No Penalty u/s 270A as Loss Declared Under ‘Income from Other Sources’ Couldn’t Be Set Off or Carried Forward | ITAT

Case Details: Badaud Shri Vardhaman Shiksha Samiti vs. ITO - [2023] 157 taxmann.com 742 (Indore-Trib.)

Judiciary and Counsel Details

• • Vijay Pal Rao, Judicial Member & B.M. Biyani, Accountant Member

Facts of the Case

The assessee was an educational society. It filed its return of income for the relevant assessment year. During the assessment proceedings, the Assessing Officer (AO) disallowed the depreciation claimed by the assessee on the building and determined the income at nil.

Further, the AO initiated penalty proceedings and levied the penalty under section 270A(8). On appeal, the CIT(A) upheld the penalty order. Aggrieved by the order, the assessee filed an appeal to the Indore Tribunal.

ITAT Held

The Tribunal held that the assessee claimed a loss under the head “Income from Other Sources, ” including the disallowed depreciation. However, the assessee did not claim a set-off against any other income in the current year and did not carry forward the same to the next year. Thus, the assessee ultimately ignored the same in the set-off and carry-forward portion.

The loss computed by an assessee under the head “Income from other sources” can be set off against any other income in the current year under sections 70 and 71. However, in the instant case, the assessee did not have any other income and was hence unable to claim a set-off.

Further, the carry-forward of loss of “Income from other sources” head to the next year is permitted under section 74A, and that section permits the carry-forward of a particular type of loss, i.e., loss from owning and maintaining racehorses. Since the assessee’s loss had not arisen from such a source, there was no enabling provision to allow carry-forward benefit.

The software utility itself did not allow set-off in the current year or even carry-forward. Therefore, irrespective of whether it was the assessee who voluntarily did not claim any set-off or carry-forward of loss of “Income from Other Sources” or it was automatic in the situation by virtue of law, the fact remained that the Total Income as per return was nil, and the AO also assessed Total Income at nil. Coupled with this, it was also a fact that the assessee did not have any benefit of set-off or carry-forward of loss. Thus, the penalty under section 270A(8) was not leviable.