The Cuttack Bench of Income Tax Appellate Tribunal ( ITAT ) directed disallowance of set-off of the brought-forward loss of Rs.1,47,26,425 citing that adjustments had already been made in previous years.
Posco India Private Limited, the assessee manufactures steel rolled products and places. The assessee filed its income tax return declaring Rs. 15,50,04,960 as total income after claiming a set-off of carried-forward business losses and depreciation of Rs. 2,40,17,457.
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The Assessing Officer ( AO ) completed the assessment adjusting the income to Rs. 25,83,26,990. The Principal Commissioner of Income Tax ( PCIT ) found erroneous and prejudicial to the revenue’s interest in the AO’s assessment and revised the assessment.
PCIT directed the disallowance of a business loss of ₹1,47,26,425 for the assessment year 2018-2019 and to reduce interest income from fixed assets based on a previous ITAT ruling in the company’s favor for the assessment year 2015-2016.
Aggrieved by the PCIT revision order, the assessee challenged the order before the Cuttack Bench of ITAT arguing that the loss and depreciation claimed from previous years had not yet been finalized because of pending litigation in other forums.
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Therefore, the set-off of the carried-forward losses and depreciation was legitimate and should not be treated as erroneous or prejudicial to the revenue.
On the contrary, the revenue counsel argued that AO had allowed the carry-forward of business losses incorrectly without considering the reduced losses from prior years’ assessments.
The counsel contended that since previous years’ assessments had reduced losses for the assessee, the AO’s decision to allow full carried-forward losses based on the company’s returns was erroneous and against the revenue’s interest.
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The two-member bench comprising George Mathan ( Judicial Member ) and Manish Agarwal ( Accountant Member ) observed that assessments for previous years had been completed under Section 143(3) and reductions in losses were made. The AO’s allowance of the set-off based on the assessee’s income tax return for those years was erroneous as well as prejudicial to the interest of revenue
The tribunal agreed with the PCIT’s observation that the AO had incorrectly allowed the set-off of the business loss for the assessment year 2018-2019. Therefore, ITAT directs AO to disallow the assessee’s set-off of business losses.
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