1986 (12) TMI 59 - AT - Income Tax

Summary

Issues:
1. Validity of returns filed after reopening assessments under section 146 for assessment years 1978-79 and 1979-80.
2. Entitlement to carry forward losses determined based on returns filed after reopening assessments.
3. Interpretation of sections 139, 80, and 153(2A) of the Income-tax Act, 1961.

Analysis:

1. The assessee, a limited company, filed returns for assessment years 1978-79 and 1979-80 after the assessments were reopened under section 146. The Income Tax Officer (ITO) contended that the returns were invalid as they were filed beyond the statutory period prescribed under section 139(4)(b)(iii) of the Income-tax Act, 1961.

2. The Commissioner (Appeals) upheld the ITO's decision, stating that returns filed beyond the prescribed time limit could not be considered valid returns under section 139, thus disallowing the carry forward of losses determined based on these returns under section 80 of the Act.

3. The assessee argued that the returns filed during the assessment proceedings should be considered valid for carry forward purposes if the ITO was satisfied that there was sufficient cause for the delay. The assessee relied on section 153(2A) to support this argument, which extends the assessment completion period by one year from the date of return filing, even in cases of assessments reopened under section 146.

4. The department's representative contended that the returns filed beyond the statutory period were not valid under section 139, citing relevant case law to support the position that returns filed after the prescribed period are not eligible for carry forward of losses under section 80.

5. The Appellate Tribunal analyzed the provisions of sections 139, 80, and 153(2A) and concluded that returns filed after reopening assessments under section 146 cannot be considered returns under section 139 for the purpose of carrying forward losses. The Tribunal referred to precedents and case law to support its decision, emphasizing that the law does not permit the carry forward of losses determined based on returns filed beyond the statutory period under section 139.

6. The Tribunal held that while the revenue authorities were justified in refusing to carry forward the business loss based on the returns, they were not justified in denying the carry forward of unabsorbed depreciation, as section 80 specifically addresses business losses and not unabsorbed depreciation. Therefore, the Tribunal directed the ITO to allow the carry forward of unabsorbed depreciation only.

7. As a result, the appeals were partly allowed, with the Tribunal ruling in favor of carrying forward unabsorbed depreciation but denying the carry forward of business losses determined based on returns filed after reopening assessments under section 146.