1982 (5) TMI 66 - AT - Income Tax

Tribunal allows carry forward of losses for assessee, rejects Department's argument

The Tribunal upheld the AAC's decision in favor of the assessee, allowing the carry forward and set off of the loss from a previous year determined in the ... - Issues:1. Whether the assessee is entitled to carry forward and set off the loss from a previous year when the loss was determined in the files of the firms and not in the assessee's own file.Analysis:The appeal was filed by the Department against the order of the AAC related to the assessment year 1977-78, where the assessee, an individual, had claimed a loss of Rs. 41,259 from the previous year 1972-73. The Department refused to allow the carry forward and set off of this loss as it was not determined in the assessee's own file. The AAC, however, ruled in favor of the assessee, citing the decision in CIT vs. Kushalchand Daga (1961) 42 ITR 177 (SC), stating that the assessee had a right to carry forward the loss determined in the firms' files, even if not quantified in the assessee's file. The AAC emphasized that the assessee had filed the return showing the loss and had responded to the notice under section 143(2), and the failure to determine the loss in the assessee's file was not the fault of the assessee.During the appeal, the Department argued that only losses determined by the ITO could be carried forward, relying on the decision in CIT vs. Manmohandas (1966) 59 ITR 699 (SC). On the other hand, the assessee's representative supported the AAC's decision, stating that the right to carry forward the loss is not conditional upon quantification in the assessee's file. The representative also cited the decision of the Bombay High Court in the case of All India Groundnut Syndicate Ltd. vs. CIT (1954) 25 ITR 90 (Bom) to support the assessee's position that the right to carry forward losses is an absolute statutory right.The Tribunal considered the arguments of both parties and upheld the AAC's decision. It emphasized that the assessee had made the claim for the loss, which was determined in the firms' files, and had complied with the necessary procedures. Relying on the principles laid down in the cases of Kushalchand Daga and All India Groundnut Syndicate Ltd., the Tribunal concluded that the AAC's decision was justified. The Tribunal clarified that the failure of the ITO to quantify the loss in the assessee's file should not penalize the assessee, as the right to carry forward losses is not contingent upon such quantification. Consequently, the appeal by the Department was dismissed.