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2005 (4) TMI 18 - HC - Income TaxCarry forward of business loss - 1. Whether ITAT was legally correct in directing the Assessing Officer to allow carry forward of business loss in the assessment year 1988-89 in contravention of the provisions of sections 80 and 139(3) in this regard? - Allahabad High Court in the case of Jan Daood and Co v. ITO, a case which arose in writ jurisdiction in the backdrop of a prayer for extension of time for furnishing the return and for continuance of registration of a firm, it was held that when the Income-tax Officer had not communicated any order to the firm. On receipt of application for further extension, the assessee can well have presumed under the belief that its request for extension of time for furnishing the return had been granted and since the Commissioner of Income-tax had not applied his mind to such relevant aspect of the matter, the Commissioner of Income-tax refusing such manifest error of law was quashed. For the reasons stated above, the question referred to us, is answered in the affirmative in favour of the assessee and against the Department
Issues involved:
1. Interpretation of provisions regarding carry forward of business loss under sections 80 and 139(3) of the Income-tax Act, 1961. Detailed Analysis: The High Court of Allahabad was presented with a question of law by the Income-tax Appellate Tribunal regarding the legality of directing the Assessing Officer to allow the carry forward of business loss in a specific assessment year. The case involved the assessee, a company, filing a return of loss beyond the prescribed time under section 139(1) of the Act. The Commissioner of Income-tax (Appeals) allowed the appeal, stating that the application for extending the time for filing the return had not been rejected, and thus, the return was deemed to be filed within the specified time. The Tribunal upheld this decision, relying on a previous case law. The Revenue appealed this decision, which was dismissed by the Tribunal, leading to the case being brought before the High Court. The Court examined the facts and found no error in the Tribunal's order. It noted that the assessee had applied for an extension of time, and since there was no communication from the Assessing Officer regarding the rejection of the application, the return filed by the assessee was deemed to be within the specified time under section 139(1) of the Act. The Court referenced the decision in Harmanjit Trust v. CIT, emphasizing the right of the assessee to apply for an extension of time for filing the return, and the duty of the Income-tax Officer to communicate the decision on such applications. In another case, the Calcutta High Court held that if an assessee files a return within the time allowed by the Income-tax Officer, they are entitled to the benefit of carrying forward the loss as determined in the assessment. The Court stressed that if no decision is communicated by the Income-tax Officer regarding an application for extension of time, it must be presumed that the extension was allowed. The Court further cited a Bombay High Court case where the duty was placed on the officer to reply to an application for extension, and in the absence of a reply, the time was deemed to be granted. Additionally, the Supreme Court in CIT v. Ajanta Electricals emphasized that the Income-tax Officer must either grant or reject an application for extension of time, and cannot ignore such requests. The Allahabad High Court in Jan Daood and Co v. ITO reiterated the importance of communication from the Income-tax Officer regarding the extension of time for filing returns. In conclusion, the High Court answered the question in favor of the assessee, emphasizing the importance of communication and the duty of the Income-tax Officer to respond to applications for extension of time for filing returns.
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