Disallowance of claim of loss not properly appearing in acknowledgment of return under section 153A is not correct

short overview : Where assessee claimed the business loss and carried forward the loss in the original return of income filed under section 139(1) and again in the return filed in response to notice issued under section 153A, however, due to some error the claim was not properly appearing in the acknowledgment of return generated, then for such genuine error the assessee should not be penalized. Thus, AO was not justified in making addition in respect of loss.

AO made addition in respect of loss appearing in acknowledgement of return filed under section 139, which was also appearing in Schedule CFL of the ITR-6 filed under section 153A. However, inadvertently the same did not add up in the “total loss carried forward” column.

it is held that Since assessee had claimed the business loss and carried forward the loss in the original return of income filed under section 139(1) and again in the return filed in response to notice issued under section 153A, however due to some error the claim was not properly appearing in the acknowledgment of return generated and for such genuine error the assessee should not be penalized. Hence, AO was not justified in making addition in respect of loss. Accordingly, AO was directed to allow the benefit of carry forward of losses as claimed in all the assessment years involved.

Decision: In assessee’s favour.

Followed: M/s. O.K. Silk Mills Ltd. v. DCIT [ITA Nos. 1393 to 1398/JP/2018, dt. 9-5-2019].

IN THE ITAT, JAIPUR BENCH

RAMESH C. SHARMA, A.M. & VIJAY PAL RAO, J.M.

Krishna Vatika Construction (P) Ltd. v. DCIT

ITA Nos. 371 to 373/JP/2019

31 May, 2019

Assessee by: Manish Agarwal, CA

Revenue by: Karni Dan, JCIT

Per Bench:

These are the appeals filed by the assessee against the separate orders of the learned Commissioner (Appeals)-IV, Jaipur, dated 27-2-2019 for the assessment years 2011-12 to 2013-14 in the matter of order passed under section 143(3) read with section 153A of the Income Tax Act, 1961 (in short, the Act).

2. At the outset, the ld AR of the assessee placed on the record the order of the Tribunal dated 9-5-2019 wherein under similar facts and circumstances, the Tribunal have decided the very same issues which have been raised in these appeals and contended that the issue is squarely covered by the decision of the Tribunal dated 9-5-2019.

3. On the other hand, the learned DR has strongly supported the orders passed by the lower authorities and contended that the lower authorities were perfectly justified in ignoring assessee’s claim of loss which was not part of return filed under section 153A of the Act.

4. We have considered the rival contentions and carefully gone through the orders of the authorities below. In all these appeals, addition has been made by the assessing officer in respect of loss which was appearing in acknowledgement of return filed under section 139 of the Act which was also appearing in the Schedule CFL of the ITR-6 filed under section 153A of the Act. However, inadvertently the same did not add up in the “Total loss carried forward’ column of the said Act.

5. We found that exactly similar issue has been allegedly decided by the Tribunal in its order dated 9-5-2019 and after considering all the facts and circumstances, the Tribunal has held as under:

“4. Rival contentions have been heard and record perused. Briefly stating the present bunch of 5 appeals are filed against the single order of learned Commissioner (Appeals) dated 7-9-2018 for assessment years 2008-09 to 2013-14 involving a single issue, and are therefore taken up together under this single order for all assessment years i.e. 2008-09 to 2013-14 for the sake of convenience and brevity.

5. Brief facts of the case are that the assessee is a private limited company engaged in the business of Builders and Contractors. A search under section 132 of the Income Tax Act, 1961 was conducted on 4-9-2013 in the case of JKD Group and Okay Plus Group and its members, and the assessee is one of the member of Okay Plus Group. Originally the Return of Income for all the respective years under appeal were filed under section 139(1) of the Income Tax Act, 1961 declaring Nil Income after claiming loss as appearing in the above table, which were claimed as carried forward to next years. Thereafter in response to notice issued under section 153A dated 4-12-2014, returns were filed within the time limit provided in the notice declaring Nil Income and claiming loss for the current year as was claimed in the returns filed under section 139(1) of the Act, however, due to some technical error the figure of current year loss claimed and carried forward did not appear in the acknowledgement generated online. The assessing officer completed assessment under section 143(3) read with section 153A of the Act for all the above assessment years at Nil Income but without giving benefit of carry forward to current year losses, stating that such loss was not claimed by the assessee in the return filed under section 153A and made addition of the same by alleging it to be additional income offered by the assessee in its return filed pursuant to search under section 153A of the Act. Learned Commissioner (Appeals) did not consider the explanation/submissions made by the assessee and confirmed the rejection of carry forward of current years loss in all the assessment years as above on the following grounds:

1. The assessee nowhere in the submission had mentioned that both returns filed under section 139(1) and 153A were exactly identical. He further alleged that since the computation is first made on the stand alone computer of the Chartered Accountant, which is then uploaded on the income tax website, it is not possible that two separate acknowledgements are generated when the data fed is exactly the same. Thus it was conclusively indicative that the two returns filed were not exactly the same.

2. That what is the technical reason due to which different acknowledgement is generated was not spelled out (even if it was assumed that both returns filed under section 139(1) and section 153A are identical). Thus this contention is vague and unspecific.

3. The claim was in the nature of fresh claim, which was never raised before assessing officer, and moreover did not arise out of the return filed under section 153A of the Act. Learned Commissioner (Appeals) further alleged that an assessee can raise only the issue that has been examined by assessing officer or that arises from the assessment order.

4. Learned Commissioner (Appeals) further alleged that the assessee would have genuinely not claimed the current year loss for some reason best known to the assessee, say not claiming certain expenditure after the search operation.

6. Against the above order of the learned Commissioner (Appeals), the assessee is in further appeal before the ITAT.

7. We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that the assessee had not declared any additional income, pursuant to search in any of the assessment years involved. The contention of the assessee that no additional income was offered in the return filed under section 153A is further strengthened by the reply of the assessee to the point no 8 of the questionnaires issued during each of the assessment proceedings, wherein the assessee has specifically mentioned the fact that no additional income was offered by it. Moreover, during the course of search no incriminating material whatsoever was found indicating any undisclosed income pertaining to assessee. Further assessing officer has not pointed any such document in the assessment order. And this being so, there was no occasion for the assessee to disclose any additional income or not claim the loss, that was been made in the return filed under section 139(1). The computation of income and other particulars like Balance Sheet etc. also shows that assessee has incurred and claimed loss in the respective assessment years.

8. We also observe that in the assessment order, the assessing officer has wrongly observed that current year income of the assessee is NIL, only on the basis of the Acknowledgement and without actually going through the complete return of income filed under section 153A. If the assessing officer would have perused schedule BP related to income from Business and profession, it would be clear from row 9 and 13 which show the current year income as loss instead of NIL income. Similarly, in the last but one main row i.e. A37 the current year business income has been shown as a loss and again at row C i.e. income chargeable under the head profit and gains has been shown as negative i.e. loss. Further in schedule CYLA in the column No. 3 meant for specifying the current year business loss if any, the assessee has duly filled the current year loss. Finally, in row VII of schedule CYLA again the current year loss (after set off) the assessee has again shown the current year loss amount. Also, in “Schedule CFL” in the row (xi) specifying the current year loss, the amount of loss is duly appearing. Thus, the assessee has duly shown its current year loss at all the required places in the ITR which are at as many as three places.

9. With regard to learned Commissioner (Appeals)’s observation to the effect that all the data in the two returns filed were not same because if it would have been so then two different Acknowledgement would not have been generated, is misplaced. In this regard, we observe that though data in the two returns were obviously same as submitted earlier also, but as the return now filed was under section 153A and the earlier return was under section 139(1) accordingly different acknowledgement would surely be generated even if the data of income etc. are same. We also found that the assessee has duly filled the current years losses in the ITR as stated above, but due to some technical error the same is not reflected in the acknowledgement generated based on information picked up from the schedules of the ITR, which in-turn picks data from the files generated at the stand alone computer of the Chartered Accountant. Thus, the carry forward of current year loss in respective years deserve to be allowed.

10. We also observe that the claim of the assessee for earlier years loss, which is inclusive of the loss of the preceding assessment year has been duly allowed by the assessing officer and the same has not been disputed by learned Commissioner (Appeals). This further strengthens our conclusion that the current years losses were not shown in the acknowledgement generated for returns filed under section 153A were due to some inadvertent technical error, and in no manner ought to have been considered as additional income declared by the assessee pursuant to the search operations carried out in the group.

11. From the record we also found that the assessee had attended the proceedings under the bona fide belief that the losses as claimed (which was same in both returns filed under section 139(1) and 153A) were duly being assessed by the assessing officer, and this intention of the assessing officer to treat the current year loss of the assessee as its additional income was never intimated during the assessment proceeding. Rather it was noticed only when the assessment order was received, thus no opportunity was ever granted to explain the issue during the course of assessment proceedings before assessing officer.

12. Moreover, we observe that it is not a case where the claim of any deduction has not been lodged in the original return filed under section 139(1) and now the assessee wants to take the benefit of the same in the return of income filed under section 153A. In the instant case, assessee has claimed the business loss and carried forward the loss in the original return of income filed under section 139(1) of the Income Tax Act, 1961 and again in the return filed in response to notice issued under section 153A, however due to some error the claim was not properly appearing in the acknowledgment of return generated and for such genuine error the assessee should not be penalized.

13. In view of the above discussion, I do not find any merits in the orders so passed by the lower authorities regarding declaration of additional income by the assessee, accordingly, we direct the assessing officer to allow the benefit of carry forward of losses as claimed in all the assessment years involved. We direct accordingly.

14. The facts and circumstances in all the years under consideration with respect to all the bunch of other appeals are same. Following the reasoning given hereinabove i.e. in ITA No. 1393/JP/2018 for the assessment year 2008-09, we set aside the orders of the authorities below and allow all the appeals so filed by the different assesses.

15. In the result, all the appeals of the different assesses are allowed in terms indicated hereinabove.”

6. As the facts and circumstances in the impugned appeals are exactly same as has been discussed elaborately by the Tribunal in its Order dated 9-5-2019. Respectfully following the order of the Tribunal dated 9-5-2019, we do not find any merit in the addition so made by the assessing officer by ignoring the assessee’s claim of loss so filed in the return under section 139(1) of the Act

7. In the result, all these three appeals of the assesses are allowed.