Section 72 r.w.s. 254, Section 154 – Business loss determined and carried forward by the AO pursuant to an order passed in accordance with directions of the Tribunal u/s 143(3) r.w.s. 254 can be set off in subsequent years though such claim is not made in the return of income. The AO is duty-bound to give relief to the assessee which has resulted pursuant to the order passed by the appellate authority and which has a cascading effect on the subsequent assessment years

26.  [2019] 107
taxmann.com 92 (Pune)

Maharashtra State Warehousing Corporation vs. DCIT

ITA Nos.: 2366 to 2399/Pune/2017

A.Y.s: 2003-04 to 2006-07

Date of order: 3^rd June, 2019

Section 72 r.w.s. 254,
Section 154 – Business loss determined and carried forward by the AO pursuant
to an order passed in accordance with directions of the Tribunal u/s 143(3)
r.w.s. 254 can be set off in subsequent years though such claim is not made in
the return of income. The AO is duty-bound to give relief to the assessee which
has resulted pursuant to the order passed by the appellate authority and which
has a cascading effect on the subsequent assessment years

FACTS

The assessee, a State Government Undertaking, was engaged in
providing warehouse facilities in the State of Maharashtra. For A.Y. 2002-03,
while assessing the total income of the assessee, the AO made certain additions
to the returned income. The assessee contested the additions in an appeal
before the CIT(A) as well as before the Tribunal. The Tribunal restored the
matter back to the AO with certain directions.

The AO passed an order u/s 143(3) r.w.s. 254 and allowed the
final net business loss to be carried forward.

Subsequently, the CIT
invoked section 263 of the Act and held the order passed by the AO u/s 143(3)
r.w.s. 254 to be erroneous and prejudicial to the interest of the Revenue.

The assessee challenged the action of the CIT before the
Tribunal. The Tribunal quashed the order passed by the CIT u/s 263. As a
result, the order passed by the AO based on the directions of the Tribunal
stood restored.

Thereafter, the assessee, in order to claim the set-off of
brought-forward business loss of A.Y. 2002-03, filed an application for
rectification of assessment orders for A.Y. 2003-04 to A.Y. 2006-07. The AO
rejected this application.

Aggrieved, the assessee preferred an appeal to the CIT(A) who
dismissed the appeals of the assessee on the ground that since the set-off was
not claimed in the return of income, the same could not be allowed to the
assessee at a belated stage.

The assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that by the time the order u/s 143(3)
r.w.s. 254 was passed whereby loss was determined and allowed to be carried
forward, the assessee had already filed return of income for the subsequent
assessment years and hence the assessee had no occasion to claim set-off of
brought-forward business loss and it was a case of supervening impossibility.
The Tribunal held that the AO is duty-bound to give relief to the assessee
which has resulted pursuant to the order passed by the appellate authority and
which has a cascading effect on the subsequent assessment years.

Further, the Tribunal relied on the decision of the Bombay
High Court in the case of CIT vs. Pruthvi Brokers & Shareholders (P)
Ltd. [2012] 349 ITR 336 wherein it was held that the assessee is
entitled to raise additional ground not merely in terms of legal submissions
but also additional claims which were not made in the return filed by it. It
was thus held that the assessee was entitled to claim set-off of
brought-forward business loss in A.Y.s 2003-04 to 2006-07.