Business Loss cannot be disallowed as AO has not Rejected Books of Accounts: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad held that business loss cannot be disallowed as Assessing Officer has not rejected books of accounts.

The assessee, Nilamben Sandipbhai Parikh is engaged in the business of trading in dyes, chemicals & intermediates. The assessee filed an e-return of income on 30.09.2019 declaring a total income of Rs. nil. During the year the assessee has shown a gross turnover of Rs.75,89,25,857/-, gross profit of Rs. (-) 79,40,824 and net profit of Rs. (-) 47,01,251/-.

After setting off certain disallowances/additions carried forward a net loss of Rs.46,98,715/- to the subsequent year by the assessee. After perusal of the submissions made by the assessee, the Assessing Officer made additions of Rs.24,22,048/- related to unaccounted purchases, Rs.47,01,251/- towards disallowance of loss and Rs.3,72,785/- towards disallowance of service tax paid.

Being aggrieved by the assessment order the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. Aggrieved by the order of the CIT, the assessee is in appeal before the Tribunal.

The Bench consisting of Annapurna Gupta, Accountant Member, and Suchitra Kamble, Judicial Member considered the related to disallowance of business loss of Rs.47,01,251/- the AR submitted that the assessee‘s books were never rejected and details of business loss were there before the Assessing Officer as well as before the CIT(A). Hence, the same should have been allowed.

The Tribunal held that “The CIT(A) has directed the Assessing Officer to compute the taxable income of the assessee but has not directed the business loss quantified by the assessee to be taken into cognizance. The books were never rejected by the Assessing Officer and thus business loss cannot be disallowed without taking cognizance of all the relevant aspects of the matter. Therefore, we direct the Assessing Officer to compute the taxable income thereby granting the business loss after verifying the quantification of the loss claimed by the assessee. Needless to say, the assessee is given the opportunity of hearing by following the principles of natural justice.”

The Counsel for the appellant is M K Patel and the Counsel for the respondent is G C Daxini.

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