2012 (6) TMI 655 - HC - Income Tax

Unabsorbed business loss carry forward of losses - belated return Held that - According to provisions of section 139(3) and section 80 that the assessee shall be entitled to carry forward unabsorbed business loss only if such loss is computed based on a return filed within the statutory period provided under section 139(1). Decided in favor of Revenue.

Summary

Issues:
- Assessment of unabsorbed loss for the year 2005-06.
- Entitlement to carry forward unabsorbed loss and depreciation.
- Completion of assessment based on belated return.
- Interpretation of Sections 139(3) and 80 of the Income-tax Act.

Analysis:
The appeal raised the issue of whether the Tribunal was correct in confirming the assessment that denied carrying over unabsorbed loss for the year 2005-06. The assessee, a limited company, filed the income tax return for the assessment year 2005-06 through registered post on the last filing date but was received by the Assessing Officer after the deadline. The Assessing Officer treated the return as filed under Section 139(4) instead of 139(1) due to the delay, resulting in a discrepancy in the loss determination. The Tribunal allowed carry forward of unabsorbed depreciation but rejected the claim for business loss carry forward. The contention was raised that the assessment, completed after issuing notice under Section 143(2), should be considered a regular assessment allowing carry forward of losses. However, the Tribunal held that Sections 139(3) and 80 of the Act disentitle the assessee from carrying forward business loss if the return is not filed within the statutory period.

The key issue was whether the completion of assessment based on a belated return entitled the assessee to carry forward unabsorbed business loss. The Tribunal found that the provisions of Sections 139(3) and 80 act as a bar to carrying forward unabsorbed business loss unless the return is filed within the statutory period. The Assessing Officer had the authority to complete the assessment based on any timely filed return, and the return filed under Section 139(4) was valid for assessment. The Tribunal rightly rejected the claim for business loss carry forward based on the belated return but allowed the carry forward of unabsorbed depreciation since there was no similar provision prohibiting it.

The assessee's argument that the assessment should be considered based on a regular return filed under Section 139(1) was dismissed by the Tribunal, which correctly treated the return as filed under Section 139(4). Consequently, the appeal was dismissed, affirming the denial of the benefit of carrying forward business loss but allowing the carry forward of unabsorbed depreciation.