2010 (8) TMI 596 - HC - Income Tax

Long-term capital loss Carry forward and set off - assessee had not filed return declaring long-term capital loss in terms of section 139(3) of the Act within time loss cannot be carried forward and set off Appeal dismissed

Summary

Issues:
- Entitlement to benefit for carry forward of loss even if return of loss is filed beyond prescribed time under section 139(3) of the Income-tax Act, 1961.

Analysis:
The appeal before the Punjab and Haryana High Court concerned the entitlement of the assessee to carry forward a long-term capital loss for the assessment year 1996-97 to be set off in subsequent years, specifically the assessment year 1999-2000. The assessee had declared a long-term capital loss in 1996-97 but filed the return beyond the time prescribed under section 139(1) of the Income-tax Act, 1961. The Assessing Officer disallowed the set off of the loss claimed by the assessee, citing non-compliance with section 80 read with section 139(3) of the Act. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal upheld the decision, leading to the appeal before the High Court.

The main contention raised by the appellant was that the Assessing Officer had allowed the carry forward of the loss during the assessment years 1997-98 and 1998-99, implying that it should also be allowed in the subsequent year. The appellant relied on various judgments to support this argument. However, the High Court, after considering the submissions, referred to a previous judgment and held that a business loss cannot be carried forward unless it has been determined in pursuance of a return filed under section 139 of the Act. Since the assessee had not filed a valid return for the assessment year 1996-97 within the prescribed time, they were not entitled to carry forward the loss for set off in subsequent years.

The High Court emphasized that the mere filing of returns for the subsequent years depicting the carry forward of the loss did not entitle the assessee to the benefit without a specific order by the Assessing Officer. The court noted that there was no specific order by the Assessing Officer granting the carry forward benefit for the relevant years. The appellant's argument that the assessment order itself constituted permission for carry forward was deemed against the provisions of the Act. Consequently, the High Court dismissed the appeal, ruling against the assessee and upholding the decision to disallow the set off of the loss claimed for the assessment year 1999-2000.