1988 (7) TMI 86 - AT - Income Tax

Tribunal directs ITO to accept assessee's loss claim, not charge interest.

The Tribunal allowed the appeal, directing the ITO to accept the assessee's claim for carry forward and set off of loss of Rs. 1,16,731, not withdraw the ... - Issues Involved:1. Non-allowance of carry forward and set off of Rs. 1,16,731 being the assessee's share of loss in the firm of M/s Dharamnath Corporation for the assessment year 1975-76.2. Withdrawal of set off loss of Rs. 43,460 determined by the ITO for the assessment year 1974-75.3. Charging of interest under sections 139(8) and 217(1A) of the Income Tax Act.Detailed Analysis:1. Non-allowance of Carry Forward and Set Off of Rs. 1,16,731:The assessee contested the non-allowance of carry forward and set off of Rs. 1,16,731, her share of loss in M/s Dharamnath Corporation for the assessment year 1975-76. The firm had filed its return declaring a loss of Rs. 1,29,591, but no action was taken by the ITO. The ITO later assessed the firm for the assessment year 1976-77, determining the assessee's share of loss at Rs. 81,000. The assessee filed her return for the assessment year 1975-76 showing a loss of Rs. 1,16,631, but the ITO took the share of loss at NIL, subject to rectification. The AAC set aside the assessment with a direction to the ITO to inquire whether the firm had been granted registration and to pass an order on merits. However, the ITO again disallowed the assessee's claim for carry forward and set off of the loss, stating that no assessment order had ever been passed for the firm. The Tribunal found that the ITO had failed to take necessary action to finalize the assessment of the firm, and the Revenue could not take advantage of its own inaction. The Tribunal directed the ITO to accept the assessee's claim for carry forward and set off of the loss.2. Withdrawal of Set Off Loss of Rs. 43,460:The assessee also contested the withdrawal of set off loss of Rs. 43,460 determined by the ITO for the assessment year 1974-75. The ITO had determined a loss of Rs. 50,000 in the assessee's proprietory concern, Weyburne Pharmaceuticals, and after set off of the income from M/s Dharamnath Corporation, computed a loss of Rs. 43,360. The ITO withdrew the set off, stating that there was no income from the business of Weyburne Pharmaceuticals in the assessment year 1979-80. The Tribunal noted that the AAC had set aside the assessment for a limited purpose regarding the loss of Rs. 1,16,731 and found that the ITO was not justified in withdrawing the carry forward and set off of the determined loss of Rs. 43,460. The Tribunal directed the ITO not to withdraw the carry forward and set off of the loss.3. Charging of Interest under Sections 139(8) and 217(1A):The assessee contested the charging of interest under sections 139(8) and 217(1A) of the Act, arguing that the assessment framed was not a regular assessment under section 143(3) or 144 but was framed after issuing notice under section 147(a)/148. The Tribunal referred to the decision of the Gujarat High Court in Bardolia Textile Mills Ltd. vs. ITO, which held that interest could not be charged in such cases. The Tribunal directed the ITO not to charge interest under sections 139(8) and 217(1A).Conclusion:The Tribunal allowed the appeal, directing the ITO to:1. Accept the assessee's claim for carry forward and set off of loss of Rs. 1,16,731.2. Not withdraw the carry forward and set off of determined loss of Rs. 43,460 for the assessment year 1974-75.3. Not charge interest under sections 139(8) and 217(1A) of the Act.