by not following the respective provision of filing return within the due date. Accordingly, grounds raised by the assessee are dismissed. Issues:1. Denial of carry forward of business loss by the Assessing Officer.2. Validity of the reopening of assessment by the Assessing Officer.3. Admissibility of additional grounds of appeal.4. Merit of the case regarding the denial of carry forward loss.Analysis:Issue 1: Denial of carry forward of business lossThe Appellant, a public sector corporation wholly owned by the Government of Maharashtra, filed an appeal against the order of the Ld. CIT(A) regarding the denial of carry forward of business loss. The Assessing Officer (AO) had assessed the income at a loss of Rs. 5,91,28,801/- and did not allow the business loss declared by the Appellant to be carried forward. The Ld. CIT(A) allowed the carry forward of unabsorbed depreciation but sustained the findings of the AO with respect to carrying forward the business loss to the extent of Rs. 1.58 crores. The Appellant contended that the entire business loss of Rs. 5.19 crores should be allowed to be carried forward. The Tribunal dismissed the appeal, upholding the decision of the Ld. CIT(A) regarding the denial of carry forward loss beyond Rs. 1.58 crores.Issue 2: Validity of the reopening of assessmentThe Appellant challenged the validity of the reopening of assessment by the AO. The Appellant argued that the reasons for reopening were not proper and were made without tangible material. The AO had reopened the assessment due to the Appellant's failure to file the return of income within the due date. The Appellant contended that the mere non-filing of the return should not be the sole reason for reopening, citing a decision of the High Court. However, the Tribunal held that the proceedings initiated by the AO under section 147 were proper, distinguishing the case cited by the Appellant. The Tribunal dismissed the additional grounds raised by the Appellant challenging the validity of the reopening.Issue 3: Admissibility of additional grounds of appealThe Appellant filed additional grounds of appeal seeking admission based on a Supreme Court decision. The Tribunal accepted the additional grounds for adjudication, considering them to be legal in nature.Issue 4: Merit of the case regarding denial of carry forward lossThe Tribunal noted that the Appellant filed the return of income belatedly, which prevented the Appellant from availing the benefit of carry forward loss. The AO had denied the carry forward of business loss beyond a certain amount, which was upheld by the Ld. CIT(A). The Tribunal found that the Appellant did not have a proper case for availing the benefit of carry forward loss due to the delay in filing the return within the due date. Consequently, the grounds raised by the Appellant were dismissed, and the appeal was ultimately dismissed by the Tribunal.In conclusion, the Tribunal upheld the decision of the Ld. CIT(A) regarding the denial of carry forward loss beyond a certain amount, validated the reopening of assessment by the AO, admitted additional grounds of appeal for adjudication, and dismissed the appeal filed by the Appellant.