1994 (7) TMI 114 - AT - Income Tax

Application For Extension, Assessing Officer, Assessment Order, Assessment Year, Carry Forward, Retrospective Effect

Summary

Issues Involved:
1. Whether the business loss determined by the Income-tax Officer (ITO) pursuant to a belated return is liable to be carried forward and set off against the business income for subsequent assessment years.
2. Whether the Commissioner of Income-tax (Appeals) [CIT(A)] erred in not following the Central Board of Direct Taxes (CBDT) Circular No. 469, dated 23-9-1986.
3. Applicability of Section 139(10) versus Section 139(3) read with Section 80 of the Income-tax Act for the assessment year 1986-87.

Detailed Analysis:

1. Business Loss Carry Forward:
The primary issue revolves around whether the business loss of Rs. 1,21,700 determined by the ITO can be carried forward and set off against future business income despite being filed in a belated return. The return was filed on 14-11-1986, and the ITO determined the loss but did not mention its carry-forward status. The CIT(A) dismissed the appeal, stating that the return was non est under Section 139(10)(d) due to its belated filing. The CIT(A) argued that Section 139(10) supersedes Section 139(3), thus justifying the ITO's decision.

2. Non-Compliance with CBDT Circular No. 469:
The appellant contended that the CIT(A) failed to adhere to CBDT Circular No. 469, which clarified that a belated return filed within the prescribed period under Section 139(3) read with Sections 80 and 157 should not be denied the benefit of carry-forward of business loss. The appellant argued that the return was filed within the extended time applied for, supported by applications in Form No. 6. The CIT(A) ignored this beneficial circular, which has been upheld in various judicial decisions.

3. Applicability of Section 139(10) vs. Section 139(3) and Section 80:
The Tribunal examined whether Section 139(10), which deems certain returns as non est if filed after the due date, overrides Section 139(3) and Section 80, which allow for the carry-forward of losses if the return is filed within the extended time. The Tribunal noted that Section 139(10) has a non obstante clause, giving it an overriding effect. However, the Tribunal also considered judicial decisions, including those from the Calcutta High Court and Andhra Pradesh High Court, which recognized the power of the ITO to extend the time for filing returns under Section 139(3) and Section 80.

Judicial Precedents and Analysis:
- Calcutta High Court in CIT v. Janata Film Exchange (P.) Ltd.: Held that if no decision is taken on Form No. 6, it is presumed that the ITO has granted the extension, allowing the assessee to file within the extended time.
- Andhra Pradesh High Court in Palakol Co-operative Sugars Ltd. v. ITO: Held that if the ITO did not grant an extension, the loss could not be carried forward.
- Karnataka High Court in Sirigeri Kanakappa Shetty & Sons v. CIT: Emphasized that CBDT Circulars are binding on assessing authorities.
- Supreme Court in K.P. Varghese v. ITO: Affirmed that CBDT Circulars explaining the scope of a section are binding on the Department.

The Tribunal found that the CIT(A) did not annul the assessment order, which created an anomaly since the loss was determined but not allowed to be carried forward. The Tribunal also noted that the applications for extension of time were not explicitly rejected, implying that the return was filed within the extended time.

Tribunal's Conclusion:
The Tribunal concluded that the return filed on 14-11-1986 should be treated as filed within the extended time, making it a valid return under Section 139(3) and Section 80. The Tribunal emphasized the binding nature of CBDT Circular No. 469, which applies to the assessment year 1986-87, thus allowing the carry-forward of the loss. Consequently, the CIT(A)'s order was quashed, and the ITO was directed to allow the carry-forward of the loss.

Result:
The appeal was allowed, and the assessee was entitled to the benefit of carry-forward of the loss.