RAJIV GUPTA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This order shall dispose of I.T.A. Nos. 292 and 305 of 2007, as, according to the learned counsel for the parties, the issues raised herein are identical. However, the facts have been taken from I.T.A. No. 305 of 2007. I.T.A. No. 305 of 2007 has been preferred by the assessee under section 260A of the Income-tax Act, 1961 (in short, "the Act") against the order dated March 20, 2007, annexure A.1 passed by the Income-tax Appellate Tribunal "A" Bench, Chandigarh, in I.T.A. No. 442/CHD/2005 for the assessment year 1997-98. It was admitted on November 5, 2007, for determination of the following substantial question of law:

(2.) A few facts relevant for the decision of the controversy involved, as narrated in I.T.A. No. 305 of 2007 may be noticed. The assessee is the director of M/s. Monga Brox. Ltd. and resident of Ludhiana. He filed income-tax return for the assessment year 1996-97 on December 24, 1996, declaring a total income of Rs. 1,98,630. He claimed certain deductions and set off of loss. On March 25, 1997, the Assessing Officer issued notice under section 143(2) of the Act to the assessee. During the course of the assessment proceedings, the Assessing Officer observed that certain expenses were being paid to the assessee as perquisites by the company which were to be taken as part of the income. The assessee admitted liability and these perquisites were added to the income of the assessee. Thereafter, the Assessing Officer considered loss under the head "Capital gains" amounting to Rs. 2,41,799 and allowed the capital loss to be carried forward. The assessee filed income-tax return for the assessment year 1997-98 on February 3, 1998, declaring a total income of Rs. 2,53,850. The assessee claimed deductions and set off of loss as were allowed to be carried forward in the previous return. On May 4, 1998, the Assessing Officer issued notice under section 143(2) of the Act to the assessee and after hearing the assessee, the Assessing Officer adjusted the loss under the head "Capital gains" amounting to Rs. 24,608 and allowed the balance loss amounting to Rs. 2,17,191 to be carried forward in the next assessment year. On March 13, 2003, the Assessing Officer observed that the return for the assessment year 1996-97 was filed by the assessee on December 24, 1996, and thus was not entitled to the benefit of carrying forward losses. The Assessing Officer issued notice to the assessee as to why the mistake being apparent from the record be not rectified and the adjustment of brought forward long-term capital loss against the income under the same head for the assessment year 1997-98 be not disallowed. The assessee attended the proceedings but the Assessing Officer rejected all the pleas. Against the order passed by the Assessing Officer dated March 13, 2003, under section 154 of the Act, the assessee filed an appeal before the Commissioner of income-tax (Appeals), Ludhiana (CIT(A)). Vide order dated February 16, 2005, annexure A4, the Commissioner of Income-tax (Appeals) confirmed the order passed by the Assessing Officer. Still not satisfied, the assessee preferred an appeal before the Tribunal. Vide order dated March 20, 2007, annexure A.1, the Tribunal dismissed the appeal. Hence the present appeals by the assessee.

(3.) Learned counsel for the appellant-assessee submitted that the disallowance of set off of capital loss for the assessment year 1996-97 in the current assessment year, i.e., 1997-98 without rectifying the assessment order of 1996-97 was unsustainable. In other words, according to the learned counsel, the Assessing Officer could not do so without first rectifying the order passed for the assessment year 1996-97 wherein the loss of Rs. 2,41,799 under the head "Capital gains" was allowed to be carried forward under section 143(3) of the Act. He drew support from the judgment of the Gujarat High Court in Saurashtra Cement and Chemical Industries Ltd. v. CIT,1980 123 ITR 669(Guj).