1987 (7) TMI 158 - AT - Income Tax

Issues Involved:
1. Whether the loss of Rs. 22,540 can be carried forward despite the return being filed beyond the time limit prescribed under section 139(1) and section 139(3) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Whether the loss of Rs. 22,540 can be carried forward despite the return being filed beyond the time limit prescribed under section 139(1) and section 139(3) of the Income-tax Act, 1961:

The primary issue revolves around the interpretation of section 139(3) and section 139(4) of the Income-tax Act, 1961, in relation to the carry forward of losses when the return is filed beyond the prescribed time limit.

Appellant's Argument:
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in directing the Income-tax Officer (ITO) to carry forward the loss of Rs. 22,540. The Revenue relied on the Supreme Court's decision in Brij Mohan v. CIT [1979] 120 ITR 1, which stated that a belated return filed under section 139(4) cannot be equated with a return under section 139(1).

Assessee's Argument:
The assessee, a private limited company, argued that the return filed under section 139(4) was valid and the loss should be carried forward as the ITO had accepted the loss in the assessment order. The assessee relied on the Supreme Court's decision in CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 and the Calcutta High Court's decision in Presidency Medical Centre (P.) Ltd. v. CIT [1977] 108 ITR 838.

Tribunal's Analysis:
- The Tribunal noted that the return was due on 30-6-1980 but was filed on 5-6-1981. The ITO refused to carry forward the loss based on section 139(3).
- The CIT(A) vacated the ITO's finding, relying on the decisions in Kulu Valley Transport Co. (P.) Ltd. and Presidency Medical Centre (P.) Ltd., stating that a return filed within the time allowed by section 139(4) should be deemed in accordance with law.
- The Tribunal observed that the facts in the case of Ratanlal Bhangadia were different as the return and revised return were filed within the time allowed under section 139(4), which was not the case here.

Judicial Member's View:
- The Judicial Member argued that the Supreme Court's decision in Kulu Valley Transport Co. (P.) Ltd. was under the old Act and did not anticipate section 139(3) of the new Act.
- He emphasized that the Supreme Court in Brij Mohan's case held that a return filed within the extended period is not deemed to be filed within the original period prescribed.
- Thus, the Judicial Member concluded that the CIT(A) was not justified in allowing the carry forward of the loss.

Accountant Member's View:
- The Accountant Member disagreed, citing that the provisions of the 1922 Act and the 1961 Act are in pari materia.
- He referred to the Madhya Pradesh High Court's decision in Co-operative Marketing Society Ltd. v. CIT [1983] 143 ITR 99, which held that sections 139(1) and 139(4) should be read together, allowing the carry forward of loss if the return is filed within the time allowed under section 139(4).
- He also noted that the Supreme Court's observations in Brij Mohan's case were in the context of penalty and not the carry forward of loss.

Third Member's Decision:
- The Third Member agreed with the Accountant Member, noting that section 80 was amended with effect from 1-4-1985 to restrict the benefit of carry forward only to returns filed within the time allowed under section 139(1).
- Prior to this amendment, a return filed under section 139(4) was still valid for the purpose of carrying forward losses.
- The Third Member concluded that the CIT(A)'s order should be upheld, allowing the carry forward of the loss.

Final Outcome:
The appeal was allowed, and the CIT(A)'s direction to carry forward the loss was upheld, based on the interpretation that a return filed under section 139(4) was valid for carrying forward losses prior to the amendment effective from 1-4-1985.

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