2003 (1) TMI 32 - HC - Income Tax

Carry forward of the loss - Whether, in the light of section 80 of the Income-tax Act, the assessee is entitled to carry forward the loss computed on the basis of the return of income filed within the time for which extension was sought from the AO ? Section 80 of the Act introduced with effect from April 1, 1985, provides that the return of loss must be submitted within the period prescribed under section 139(1) of the Act. Under section 80, no loss can be allowed to be carried forward and set off under section 72(1) or section 73(2) or section 74(1) or section 74A(3), unless such loss has been determined in pursuance of a return filed by the assessee under section 139. By virtue of the provisions of section 80, no loss would be allowed to be carried forward or set off, unless the return under section 139(1) has been filed within the time allowed under sub-section (1) of section 139 for filing the return or within such further time as may be allowed by the ITO We answer the question referred in the affirmative, that is, in favour of the assessee and against the Revenue.

Issues:
1. Interpretation of section 80 of the Income-tax Act regarding the entitlement to carry forward losses.
2. Application for extension of time for filing tax returns and its impact on carrying forward losses.
3. Discretionary power of the Assessing Officer in granting extensions for filing returns.
4. Legal implications of not passing an order on an application for extension of time.

Analysis:
1. The primary issue in this case revolves around the interpretation of section 80 of the Income-tax Act, 1961, concerning the entitlement of the assessee to carry forward losses. Section 80 stipulates that no loss can be carried forward or set off unless the return has been filed within the prescribed time under section 139(1) of the Act or within any further time allowed by the Income-tax Officer. The court emphasized the importance of adhering to the timelines specified under the Act for filing returns to claim the benefit of carrying forward losses.

2. The case also delves into the significance of applying for an extension of time for filing tax returns and its impact on the allowance of carrying forward losses. The respondent-assessee in this matter had applied for an extension of time before the due date for filing the return under section 139(1) of the Act. Despite the Assessing Officer not passing any order on the application, the assessee filed the return within the extended period applied for. The court noted that in such situations, where no specific orders are passed on extension applications, the presumption should be in favor of the assessee, allowing for the filing within the extended period.

3. Furthermore, the judgment highlights the discretionary power of the Assessing Officer in granting extensions for filing returns. The Assessing Officer's failure to respond to the application for an extension of time led to the presumption that the extension was granted. The court drew parallels with previous decisions under similar provisions of the Income-tax Act, emphasizing that silence on the part of the Assessing Officer could be construed as approval of the extension sought by the assessee.

4. Lastly, the legal implications of not passing an order on an application for extension of time were discussed in detail. The court referred to precedents where the failure to reject an extension application implied the extension had been granted. This principle was applied in the present case, supporting the Tribunal's decision that the assessee was entitled to carry forward the losses claimed in the return filed within the extended period. The judgment ultimately favored the assessee, emphasizing the importance of timely filing and the Assessing Officer's duty to respond to extension requests promptly.

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