2003 (3) TMI 7 - HC - Income Tax

Carry forward of the business loss - Whether Tribunal has been right in law in holding that the assessee is not entitled to carry forward of the business loss determined on a belated return of income? - Held that Tribunal was not justified in law in holding that the assessee was not entitled to carry forward the business loss determined on the belated return of income, as the return of income, in fact, was not belated but had been tendered within the extended time which was prayed for.

Summary

Issues Involved:
1. Entitlement to carry forward business loss determined on a belated return of income.
2. Validity and effect of an unaddressed application for an extension of time to file the return.
3. Applicability of the precedent set by CIT v. Gordhanbhai Jethabhai in the context of carry forward of losses.
4. Tribunal's adherence to judicial precedent and duty to provide reasoned orders.

Detailed Analysis:

1. Entitlement to Carry Forward Business Loss Determined on a Belated Return of Income:
The primary issue was whether the assessee was entitled to carry forward the business loss determined on a return of income filed after the statutory due date. The return was due on July 31, 1985, but was filed on December 23, 1985. The Assessing Officer disallowed the carry forward of the business loss of Rs. 2,35,461, citing the late filing of the return.

2. Validity and Effect of an Unaddressed Application for Extension of Time:
The assessee had filed Form No. 6 on June 28, 1985, seeking an extension of time until December 31, 1985, to submit the return. This application was neither granted nor rejected by the Assessing Officer. The Commissioner of Income-tax (Appeals) held that the assessee was entitled to presume the extension was granted, relying on the precedent set by CIT v. Gordhanbhai Jethabhai [1983] 142 ITR 84. The Tribunal, however, reversed this decision, stating that the precedent was not applicable as it pertained to penalty for late submission and not to the carry forward of losses.

3. Applicability of the Precedent Set by CIT v. Gordhanbhai Jethabhai:
The court reiterated that under section 139(3) of the Income-tax Act, a return of loss must be filed within the time allowed under sub-section (1) or within such further time allowed by the Assessing Officer. The court emphasized that the statutory scheme requires the Assessing Officer to either grant or reject the application for an extension and communicate the decision to the assessee. If the application is neither granted nor rejected, the assessee can presume the extension was granted. This principle was upheld in CIT v. Gordhanbhai Jethabhai, which the Tribunal failed to apply correctly.

4. Tribunal's Adherence to Judicial Precedent and Duty to Provide Reasoned Orders:
The court criticized the Tribunal for its cursory and casual approach in handling the matter. The Tribunal failed to provide a reasoned order and did not adequately address why the precedent set by CIT v. Gordhanbhai Jethabhai was not applicable. The court emphasized that the Tribunal is bound by the decisions of the highest court in the State and must provide clear reasoning in its orders. The Tribunal's failure to do so constituted a jurisdictional error and indicated a lack of application of mind.

Conclusion:
The court concluded that the Tribunal was not justified in holding that the assessee was not entitled to carry forward the business loss, as the return was filed within the extended time presumed to have been granted. The Tribunal's order was found to be contrary to the settled legal position and was therefore set aside. The question referred to the court was answered in favor of the assessee and against the Revenue, with no order as to costs.