2018 (6) TMI 1467 - HC - Income Tax

Assessment u/s 153A - Whether a loss return filed within the time specified in the notice under Section 153A(1)(a) is required to be treated as a return filed in accordance with the provisions of Section 139(3) for the purpose of carrying forward of the loss in terms of Section 72 read with Section 80? - Held that - A definitive final order cannot be passed without being sure of the date of issuance of the notice under Section 153A(1)(a) and the time afforded by such notice for the assessee to file the return. For such purpose, the orders impugned passed by the Appellate Tribunal require to be set aside and the matters remitted back to the Tribunal for the Tribunal to ascertain the details as to the date of the notice and the time afforded to file the return and pass an order in the light of the views expressed herein on the questions of law and it is ordered accordingly. The first question of law for the purpose of carrying forward the loss in terms of Section 72 read with Section 80 of the Act, in a case where search operations have been conducted under Section 132 of the Act, the time to file the return within the meaning of Section 139(3) of the Act has to be regarded as the reasonable time afforded by the consequent notice under Section 153A (1)(a). When search operations are conducted under Section 132 the obligation of the assessee to file any return remains suspended till such time that a notice is issued for such purpose under Section 153A(1)(a) of the Act. If the return is filed by the assessee within the reasonable time permitted by such notice under Section 153A(1)(a) of the Act, such return would then be deemed to have been filed within the time permitted under Section 139 (1) of the Act for the benefit under Section 139(3) of the Act to be availed of by the assessee.

Summary

Issues:
1. Interpretation of provisions related to filing returns and carrying forward losses under the Income Tax Act, 1961 in a case involving search and seizure operations.
2. Determining the impact of a notice issued under Section 153A(1)(a) on the filing of returns and carrying forward losses.
3. Authority of assessing officer to decide on carrying forward losses from a previous year and setting off against subsequent year's income.

Issue 1 Analysis:
The case involved a search and seizure operation in 2004, leading to the non-filing of the return for the assessment year 2004-05 within the stipulated date. The appellant argued that the return filed in response to the notice under Section 153A(1)(a) should be considered as filed in accordance with Section 139(3) for carrying forward losses. The Court held that the time to file the return for carrying forward losses should be determined by the reasonable time specified in the notice under Section 153A(1)(a).

Issue 2 Analysis:
Regarding the impact of the notice under Section 153A(1)(a) on filing returns, the Court ruled that the obligation to file any return remains suspended until such notice is issued. If the return is filed within the reasonable time specified in the notice, it would be deemed as filed within the time permitted under Section 139(1) for availing benefits under Section 139(3) of the Act.

Issue 3 Analysis:
The authority of the assessing officer to decide on carrying forward losses and setting off against subsequent year's income was also discussed. The Commissioner set aside an order allowing the carry forward of losses from 2004-05 to 2006-07, stating that the assessee had not filed the return within the specified time under Section 139(1). The Court emphasized that the decision on carrying forward losses and setting off against future income should be determined during the relevant subsequent year's assessment.

The judgment highlighted the significance of the notice under Section 153A(1)(a) in relation to filing returns and carrying forward losses, emphasizing that the time specified in such notice should be considered for filing returns in cases involving search and seizure operations. The Court directed the matters to be remitted back to the Tribunal for further clarification on the date of the notice and the time afforded for filing the return, ensuring a definitive final order based on the clarified details.