The appeal filed by the Revenue arose from the order passed by the National Faceless Appeal Centre for Assessment Year 2014-15. The assessee, Sri Lakshmi Electro Smelters Private Limited, is engaged in the business of manufacturing and sale of ferro alloys.

The return of income for the relevant assessment year was filed declaring a nominal income. The assessment was completed under section 143(3) of the Income-tax Act, 1961, wherein the Assessing Officer made an addition of ₹1.25 crore on account of outstanding sundry creditors, being advance received towards supply of machinery, based on the concession made by the assessee. The Assessing Officer also denied the claim of set-off of unabsorbed depreciation and carry-forward business losses, holding that the assessee had failed to substantiate the claim.

Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner (Appeals). The assessee contended that the Assessing Officer ought to have allowed set-off of unabsorbed depreciation against business income and that the addition relating to advances received against machinery could not be taxed under section 41(1), but required examination under section 51(1) of the Act.

The Commissioner (Appeals), after considering the submissions, set aside the issue relating to set-off of unabsorbed depreciation to the file of the Assessing Officer for fresh examination. However, the issue relating to taxability of sundry creditors under section 51(1) remained unadjudicated.

The Revenue carried the matter in appeal before the Tribunal, contending that the Commissioner (Appeals) ought not to have restored the issue of unabsorbed depreciation in the absence of returns for earlier years and merely on the basis of written submissions.

After hearing the rival submissions and examining the record, the Tribunal observed that the Commissioner (Appeals) had only remanded the issue of set-off of unabsorbed depreciation to the Assessing Officer for fresh consideration. Such a direction, in the opinion of the Tribunal, did not cause any prejudice to the Revenue, as the matter was yet to be examined on merits by the Assessing Officer.

Accordingly, the Tribunal found no merit in the grounds raised by the Revenue and dismissed the appeal. The cross-objection filed by the assessee was also dismissed as withdrawn.

Source Link- https://itat.gov.in/public/files/upload/1767847239-FmVEpf-1-TO.pdf

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