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2022 (5) TMI 512 - AT - Income TaxDisallowance of loss - AO disallowed current year’s entire loss and he has not given set off of loss of the current year from the other heads of income - assessee had not filed original return u/s.139(1) and also failed to file the return of income in response to notice u/s.153A within the due date specified, the loss declared by the assessee is not allowable and accordingly, he disallowed the same - assessee submitted that current year’s loss has not been carried forward to the next year and only the assessee has set off the current year’s loss from the other heads of income, which are allowed as per the provisions of the Act. Under Chapter VI, under the head, the assessee can set off, or carry forward and set off of loss as per section 70, 71, 71A, 71B, 72, 72A, 72AA, 72AB, 73, 73A, 74, 74A, 75, 78 & 79 - HELD THAT:- We make it clear that the assessee can set off of current year’s loss from other heads of income and assessee is not eligible to carry forward the balance loss of the current year for the reason that it did not file return of income within the due date of filing of return of income as mentioned in the notice dated 10/11/2014 issued u/s 153A of the Act. We find that the submissions made by both the sides are contrary In nature and, therefore, we deem fit and proper to restore this issue back to the file of the AO with a direction to find out or verify the exact claim of the set off of loss and carried forward, if any, and decide the issue in accordance with law and on merits after providing opportunity of hearing to assessee. Thus, this ground raised by the revenue is treated as allowed for statistical purposes. Addition on account of interest attributable to the debit balance of the partners - partners had withdrawn huge funds from the firm but no interest was charged on these drawings. Thus, according to AO, the interest bearing funds were diverted/misutilised by the partners in the form of interest free drawings - HELD THAT:- On perusal of the balance sheet, it clearly shows that the assessee’s capital account is showing debit balance and further observed that no interest has been charged by the assessee on the debit balance of the partner’s capital account whereas the assessee is paying interest on loans. We observe that both the parties were unable to establish that the interest bearing funds were given to the partners by the assessee and also unable to substantiate that there was direct nexus between the interest bearing loans were given to partners. In view of these observations and considering the totality of the facts and circumstances of the case, we restore this issue to the file of the AO with a direction to examine whether the assessee has given interest bearing loans to the partners and thereafter decide the issue in accordance with law after providing opportunity of being heard to assessee. The assessee is directed to substantiate its claim that no interest bearing funds were utilized by the partners before the AO. Thus, the grounds raised on this issue are treated as allowed for statistical purposes.
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