1974 (10) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Whether the loss determined for the assessment year 1964-65 should have been directed to be carried forward u/s 72(1) read with section 80 of the Income-tax Act, 1961.

Summary:

Issue 1: Carry Forward of Loss Determination

In this reference u/s 256(1) of the Income-tax Act, 1961, the primary issue pertains to the assessment year 1964-65. The assessee filed a return on 3rd October 1964, showing a loss of Rs. 15,890, which the Income-tax Officer determined at Rs. 8,387. However, the officer did not allow the carry forward of the loss, stating that the return was not filed within the time allowed u/s 139(1) and no notice u/s 139(2) was served.

The Appellate Assistant Commissioner upheld this decision, noting that there was no automatic extension of time and the benefit of carry forward was available only if the return was filed within the time allowed u/s 139(1). The Tribunal also affirmed this view, emphasizing that the return should have been filed within six months from 21st March 1964, and the posting of the return on 1st October 1964 did not meet the requirements of section 139(3).

The Tribunal referred to the Mysore High Court decision in B. B. Danganavar v. Income-tax Officer [1967] 65 ITR 370 (Mys), which held that there was no discretion vested in the Income-tax Officer to extend the time.

Upon appeal, the High Court examined the relevant provisions of the Indian Income-tax Act, 1922, and the Income-tax Act, 1961. The court noted that the Supreme Court in Commissioner of Income-tax v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 (SC) had held that a return submitted before assessment was valid and that section 22(3) of the 1922 Act should be read as a proviso to section 22(1). This principle was applicable to the 1961 Act as well.

The High Court concluded that the changes in the 1961 Act, which removed the discretion of the Income-tax Officer to extend the time, did not materially affect the situation. The return filed within the time specified by sub-section (4) of section 139 should be deemed in accordance with law, and the loss should be determined and carried forward.

Conclusion:
The High Court answered the question in the affirmative and in favor of the assessee, allowing the loss determined for the assessment year 1964-65 to be carried forward. Each party was ordered to bear their own costs.