2021 (10) TMI 420 - HC - Income Tax

Rectification u/s 154 - incorrect carry forward of loss to be rectified relating to the assessment years 2003-04 and 2004-05, as return of income for the assessment years were not filed in time - CIT (Appeals) rejected the claim of carry forward of the loss, further observing that the assessee had not moved any application to CBDT for condonation of delay in filing the loss return - HELD THAT - Admittedly, the return for the relevant assessment year herein was filed on 02.11.2004 instead of 31.10.2004. As per Section 139(1) and the explanation to thereto, due date means, 31st day of October of the assessment year. As aforesaid, 139(3) makes it clear that the return has to be filed as per sub- Section (1) of Section 139 for carrying forward and setoff of losses. If any order was passed inadvertently u/s 143 sans considering the date of filing of the return for losses, the same certainly is an error apparent on the record, which do not require any further adjudication. Hence, the finding of the authorities on this issue cannot be faulted with. Accordingly, the questions of law raised are answered in favour of the assessee and against the revenue. We reserve liberty to the assessee to file an application under Section 119(2)(b) of the Act before the competent authority seeking for condonation of delay in filing returns and thereafter to seek for carry forward of loss to the subsequent assessment year which were incurred during the assessment year 2004-05. If such an application is filed by the assessee within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered by the competent authority in accordance with law, in an expedite manner and the consequential reliefs shall be extended accordingly.

Summary

Issues:
1. Rectification of alleged mistake under Section 154 of an issue debatable in nature.
2. Rejection of setoff of loss to the appellant for a timely filed return.
3. Justification of disturbing the loss of the immediately preceding year.
4. Denial of set-off of loss for the year due to a delay in filing the return.
5. Determination of loss for the purpose of carry forward due to a one-day delay in filing the return.

Analysis:
1. The appellant, a cooperative bank, filed a return of income for the assessment year 2006-07, declaring 'Nil' income. The Assessing Officer issued a notice under Section 154 alleging incorrect carry forward of loss for the assessment years 2003-04 and 2004-05 due to belated filing of returns. The Assessing Officer rectified the assessment order, disallowing the claimed loss for 2004-05. The CIT (Appeals) and the Tribunal upheld this decision, leading to the current appeal under Section 260A of the Income Tax Act, 1961.

2. The appellant argued that denial of set-off of carry forward loss based on Section 80 was unjustified. They contended that the delay in filing the return for 2004-05 should have been condoned, citing previous court judgments. The revenue's counsel, however, supported the authorities' decisions, emphasizing the mandatory nature of filing returns for losses within the prescribed time.

3. The court examined Sections 80, 139(3), and 154 of the Act. It noted that the return for the relevant assessment year was filed a day late, constituting an apparent error as per Section 139(1) and the explanation thereto. The court held that if an order was passed without considering the return filing date for losses, it amounted to an error apparent on the record, justifying rectification under Section 154.

4. The court referred to the T.S. Balaram case, highlighting that rectification under Section 154 is permissible only for obvious and self-evident mistakes, not requiring further investigation. Since the error in this case was clear regarding the late filing of the return, the authorities' decisions were upheld. The court granted the appellant the opportunity to seek condonation of delay under Section 119(2)(b) for filing returns and carrying forward losses to subsequent assessment years.

5. The court ultimately disposed of the appeal, answering the raised questions of law in favor of the assessee. It allowed the appellant to apply for condonation of delay within two weeks for carrying forward losses incurred during the assessment year 2004-05.