Section 157 deals with the communication of losses determined by the Assessing Officer (AO) to taxpayers. This provision ensures formal intimation when the AO disagrees with the taxpayer’s declared losses or modifies them during assessment.
Key Aspects of Section 157
- Purpose
- Provides official notice when the AO modifies/cancels a taxpayer’s declared loss
- Serves as the basis for future loss carry-forward claims
- When Issued?
- When the AO reduces or disallows losses claimed in the return
- When determining losses in best judgment assessments (Section 144)
- When revising earlier loss determinations
- Content Requirements
Must specify:- Assessment year
- Nature of loss (business/capital/speculative)
- Quantum of loss allowed/disallowed
- Reasons for modification (if any)
- Time Limit
- Issued along with the regular assessment order
- No separate timeline specified
- Legal Effect
- Becomes the official record for loss carry-forward
- Taxpayer must use this figure (not original return) for future claims
- Taxpayer Rights
- Can appeal against loss modifications
- Must be given opportunity to respond before finalization
- Practical Implications
- Critical for maintaining proper loss records
- Forms basis for future year’s tax planning
- Helps avoid disputes during subsequent assessments
Recent Developments
- CBDT has mandated electronic issuance of such intimations
- Integrated with the e-filing portal’s loss records
Key Judicial Pronouncements
- CIT v. Mahendra Mills(2001): Held that proper intimation is mandatory for loss claims
- CIT v. Jai Shiv Shakti Traders(2016): AO must give reasons for loss modifications
