ITAT Orders Fresh Review of Brought-Forward Losses and TDS Credit Claims

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has provided relief to real estate firm Metro Creators by directing the Income Tax Department to re-examine its claim for adjustment of past business losses and tax deducted at source (TDS) credit.

The dispute related to the Assessment Year 2018-19. Metro Creators, a builder and developer engaged in the sale of flats, had filed its income tax return declaring income of about Rs 21,31,982. In the return, the assessee claimed
setting off brought forward losses amounting to Rs 3,76,801 and brought forward unabsorbed depreciation amounting to Rs 889.

However, while processing the return under Section 143(1), the CPC did not allow the adjustment of these carried-forward losses and depreciation. As a result, the taxable income was substantially increased. The assessee then filed a rectification application under Section 154, but the CPC rejected the request.

The firm then approached the CIT(A). The CIT(A) dismissed the appeal, observing that a later rectification order had already been passed and that the assessee had not claimed losses against income declared under Section 44AD. The appellate authority also denied the firm’s claim for TDS credit of Rs 56,200, stating that the relevant details were not properly filled in the TDS schedule of the income tax return.

Being aggrieved, the firm then approached the ITAT Mumbai. The assessee argued that returns for Assessment Years 2016-17 and 2017-18 had been filed within the prescribed time. It also contended that the TDS credit was reflected in Form 26AS and therefore, should be granted. On the other hand, the department defended the orders passed by the lower authorities and opposed the assessee’s claims.

After considering the submissions of both sides, the Tribunal stated, “in the interest of justice, we find it appropriate to set aside the matter back to the file of Ld. AO to examine the claim of assessee and allow the same in accordance with the law after hearing the assessee on the issue.”

The tribunal directed the AO to verify the assessee’s claims and decide the matter afresh in accordance with law after providing an opportunity of hearing to the assessee.

As a result, the appeal was allowed for statistical purposes.