2001 (10) TMI 83 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee was entitled to carry forward the share of loss determined in the hands of the firm despite filing the return beyond the time limit provided under section 139(4) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Requirement of Filing Return by Partner:
The primary issue was whether a partner needs to file a return under section 139 of the Income-tax Act to carry forward the share of loss determined in the hands of the firm. The court examined the provisions of sections 67, 80, 139, and 182 of the Act. It was concluded that the scheme of the Act mandates that every assessee, including a partner in a firm, must file a return within the prescribed time to benefit from the carry forward and set off provisions. The court emphasized that section 80 explicitly bars the carry forward of any loss not determined in pursuance of a return filed under section 139.

2. Assessment of Firm vs. Partner:
The court noted that the assessment of a firm and its partners are separate and distinct proceedings. The determination of the share of profit or loss in the hands of the firm does not negate the requirement for the partner to file a return and have the loss determined in his own hands. The court referred to the provisions of section 182, which outline the procedure for assessing the total income of the firm and apportioning the share of each partner. It was highlighted that the loss to be carried forward and set off is in the hands of the partner, not the firm.

3. Filing of Return Beyond Time Limit:
The assessee filed the return for the assessment year 1982-83 on May 3, 1985, which was beyond the two-year period specified under section 139(4). The court held that such a return is non est in law and cannot be considered for any purpose, including the determination of loss for carry forward and set off. It was noted that even in the absence of section 139(10) (which was inserted later and declares returns filed beyond the period of limitation as non est), the return filed by the assessee was invalid due to the specific time limit prescribed under section 139(4).

4. Determination of Loss in the Hands of the Partner:
The court rejected the assessee's contention that once the share of loss is determined in the hands of the firm, no further determination is required in the hands of the partner. It was reasoned that partners may have multiple sources of income and losses from various firms, necessitating a comprehensive assessment of their total income. The court emphasized that the assessment of the partner is essential for determining the net result and ensuring that the benefit of carry forward and set off is properly applied.

Conclusion:
The court concluded that the assessee was not entitled to carry forward the share of loss determined in the hands of the firm, as the return was filed beyond the time limit prescribed under section 139(4). The question referred was answered in the affirmative, in favor of the Revenue and against the assessee.