Assessee entitled to set off brought forward losses against current year income under Section 80

ITAT Kolkata held that the assessee was entitled to set off brought forward losses from A.Y. 2021-22 and 2022-23 against income of A.Y. 2023-24. The tribunal clarified that Section 80 does not require the return for the year in which loss is set off to be filed within the due date under Section 139(3). Since the A.Y. 2022-23 return was filed within due date, that loss could be carried forward. The AO was directed to verify the filing date of A.Y. 2021-22 return and allow set off if filed within due date. Interest under Sections 234B and 234C to be recomputed accordingly.

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Issues:
1. Disallowance of setting off losses pertaining to earlier years
2. Charging of interest under section 234B and 234C of the Act

Analysis:

Issue 1: Disallowance of setting off losses pertaining to earlier years

The appeal was filed against the order of the Ld. ADDL/JCIT(A) confirming the action of the AO-CPC in determining the total income without setting off losses from earlier years. The assessee had filed its original return of income for the assessment year 2023-24, showing total income after adjustment of brought forward business losses. The Ld. AO did not consider the brought forward losses without providing any reason. The Ld. Addl./Jt. CIT(A) noted that the returns for earlier years were filed within the due date or extended due date. However, the Ld. AO contended that since the return for the assessment year 2023-24 was filed after the due date, the losses could not be carried forward. The Tribunal held that there is no requirement in the Act that the return for the assessment year in which the loss is to be set off must be filed within the due date specified under section 139(3). Therefore, if the returns for earlier years were filed within the due date, the assessee was entitled to set off the brought forward losses in the current year. The Tribunal directed the Ld. AO to verify the date of filing of the return for the earlier years and allow the set off if filed within the due date specified under section 139(3).

Issue 2: Charging of interest under section 234B and 234C of the Act

The ground relating to the charging of interest under section 234B and 234C of the Act was considered consequential to the income determined after setting off the losses claimed. The Tribunal directed the Ld. AO to recompute the interest, if required, based on the revised income calculation after allowing the set off of brought forward losses. The Tribunal allowed the appeal of the assessee, subject to the verification mentioned above.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the Ld. AO to verify the date of filing of the return for the earlier years and allow the set off of brought forward losses if filed within the due date specified under section 139(3). The Tribunal also directed the Ld. AO to recompute the interest under section 234B and 234C based on the revised income calculation.

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