TMI Blog2011 (6) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... e carried forward as per section 72 - Hence, direct the Assessing Officer to allow carried forward of business loss as per section 72 of the Act - Decided in favour of assessee. - IT APPEAL NOS. 825 & 837 (AHD.) OF 2009 - - - Dated:- 30-6-2011 - G.D. AGARWAL, D.K. TYAGI, JJ. R.R. Pathak for the Appellant. Sanjay R. Shah for the Respondent. ORDER G.D. Agarwal, Vice-President. These are cross-appeals by the revenue and the assessee against the orders of the Commissioner of Income-tax (Appeals), Gandhinagar arising out of the order of the Assessing Officer passed under section 154 of the Income-tax Act, 1961. For the sake of convenience, we dispose of the appeals and CO by this common order. 2. The grounds raised in these appeals read as under: ITA No. 825/Ahd/2009 "1. The ld.CIT(A) has erred in law and on facts of the case in directing the Assessing Officer to allow the claim of carry forward unabsorbed depreciation loss relying upon the provision of Explanation 5 to section 32 of the Act. However, the provision of Explanation 5 to section 32 is introduced with effect from 1-4-2002 whereas the assessment year involved is 1999-2000." ITA No. 836/Ahd/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(3) of the act and, consequently the provisions of section 80 are also not applicable in appellant's case. It is submitted that it be so held now. 3.2 The learned CIT(A) failed to appreciate loss was determined pursuance to order giving effect to appellate order and not due to reassessment under section 147 of Income-tax Act. It is submitted that in the facts and circumstances such loss ought to have been allowed to be earned forward." 3. The facts of the case are that the assessee is a co-operative society deriving income from processing of milk, milk products and manufacturing of cattle feed. The assessment year under consideration is assessment year 1999-2000 for which the assessee furnished the return of income on 27-12-1999 declaring total income at NIL. The return was processed under section 143(1) of the Act on 15-12-2000 at the returned income. Thereafter, notice under section 148 was issued on 29-3-2006. In response to which, the assessee furnished the return of income on 25-4-2006 declaring income at NIL. The assessment was completed under section 143(3) read with section 147 at the total income of Rs. 48,19,80,910. The assessee filed appeal before the CIT(A) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross-objection supporting the order of the CIT(A). 5. Since all the issues arising in the revenue's appeal as well as assessee's appeal/CO are inter-related they are being considered together for the sake of convenience. 6. At the time of hearing before us, it is stated by the learned DR that as per the return of income furnished by the assessee, the income declared was NIL. As per the section 80 of the IT Act loss can be allowed to be carried forward only when it has been determined in pursuance to a return filed under section 139(3). As per section 139(3), the assessee has to furnish the return of loss in a prescribed form and verify in the prescribed manner before the due date for furnishing the return of income. Since the assessee has not furnished any return of loss, the question of allowing the carry forward of the loss cannot arise. He also stated that the return of income, declaring NIL income was accepted under section 143(1) and thereafter the notice under section 148 was issued. As per the decision of the Hon'ble Apex Court in the case of Sun Engineering Works (P.) Ltd. (supra), section 147 is for the benefit of the Revenue the assessee cannot claim any benefit bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the CO is only in support of the order of the CIT(A). 9. We have carefully considered the arguments of both the sides and perused the material placed before us. In the revenue's appeal, the only issue is with regard to carry forward of unabsorbed depreciation. The sub-section (2) of section 32 reads as under: "(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years." From the above it is evident that for carry forward of unabsorbed depreciation, the only condition is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r profession" is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where he has no income under any other head, the whole loss 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 business or profession carried on by him and 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: Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinuted in the circumstances specified in that section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable to such busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1) a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1)." From the above, it is evident that the sub-section would be applicable in the case of a person who has sustained a loss in any previous year under the head "Profits and Gains of business or profession" or "Capital Gain" and has claimed such loss to be carried forward. In such circumstances, he has to furnish the return of income within the time allowed under section 139(1) of the Act. The case of the revenue is that since the assessee has furnished the "NIL" return, because of the section 139(3), the assessee will not be entitled to carry forward of the business loss. We are unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopened under section 148. In the case of Sun Engineering Works (P.) Ltd. (supra), the Hon'ble Apex Court held at page Nos. 320 and 321 of 198 ITR as under: "As a result of the aforesaid discussion, we find that, in proceedings under section 147 of the Act, the Income-tax Officer may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of the notice under section 148 and where reassessment is made under section 147 in respect of income which has escaped tax, the Income-tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income-tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under section 147. An asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reassessment and whether in the reassessment, the assessee has right to re-agitate the question which had been decided in the original assessment proceedings. The Hon'ble Apex Court held that when the assessment is reopened, it is only the under assessment, which is set aside and not the entire assessment. The Assessing Officer cannot make an order of re-assessment unconcerned with the original order of the assessment in respect of the matters, which are not subject of proceedings under section 147. However, before us, the issue is different. The assessee has not claimed re-adjudication of any question which had been decided in the original assessment proceedings. In fact, the assessment proceedings as well as appellate proceeding are already completed. The Assessing Officer himself has given the effect to the appellate orders and determined the loss at Rs. 5,41,00,842. The above loss is consisted of two components - one is unabsorbed depreciation amounting to Rs. 5,10,45,563 and other is business loss of Rs. 30,55,273. As against the NIL return income, how the loss is determined after the order of the appellate authorities, we are not aware, though the assessee explained that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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