1995 (4) TMI 84 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the return filed by the appellant-company in response to notice under section 139(2) of the Income-tax Act, 1961.
2. Applicability of section 139(10) in the facts and circumstances of the case.
3. Entitlement of the appellant-company to carry forward the business loss as assessed by the Assessing Officer.

Detailed Analysis:

Issue 1: Validity of the Return Filed
The appellant-company filed a return of loss on 8-3-1988 in response to a notice under section 139(2) of the Income-tax Act, 1961. The return was accepted and acted upon by the Assessing Officer, who determined the loss at Rs. 4,41,940. However, the CIT (Appeals) held that the return should be deemed never to have been furnished under section 139(10). The Tribunal directed the CIT (Appeals) to redecide the matter, considering the provisions of sections 139(10), 139(2), and 139(9). The CIT (Appeals) concluded that the return was invalid under section 139(10), but the Tribunal found that the return was valid since it was filed in response to a notice under section 139(2) and within the specified period.

Issue 2: Applicability of Section 139(10)
The CIT (Appeals) applied section 139(10) to deem the return invalid, arguing that the return showing loss was not filed within the time allowed under section 139(3). However, the Tribunal noted that section 139(10) does not apply to returns filed in response to a notice under section 139(2). The Tribunal also referred to a CBDT Circular No. 493, which clarified that returns filed in response to a notice under section 139(2) should be accepted. Therefore, the return filed by the appellant-company was valid and not non est under section 139(10).

Issue 3: Entitlement to Carry Forward Business Loss
The Assessing Officer determined the loss but did not allow the carry-forward of the loss, citing that the return was not filed within the time prescribed under section 139(3). The Tribunal found that the return was filed within the time allowed by the notice under section 139(2) and that the provisions of section 80, which deal with the submission of returns for losses, were satisfied. The Tribunal held that the appellant-company was entitled to the determination and carry-forward of the loss, as the return was filed within the extended time and was valid under the law.

Conclusion:
The Tribunal quashed the order of the CIT (Appeals) and directed the Assessing Officer to allow the appellant-company the benefit of carrying forward the loss already determined. The appeal was allowed, and the return filed by the appellant-company was deemed valid and acted upon in accordance with the provisions of the Income-tax Act, 1961.