2025 (8) TMI 188 - AT - Income Tax

ITAT orders AO to re-examine set-off of brought forward losses under income tax law for accurate income computation

The ITAT Mumbai directed the AO to re-examine the issue of set-off of brought forward losses in computing the assessee's total income. The tribunal held ... Addition made by the AO in the rectification order passed by the AO u/s.154 - HELD THAT:- There should not be any dispute that the total income of the assessee should be computed in accordance with law. Hence, it is to be ensured by the AO that the total income is computed after allowing set-off of correct amount of brought forward losses. Accordingly, having regard to the submissions made by the AR, we are of the view that this issue requires fresh examination. We restore this issue to the file of the AO with a direction to allow set-off of correct amount of brought forward losses against the current year’s income in accordance with law, while computing total income of the current year. The ITAT Mumbai, in appeal challenging the Ld. CIT(A)'s order dated 24-09-2024 for AY 2011-12, addressed the addition of Rs. 3.66 crores made by the AO via rectification order under section 154 of the Income Tax Act, 1961. The AO's order was based on Revenue Audit objections that the assessee had wrongly claimed set-off of brought forward losses. The assessee contested the rectification on legal grounds only, which the Ld. CIT(A) rejected without adjudicating the merits. The assessee's representative submitted detailed accounts of brought forward losses from prior years, asserting sufficient losses were available for set-off, which the Audit Party failed to properly consider. The Tribunal emphasized that 'the total income of the assessee should be computed in accordance with law' and directed a fresh examination by the AO to verify and allow the correct amount of brought forward losses set-off. Since the Ld. CIT(A) did not decide on merits and the claim required verification, the issue was restored to the AO with the direction to compute total income after allowing the correct brought forward losses. The appeal was accordingly allowed.