ACIT 18(2), MUMBAI V. VIJAYRAJ PROPERTIES, MUMBAI

ITA 1266/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79368 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 24-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH RANJAN PRASAD
• Assessee Lawyers: K SHIVARAM
• Keywords: Carry forward of business losses; Reasonable cause; Retraction
• Section: 143(3); 133A; 131; 263

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 1266/M/2011 ( AY: 200 6 - 20 07 ) ACIT - 18(2), R.NO.115, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012. / VS. VIJAYRAJ PROPERTIES, 102 ADITI M. SHIV SENA BHAVAN PATH, DADAR (W), MUMBAI - 28. ./ PAN : AADFV0536F ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO. 3657/M/2011 ( AY: 200 7 - 20 08 ) VIJAYRAJ PROPERTIES, 102 ADITI M. SHIV SENA BHAVAN PATH, DADAR (W), MUMBAI - 28. / VS. ACIT - 18(2), R.NO.115, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012. ./ PAN : AADFV0536F ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI K. SHIVARAM / REVENUE BY : SHRI RAJENDRA KUMAR & MR. RAJESH RANJAN PRASAD , DR / DATE OF HEARING :19 .5 .2014 / DATE OF PRONOUNCEMENT : 4.7 .2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. ITA NO.1266/M/2011 IS FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2006 - 07 AND ITA NO.3657/M/2011 IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE CONNECTED , THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. 2. FIRSTLY, WE SHALL TAKE UP APPEAL ITA NO.1266/M/2011, WHICH IS FILED BY THE REVENUE ON 10.2.2011 IS AGAINST THE ORDER OF CIT (A) - 29, MUMBAI DATED 29.11.2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN NOT RELYING ON THE STATEMENT OF THE PARTNER OF THE ASSESSEE SHRI VIJAY YEOLEKAR RECORDED U/S 131 OF THE IT ACT, 1961 DURING THE SURVEY CONDUCTED ON 26.9.2008, WHEREIN CLAIM OF CARRY FORWARD OF BUSINESS LOSS FOR AY 2006 - 2007 & 2007 - 2008 WAS OFFERED TO BE WITHDRAWN / NOT TO BE PRESSED AS THE BUSINESS LOSS AROSE SOLELY ON ACCOUNT OF INTEREST EXPENSES ON DIVERSION OF FUNDS TO SISTER CONCERN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN ALLOWING LOSS OF RS. 57,45,831/ - WITHOUT APPRECIATING THE FACT THAT THE TAX AUDIT REPORT SHOWS THAT INTEREST HAS NOT BEEN CHARGED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ON THE ADVANCES / LOAN GIVEN TO ITS SISTER CONCERN. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT AND FILED THE RETURN OF INCOME CLAIMING THE LOSS OF RS. 57,45,831/ - . ASSESSMENT WAS COMPLETED DISALLOWING THE SAID LOSS. IN THE PROCESS, AO RELIED HEAVILY ON THE STATEMENT OF ONE OF THE PARTNERS OF THE ASSESSEE NAMELY SHRI VIJAY YEO LEKAR, DATED 26.9.2008 RECORDED U/S 131, DURIN G THE SURVEY ACTION U/S 133A OF THE ACT. IN THE STATEMENT, VIDE QUESTION NO.19, THE SAID PARTNER STATED AS UNDER: Q NO.19 DO YOU WANT TO SAY ANYTHING ELSE? ANS: FURTHER I WOULD LIKE TO CONFIRM THAT FROM THE ABOVE INCOME OF RS. 2,65,28,250/ - OF AY 2009 - 2010, NO LOSS OF EARLIER YEAR I.E., AY 2006 - 2007 OR AY 2009 - 2007 - 08 WILL BE ADJUSTED. I WILL FILE THE RETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 2,65,28,280/ - (TWO CRORES SIXTY FIVE LAKH TWENTY EIGHT THOUSAND AND TWO HUNDRED AND FIFTY) ONLY. I AM GIVING YOU SIX POST DATED CHEQUES TOWARDS MY TAX LIABILITY ON RS. 2,65,28,280/ - . THE ABOVE STATEMENT IS RECORDED WITHOUT ANY THREAT COERCION OR ANY UNDUE INFLUENCE. I HAVE MADE ABOVE DISCLOSURE OF RS. 2,65,28,250/ - . 4. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE SUBMITTED THAT THE SAID STATEMENT WAS GIVEN WITHOUT HAVING PROPER KNOWLEDGE OF LAW AND OTHERWISE THE SAID LOSS IS RIGHTLY ALLOWABLE AS THE SAME IS UNDISPUTEDLY A BUSINESS LOSS, THE FACT OF WHICH WAS DULY BY THE ASSESSING OFFICER. THERE WAS A DEL AY IN THE EXECUTION OF THE PROJECT AND MOUNTED INTEREST INCOME IS THE CAUSE OF SAID LOSS DUE TO DELAY IN COMPLETION OF PROJECT. AO REJECTED THE SAME, RELIED HEAVILY ON THE SAID STATEMENT OF SHRI VIJAY YEO LEKAR, DISALLOWED THE LOSS AND DENIED THE CARRY FOR WARD BENEFIT OF THE LOSS. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 5. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, VIDE THE IMPUGNED ORDER, CIT (A) GRANTED RELIEF TO THE ASSESSEE FULLY STATING THAT MERE SUBMISSION WHICH IS NOT CO RROBORATED BY ANOTHER EVIDENCES CANNOT BE THE GROUND FOR DENIAL OF 3 THE SAID LOSS. IT IS THE RIGHT OF THE ASSESSES TO CARRY FORWARD THE SAID LOSS AS PER THE STATUTE. THE STATEMENT OF THE SAID PARTNER, WHICH SUBSEQUENTLY RETRACTED, IS NOT A BASIS FOR MAKING SUCH HUGE DISALLOWANCES. ON MERITS, HE OBSERVED THAT THERE IS NO EVIDENCE TO SUGGEST THAT INTEREST BEARING FUNDS WERE DIVERTED TOWARDS INTEREST FREE ADVANCES OF THE RELATED CONCERNS I.E., MATOSHREE PROPERTIES OR OTHERS. GIVING REASONS, CIT (A) GRANTED R ELIEF TO THE ASSESSEE. PARA 5 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO AS WELL AS THE STATEMENT OF MR. VIJAY YE OLEKAR. 7. ON HEARING BOTH THE PARTIES, WE FIND IT RELEVANT TO EXTRACT THE SA ID PARA 5 OF THE IMPUGNED ORDER WHICH READS AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. (1) THE RIGHT TO CARRY FORWARD A LOSS IS A STATUTORY RIGHT AND CANNOT BE LIMITED BY A STATEMENT U/S 133A. THE INCOME / LOSS HAS TO BE ASSESSED ON THE BASIS OF GIVEN FACTS. THE STATEMENT IS ONLY A CORROBORATIVE EVIDENCE MADE TO SUPPORT THE FACT OF EARNING INCOME OR INCURRING LOSS. (2) THE DEC ISIONS RELIED UPON BY THE ASSESSING OFFICER ONLY SUPPORTS THIS BASIC THESIS. NOWHERE IT CAN BE SAID THAT ON THE BASIS OF A STATEMENT ALONE, THE INCOME / LOSS CAN BE ASSESSED. (3) THE STATEMENT MADE HAS BEEN RETRACTED. (4) THERE IS NO SPECIFIC FINDING THAT INTERES T BEARING FUNDS HAVE BEEN DIVERTED TOWARDS INTEREST FREE ADVANCES. OUT OF TOTAL FUNDS ADVANCED TO VARIOUS PARTIES OF RS. 1.49 CRS, INTEREST HAS BEEN CHARGED ON ADVANCES OF RS. 55.35 LAKHS GIVEN TO MATOSHREE PROPERTIES. THE REST OF THE ADVANCES ARE COVERE D BY NON - INTEREST BEARING FUNDS RECEIVED FROM PARTIES SUCH AS M/S. SOMRAJ DEVELOPERS SERVICES (55.00 LAKHS) AND RICHA REALTORS PVT LTD (18.87 LAKHS) AND VARIOUS ADVANCES RECEIVED INTEREST FREE. (5) IT IS ALSO TRUE THAT MAJORITY OF THESE ADVANCES WERE GIVEN IN THE EARLIER YEAR I.E., AY 2005 - 2006 AND NO ADVERSE FINDING WAS MADE IN THE ORDER U/S 143(3). (6) IN THE NEXT YEAR LOSS OF RS. 80,97,803/ - HAS BEEN ACCEPTED IN AN ORDER U/S 143(3). THIS PERIOD WAS ALSO COVERED IN THE STATEMENT. THEREFORE, IT CAN BE SEEN THAT, THE RETURN OF INCOME DISCLOSING BUSINESS LOSS CANNOT BE ASSESSED AS NIL ON THE BASIS OF GIVEN FACTS AND SOLELY ON THE BASIS OF APPELLANTS OWN STATEMENT. IN VIEW OF THIS DISALLOWANCE OF RS. 57,45,831/ - IS DELETED AND ASSESSING OFFICER IS DIRECTED TO ALLOW CARRY FORWARD OF THIS LOSS. 8. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO THIRD PARTY EVIDENCE TO SUGGEST THAT IMPUGNED LOSS IS A BOGUS LOSS OR WHICH IS NOT STATUTORILY DISALLOWABLE. IN OUR OPINION, THE ADDITION MADE BY THE AO IS UNSUSTAINABLE IN LA W. THE ANSWER TO QUESTION NO.19, EXTRACTED ABOVE READ WITH CONCLUSION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, INDICATES THE ARBITRARY DECISIONS OF THE REVENUE WHICH ARE 4 UNSUSTAINABLE IN LAW. THEREFORE, WE ARE OF THE OPINION THAT THE CONCLUSIONS DRAWN BY THE CIT (A) ARE FAIR AND REASONABLE AND THEY DO NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ./I.T.A. NO.3657/M/2011 (AY:2007 - 2008) (BY ASSESSEE) 10. THIS APPEAL FILED BY THE ASSESSEE 6.5.2011 IS AGAINST THE ORDER OF THE CIT - 18, MUMBAI U/S 263 OF THE ACT DATED 18.4.2011 FOR THE AY 2007 - 2008. IN THIS APPEAL ASSESSEE RAISED THE FOLLOWING EFFECTIVE GROUND WHICH READ S AS U NDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) ERRED IN SETTING ASIDE THE ASSESSMENT FOR THE AY 2007 - 2008 COMPLETED U/S 143(3) OF THE ACT. 11. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR THE AY 2007 - 2008 CLAIMING THE CARRY FORWARD LOSS OF RS. 81,13,812/ - . THE RETURN OF INCOME WAS SCRUTINIZED ON 7.12.2009. AFTER EXAMINING THE CLAIMS OF THE ASSESSSEE AND CALLING FOR DETAILS, THE ASSESSED LOSS IS QUAN TIFIED AT RS. 80,97,803/ - . THERE WAS A SURVEY ACTION ON THE ASSESSEE AS DISCUSSED IN PRECEDING PARAGRAPHS OF THIS ORDER IN CONNECTION WITH ITA NO.1266/M/2011 (SUPRA) AND STATEMENT WAS RECORDED FROM MR. VIJAY YE OLEKAR, WHEREIN SHRI VIJAY YEOLEKAR STATED TH AT HE SHALL NOT CLAIM THE CARRY FORWARD BENEFIT OF LOSS FOR THE AY 2006 - 2007 AND AY 2007 - 2008. CONSIDERING THE FACT THAT AO ALLOWED THE CLAIM OF CARRY FORWARD LOSS FO R THE AY 2007 - 2008, THE CIT INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT AND HELD THA T THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. AO WAS DIRECTED TO DISALLOW THE LOSS AND MODIFY HIS ASSESSMENT ACCORDINGLY . IN THE REVIEW ORDER, CIT HEAVILY RELIED ON THE STATEME NT RECORDED FROM SHRI VIJAY YE OLEKAR AND HELD THAT THE CONFESSION MADE BY HIM BEFORE THE OFFICER IS BINDING EVEN IF THE SAME IS RETRACTED SUBSEQUENTLY. HE IGNORED THE FACT THAT SIMILAR DISALLOWANCE MADE FOR THE AY 2006 - 2007 AND THE SAME WAS REVERSED BY THE CIT, WHICH IS A MATTER OF APPEAL BEFORE THE ITAT AT THE TIME OF PASSING OF THE REVIEW ORDER. CIT ALSO NOTED THAT WHILE ALLOWING THE CARRY FORWARD BENEFIT OF LOSS FOR THE AY 2007 - 2008, AO HAS NOT GIVEN ANY REASONING AND HE DEFERRED FROM THAT OF THE ASSESSMENT YEAR 2006 - 2007. THUS, HE HELD THAT AO HAS NO T APPLIED HIS MIND TO THE ABOVE FACTS AND 5 ALLOWED THE CLAIM OF CARRY FORWARD OF LOSSES ERRONEOUSLY. DURING THE PROCEEDINGS, ASSESSEE SUBMITTED THAT THE AO WAS INFORMED ABOUT THE SURVEY ACTION AND THE SUBMISSIONS TO THE CIT. IT WAS ALSO SUBMITTED THAT AO FINALIZED THE ASSESSMENT ONLY AFTER CONSIDERING THE CLAIMS OF THE ASSESSEE AND THE LEGAL POSITION RELATED THERETO. THE CONTENTS OF PARA 4.1 ARE RELEVANT HERE. ASSESSEE ARGUED THAT THE ORDER PASSED BY THE AO U/S 143(3) IS NOT ERRONEOUS. THEY ALSO SUBMITT ED THAT MERELY RELYING ON THE STATEME NT RECORDED FROM SHRI VIJAY YE OLEKAR, WHICH IS NOT CORROBORATED BY ANY INCRIMINATING EVIDENCES CANNOT BE THE GROUND FOR DENYING THE CLAIM OF CARRY FORWARD BENEFIT OF LOSSES WHICH ARE STATUTORILY ALLOWABLE UNDER THE LAW. IT IS THE SUBMISSION OF THE ASSESSEE AND THE SAME CANNOT BE TAKEN AWAY BY A STATEMENT GIVEN BY A PERSON WHO IS NOT LEGALLY WELL INFORMED. ON MERITS, ASSESSEE ARGUED THAT THE LOSS IN QUESTION RELATES TO THE FINANCIAL LIABILITY OF THE ASSESSEE WHICH HAVE GONE UP DUE TO DELAY IN PROJECT RELATING TO REAL ESTATE. CIT CONSIDERING THE ABOVE STATEMENT AND MENTIONED THAT THE ASSESSMENT ORDER DATED 7.12.2009 FOR THE AY 2007 - 08 WAS FINALIZED WITHOUT CHECKING THE RECORD FOR THE AY 2006 - 07 AND THE STATEMENT GATHERED DURING THE SURVEY ACTION ON 26.9.2008. HE ALSO MENTIONED THAT THERE IS NO RECORD TO SUGGEST THAT THE AO IS AWARE OF THE ABOVE SAID STATEMENT. THE FACT THAT THE CLAIM OF THE ASSESSEE WAS DELETED FOR THE AY 2007 - 08 SHOULD NOT GIVE AWAY IN FINALIZING THE A SSESSMENT FOR THE AY 2007 - 2008. THUS, HE CONCLUDED BY SAYING THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND. HE ALSO REJECTED THE SUBMISSION THAT AO HAS TAKEN A VIEW OF ALLOWABILITY OF LOSS. THUS, HE HELD THAT THE ASSESSMENT ORDER DATED 7.12.2009 I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 12. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE MADE A CLAIM OF CARRY FORWARD OF THE LOSSES IN THE RETURN OF INCOME. IN THIS REGARD, HE BROUGHT OUR A TTENTION TO THE PAGES 2 AND 3 OF THE PAPER BOOK. HE ALSO MENTIONED THAT THE ISSUE RELATING TO LOSSES WAS EXAMINED IN DETAIL. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE LETTERS DATED 5.2.2009 (CLARIFICATION NO.2 AT PAGE 23 OF THE PAPER BOOK). THE SAID CLARIFICATION DEALS WITH THE SURVEY ACTION. HE ALSO BROUGHT OUT ATTENTION TO THE OTHER LETTERS DATED 17.2.2009, 26.11.2009 (ITEM NO.5) AND 2.12.2009 (ITEM NO.3). FURTHER, HE MENTIONED THAT THE ASSESSMENTS FOR BOTH YEARS WERE D ONE IN THE SAME RANGE - 18, MUMBAI AND THE QUESTION OF NON - AVAILABILITY OF RECORDS SHOULD NOT BE ACCEPTED AS A REASONABLE CAUSE. THE FACT THAT THE LOSS IS RELATABLE TO THE INTEREST EXPENDITURE 6 WHICH IS RIGHTLY ALLOWABLE WAS HIGHLIGHTED. IT IS THE SUBMISS ION OF THE ASSESSEE THAT THE AO APPLIED HIS MIND TO ALL THE ASPECTS OF THE SURVEY ACTION AND BEFORE PASSING THE REGULAR ASSESSMENT. THE DECISION TAKEN BY THE AO IN NO DENYING THE CARRY FORWARD BENEFITS OF THE BUSINESS LOSSES IS ONE OF THE VIEWS TAKEN BY T HE AO. REFERRING TO THE LEGAL ASPECTS OF THE REVIEW ORDER, LD COUNSEL MENTIONED THAT THE DENIAL OF SUCH CARRY FORWARD BENEFIT OF LOSSES MERELY BASED ON THE STATEMENT RECORDED IN THE SURVEY ACTION IS UNSUSTAINABLE. THE STATEMENT IN QUESTION IS ITSELF DEBA TABLE ONE WHEN THE SAME IS SUBSEQUENTLY RETRACTED. FURTHER, HE BROUGHT OUR ATTENTION TO THE OUTCOME OF THE DISALLOWANCE OF LOSS FOR THE AY 2006 - 07 DURING THE FIRST APPELLATE PROCEEDINGS AND MENTIONED THAT SUCH DISALLOWANCE WAS RESTORED BY THE CIT . THUS, EXPLAINING THE FALSEHOOD STATEMENT TAKEN BY THE REVENUE FROM SHRI VIJAY YE OLEKAR, LD COUNSEL FOR THE ASSESSEE SUMMED UP BY STATING THAT WHEN THE ISSUE IS DEBATABLE, CIT CANNOT ASSUME JURISDICTION U/S 263 OF THE ACT. HE RELIED ON VARIOUS DECISIONS TO SUPP ORT THE SAME. 13. ON THE OTHER HAND, LD DR RELIED HEAVILY ON THE ORDER OF THE CIT AND MENTIONED THAT THE FACTS EXISTING AT THE TIME OF PASSING OF THE ORDER U/S 263 SHOULD ONLY BE SEEN. THE OUTCOME OF THE FIRST APPELLATE PROCEEDINGS FOR THE AY 2006 - 2007 M UST NOT BE CONSIDERED. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES ALONG WITH THE CONTENTS OF THE PAPER BOOK FILED BEFORE US. THE PAPER BOOK CONTAINS NOT ONLY THE COPIES OF THE RETURN OF INCOME BUT ALSO THE CORRE SPONDENCE WITH THE AO AT THE TIME OF REGULAR ASSESSMENT PROCEEDINGS BEFORE THE YEAR UNDER CONSIDERATION AND ALSO FOR THE LATTER YEARS. REGARDING THE AVAILABILITY OF INFORMATION IN POSSESSION OF AO, PAGE 23 OF THE PAPER BOOK CERTAIN REFERS TO THE FACTS (CLA RIFICATION NO.2) RELATING TO THE SURVEY ACTION U/S 133A OF THE ACT. OBVIOUSLY, AO IS IN POSSESSION OF THE INFORMATION ABOUT THE OCCURRENCE OF SURVEY ACTION ON THE ASSESSEE. THE DATE OF SURVEY ACTION ON 26.9.2008 AND PASSING OF THE ASSESSMENT ORDER FOR TH E AY 2006 - 07 ON 29.12.2008 SUGGEST THAT THE SAME ARE ANTERIOR IN TIME TO THE DATE OF PASSING OF THE ASSESSMENT ORDER FOR THE AY 2007 - 08. CONSIDERING THE FACT THAT BOTH THE ASSESSMENTS ARE COMPLETED IN RANGE - 18, MUMBAI TOGETHER WITH THE FACT THAT THE AO IS INFORMED OF THE SURVEY ACTION AS REFERRED ABOVE, IT IS REASONABLE TO PRESUME THAT THE AO IS AWARE OF THE FACTS AND THE VIEW TAKEN BY HIM 7 IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF LOSSES IS ONE OF THE POSSIBLE VIEWS TAKEN BY HIM. CIT RELI ED HEAVILY ON THE STATEMENT OF SHRI VIJAY YEO LEKAR, WHICH ITSELF IS DEBATABLE ONE IN VIEW OF THE RETRACTIONS AND THE SAME IS NOT SUPPORTED BY ANY MATERIAL THAT THE LOSS CLAIMED BY THE ASSESSEE IS ALLOWABLE ONE. THE ARBITRARY STATEMENT TAKEN BY THE REVENUE AUTHORITIES DURING THE SURVEY ACTION CANNOT CONSTITUTE BASIS FOR DENIAL OF RIGHTFUL CLAIM IN THE RETURN OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE ASSUMPTION OF JURISDICTION U/S 263 BY THE CIT IS NOT SUSTAINABLE IN LAW. FURTHER, WE FIND THAT THE DECISION OF THE AO IN DISALLOWING THE SIMILAR CLAIM FOR THE AY 2006 - 07 WAS REVERSED BY THE CIT (A) AND THE SAME IS IN CONFORMITY BY US IN THIS ORDER IN CONNECTION WITH THE APPEAL ITA NO.1266/M/2011 (SUPRA). THUS, THE DISALLOWABILITY OF SUCH CLAIM OF CARRY FORWARD OF BUSINESS LOSSES IS UNSUSTAINABLE IN LAW. THEREFORE, THE CIT (A) CANNOT ASSUME JURISDICTION WHEN THERE IS NO ERRONEOUS ASSESSMENT OF LAW BY THE AO. CIT CAN ASSUME JURISDICTION ONLY WHEN THERE IS ERRONEOUS ASSESSMENT OF LAW / FACT BY THE LOWER AUTHORITIES. CONSIDERING THE FACT THAT THERE IS NO ASSUMPTION OF LAW OR FACT AND WHEN THERE IS EVIDENCE TO SUGGEST THAT AO IS INFORMED BY THE SURVEY ACTION , THE CIT ORDER IS NOT VALID. THEREFORE, THE DIRECTIONS BY HIM TO THE AO IN THE IMPUGNED ORDER ARE NOT SUSTAINABLE IN LAW. ACCORDINGLY, THE GROUND RAI SED BY THE ASSESSEE IS ALLOWED. 15 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 4.7.2014. SD/ - SD/ - ( I.P. BANSAL ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 4.7 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, 8 ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI