TMI Blog1988 (7) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... harmanath Corporation w.e.f. 1st Oct., 1973 vide deed of partnership dt. 16th Oct., 1973. (3) On 20th March, 1974, the aforesaid firm filed application for registration under ss. 184/185 of the Act, in Form No. 11 for the asst. yr. 1975-76 corresponding to the previous year S.Y 2030 (17th Oct., 1973 to 13th Nov., 1974). (4) From Nos. 11 11A were filed by the aforesaid firm on 11th Nov., 1974 with a deed of partnership dt. 3rd July, 1974 as there was change in the constitution of the firm. (5) On 15th May, 1975, the aforesaid firm filed return for the asst. yr. 1975-76 declaring loss of Rs. 1,29,591. (6) No action appears to have been taken by the ITO in the case of the aforesaid firm. (7) For the asst. yr. 1976-77, the aforesaid firm filed return declaring loss of Rs.96,761 along with From No. 12 for continuation of registration. (8) On 29th March, 1979, the ITO assessed the aforesaid firm in the status of registered firm on a total loss of Rs. 90,000. Under s. 158 of the Act, he determined the assessee's share of loss in the said firm of Rs. 81,000. (9) On 31st July, 1976, during S. Y. 2032, the aforesaid firm was dissolved and the assessee took over all the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return reads as under : "Business Income: (a) Profit from proprietory business in name of Dharmanath Corporation for. Y. 2034 as per copy of profit and loss a/c enclosed 1,51,971 (b) Loss in business in name of Weyburne Pharmaceuticals. No purchase or sale done during the year. As per information and details given in past years the stock is lying pledged with Bank which is deteriorating. Hence loss on deterioration is claimed as under : Opening stock as per details given last year 48,000 Less : Estimated deterioration @ 20 per cent of stock with Bank 9,600 Balance stock 38,400 . 9,600 1,42,371 Less : Out of the total loss of Rs. 2,14,176 as per details given in note below, Rs. 1,42,371 is claimed as set off and Balance Rs. 71,405 is claimed as carried forward 1,42,371 Nil Total Income Nil ..Note: 1. Loss for asst. yr. 1974-75 as per assessment order dt. 24th March, 1981 as per self A.O. Rs. 43,360 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner: "4. It was stated that right from the beginning when the original assessment proceedings were going on before the ITO, the appellant had taken a consistent stand by stating that till that date neither it nor the firm of M/s Dharmanath Corporation had received from the Department either the order under s. 143(3) or any order granting or refusing registration for that year. In such circumstances, it was argued that obviously the appellant could not have produced before the ITO the order required by him (the ITO). 5. The ITO assessing the firm of M/s Dharmanath Corporation as to what was the result for asst. yr. 1975-76 return filed by that firm. He could have also sent an Inspector for that purpose. Since no such work was done by him, the assessment is hereby set aside with a direction that the ITO will make necessary inquiry by suitable manner and will find out as to whether the firm of M/s Dharmanath Corporation had been granted registration by the Department or not. He will therefore, pass an order on merits according to the provisions of law and will give proper treatment in respect of the loss claimed by the appellant from the firm of M/s Dharmanath Corporation. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) In this case the assessee has claimed a set off of Rs. 43,360 of the loss determined in asst. yr. 1974-75. The assessee was a partner in M/s Weyburne Pharmaceuticals which firm was dissolved on 24th Oct., 1972, relevant to asst. yr. 1973-74. Thereafter, the business of this firm was taken over by the assessee as proprietory concern. From this business the assessee incurred a loss. The total loss was determined at Rs. 50,000 in the assessment order dt. 24th March, 1981 and after set off of the income of the assessee being the share of profit from M/s Dharmanath Corpn., the total loss was computed at Rs. 43,360 and this loess has been claimed as set off against the income of the assessee earned from the business other than the proprietory business carried on by the assessee in the name of M/s Weyburne Pharmaceuticals. During the year the assessee did not earn any profits from the business run in the name of Weyburne Pharmaceuticals as proprietory concern. Hence, if there is no income from this business, then naturally the loss incurred by the assessee in this business cannot be given as a set off. The assessee is only entitled to get the set off of the business loss of Rs. 43, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for carry forward and set off of loss of Rs. 1,16,731 the Income Tax Authorities were not justified in ignoring the same merely on the ground that no action had been taken by the concerned ITO in the case of the aforesaid firm in which the assessee was partner. In the said case, the Hon'ble Supreme Court has clearly held that failure on the part of the ITO to comply strictly with the provisions of the Act, should not be permitted to be taken advantage of by the Revenue nor should it be used to the prejudice of the assessee. Inviting our attention to the statement of facts filed before the Commissioner (A) as well as relevant portion of the order of the ITO (reproduced above), the learned counsel for the assessee highlighted the fact that even though M/s Dharmanath Corpn. had in fact filed its return of income for the asst. yr. 1975-76 along with application for registration, the concerned ITO had not taken any action thereon. Therefore, in view of the said decision of the Hon'ble Supreme Court, the assessee's claim for carry forward and set off of loss of Rs. 1, 16,731 ought to have been accepted by the Income Tax Authorities. Relying on an order of the Tribunal reported in IT Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile Mills Ltd. vs. ITO (1985) 45 CTR (Guj) 274 (FB) : (1985) 151 ITR 389 (Guj) (FB). In this connection, he invited our attention to the following observations appearing at page 423 of the report: "The other approach made to the case by the Andhra Pradesh High Court concerned the meaning given by the Court to the term "regular assessment" in s. 214. The view taken was that an order under s. 143 or s. 144 could only be an order passed originally by the ITO and not an order pursuant to an appellate or revisional decision. Even the Department has no such case before us. Naturally so. When, to give effect to an appellate decision an ITO is called upon to pass a revised assessment order he can act only under the provision of s. 143. He acts under s. 143. Otherwise, he will have no power to pass an order at all. The orders, which are before us on the basis of which refunds were made, refer to the section under which the orders are passed as s. 143 and as we noticed that is not a matter in controversy. May be that regular assessment may not include assessment of escaped income for "regular assessment" having been defined as one made under s. 143 or s. 144, if another provision of law en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative for the Department submitted that in view of proviso to cl. (i) of sub-s. (1) of s. 72 of the Act, the ITO was fully justified in withdrawing the said loss. According to him, the AAC, vide his order dt. 7th Feb., 1983, had set aside the entire assessment with a direction to the ITO to reframe the same and, therefore, the ITO could have withdrawn carry forward and set off of determined loss of Rs. 43,460, in the assessment made afresh. 10.2 Regarding charging of interest under s. 139(8) and s. 217(1A) of the Act, he submitted that since the assessment framed by the ITO was an original assessment, he had rightly charged interest under those sections. 11. We have carefully considered the rival submissions of the parties and we find considerable force in the submissions made on behalf of the assessee on all the issues. According to us, the ratio laid down in the case of CIT vs. Biharilal Ramcharan Ltd. clearly support the assessee's case that she should have been allowed to carry forward and set off of her share of loss of Rs. 1,16,731 in the year under consideration. It is quite apparent from the records that the ITO having jurisdiction on M/s Dharmanath Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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