Mr. Ashish filed his return of income for A.Y. 2025-26 by declaring a total income of 10 lakhs. His case was selected for scrutiny assessment and an…

(1) Issue Involved: The issue under consideration is whether the Assessing Officer is bound to allow the set-off of brought forward losses under section 72 even if the assessee, Mr. Ashish, in this case, has not claimed the same in the return filed by him and the time limit for filing revised return has expired. (2) Provisions Applicable: Under section 72, business losses shall be carried forward and shall be set-off against the profits and gains of any business in the next assessment year. It is assumed that the assessee has filed the return of income within the time stipulated u/s 139 (1) and hence is eligible for set off of the unabsorbed loss in the subsequent year. The wording used in section 72 is "shall”, indicating that the provisions relating to set off of brought forward business loss are mandatory provided the loss was determined in pursuance of a return filed under section 139 (3) in any earlier previous year. (3) Analysis and Conclusion: As per CBDT Circular No.14 (XL-35) of 1955 dated 11.04.1955, it is the duty of the Assessing Officer to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard, they should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. Thus, it is the duty of the Assessing Officer to apply the relevant provisions of the Act for the purpose of determining the true figure of Mr. Ashish's total income and consequential tax liability. Merely because Mr. Ashish has not claimed the set-off of brought forward losses of 8lakh in the original return filed and the time limit for filing revised return has expired, it cannot relieve the Assessing Officer of his duty to apply section 72 in the appropriate case. The Assessing Officer is bound to accept the request of Mr. Ashish and allow the set-off of brought forward losses of 8lakh under section 72, even if Mr. Ashish has not claimed the same in the return filed, and the time limit for filing the revised return has expired. Note - The above answer is based on the rationale of the Supreme Court in CIT v. Mahalakshmi Sugar Mills Co. Ltd. (1986) 160 ITR 920, taking note of the CBDT Circular No.14 (XL-35) of 1955 dated 11.04.1955.