TaxTMI 
TaxTMI 
2023 (8) TMI 1506
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.... to Rs. 8,36,02,091/- made by Ld. AO(CPC) in the order passed u/s 143(1) even when the Ld. AO lacked powers to do so. 3. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the action of Ld. AO of not allowing carry forward of loss of Rs. 8,36,02,091/- claimed u/s 35AD. 4. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before jhe disposal of the same. 2. Briefly, the facts of the case are that the assessee filed its return of income declaring total income at NIL and claiming carry forward of current year business losses to the tune of Rs. 8,57,53,970/-. The return was filed on 30/09/2020 as against the original due date of 30/09/2019 and extended due date of 31/10/2019. The CPC Bengaluru while processing the return of income vide its order dt. 24/12/2020 under section 143(1) has restricted the carry forward of current year business losses to Rs. 21,51,879/- which is the unabsorbed depreciation of the current year. The current year business losses of specified business under section 35AD amounting to Rs. 8,36,02,090/- was however not allowed to be carry....
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....upport, reliance was placed on the Hon'ble Supreme Court decision in the case of CIT Vs. Manmohan Das reported in 59 ITR 699. It was further submitted that the decision of Hon'ble Supreme Court has subsequently been followed by the Coordinate Delhi Benches in case of Burda Druck India Pvt. Ltd. Vs. ACIT (in ITA No. 3895/Del/2019 dt. 05/12/2022), and Coordinate Mumbai Benches in case of DCIT Vs. Instant Traders Pvt. Ltd. (in ITA No. 7364/Mum/2016 dt. 20/06/2018) and M/s Orra Fine Jewellery Pvt. Ltd. Vs. DCIT (in ITA No. 2926/Mum/2018 dt. 25/09/2020). It was accordingly submitted that in light of the aforesaid settled position in law, there is no basis for the AO/CPC to restrict the carry forward of current year business losses from specified business claimed by the assessee under section 35AD of the Act and for the ld CIT(A) to sustain the same. 7. Per contra the Ld. CIT DR submitted that the provisions of Section 139(3) are clear to the effect that if any person has sustained the losses in any previous year under the head "Profit & Gains of the Business & Profession" and claim that all loss or any part thereof should be carry forward under sub section (2) of Section 73A as appli....
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....rd and set off of losses of specified business and the same reads as under: "(1) Any loss, computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business. (2) Where for any assessment year any loss computed in respect of the specified business referred to in sub-section (1) has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee has no income from any other specified business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and- (i) it shall be set off against the profits and gains, if any, of any specified business carried on by him assessable for that assessment year; and (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on." 11. Sub-section (2) to Section 73A provides that any loss, computed in respect of any specified business referred to in section 35AD which has not been wholly set off under sub- section (1),....
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.... 15. In case of Manmohan Das (Supra), the Hon'ble Supreme Court held that it is for the ITO dealing with assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year and a decision recorded by the ITO who computes the loss in the previous year that loss cannot be set off against the income of the subsequent year is not binding on the assessee and the relevant findings are contained in para 3 of its order which read as under: "3. The second question presents little, difficulty. In making his order of assessment for the year 1950-51, the ITO declared that the loss computed in that year could not be carried forward to the next year under s. 24(2) of the IT Act, as it was not a business loss. The ITO has under s. 24(3) to notify to the assessee the amount of loss as computed by him, if it is established in the course of assessment of the total income that the assessee has suffered loss of profits., Sec. 24(2) confers a statutory right (subject to certain conditions which are not material) upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward t....
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....the case of CIT Vs. Manmohan Das (supra) applied squarely to the facts of the assessee's case." 7. In the light of aforementioned discussion and respectfully following the ratio laid down by the Hon'ble Supreme Court in the case of Manmohan Das (supra). We have no hesitation in directing the AO to expunge the concluding remark "brought forward loss is not allowed to be carry forward as per para 3,4 and 5." 17. Similarly, the Coordinate Mumbai Benches in case of Instant Traders Pvt Ltd (Supra) has held in para 5-7 of its order which read as under: "5. After having carefully considered the rival submissions, we find that the limited plea of the assessee before us is to the effect that the dispute regarding the denial of the carry forward of loss on the basis of prohibition contained in section 79 of the Act be considered by the Assessing Officer in accordance with law in the subsequent year where the assessee claims actual set off. An identical situation has been considered by our co- ordinate Bench in the case of Khajrana Ganesh Properties Private Limited (supra), wherein one of us is part of the Bench. The Tribunal, by relying the judgment of Hon'ble Suprem....
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....sing Officer in the subsequent year while evaluating the claim of the assessee for set-off of the impugned business loss. As a consequence of our aforesaid discussion, we set-aside the order of CIT(A) and direct the Assessing Officer to remove the directions relating to denial of carry forward and set-off of loss of Rs. 7,96,21,402/-. Thus, on this aspect, assessee succeeds for statistical purposes." 6. Considering in the aforesaid light, in our view, so far as the instant assessment year is concerned, the Assessing Officer is not competent to give a finding that the loss cannot be carry forward and set off against the income of the subsequent year. Accordingly, the matter is remanded back to the file of the Assessing Officer to remove the direction relating to denial of carry forward and setoff of loss. However, our direction should not be interpreted to be any reflection on the merits of invoking section 79 of the Act, which prohibits carry forward and set off of loss in specified situations. The same shall be open to be considered by the Assessing Officer in the subsequent year of actual set-off while evaluating the claim of the assessee for set off of the impugned busi....
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....ried forward to the next year under section 24(2) of the Income-tax Act, as it was not a business loss. The Income-tax officer has under section 24(3) to notify to the assessee the amount of loss as computed by him, if it is established in the course of assessment of the total income that the assessee has suffered loss of profits. Section 24(2) confers a statutory right (subject to certain conditions which are not material) upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward the loss as is not set off under sub-section (1) to the following year, and to set off against his profits and gains, if any, from the same business, profession or vocation for that year. Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and against the same business, profession or vocation under s. 24(2) has to be determined by the Income-tax Officer who deals with, the assessment of the subsequent year. It is for the Income- tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profit....
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.... v. Manmohan Das (supra) wherein it has been held that the claim of the assessee has to be examined by the Assessing Officer in the year in which such claim for set off was made by the assessee in the return of income. Following the decision of the Hon'ble Apex Court, the Tribunal in this case decided the appeals against the assessee. 23. The ratio of the decision of the Hon'ble Supreme Court in the case of CIT v. Manmohan Das (supra) applies squarely to the facts of the assessee's case. On a reading of the Tribunal order in ITA.No.5760/Mum/2009 dated 05.06.2013 passed for the A.Y. 2006-07 wherein the claim for carry forward of losses were denied invoking provisions of section 79 of the Act, we observed that the decision of the Hon'ble Supreme Court in CIT v. Manmohan Das (supra) was not brought to the notice of the Tribunal and the Tribunal had no occasion to examine the effect of this decision. Therefore, we are of the considered view that in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Manmohan Das (supra) the decision of the Tribunal for the A.Y.2006-07 sustaining the action of the Assessing Officer in not carrying forward the....