FILING OF RETURN OF LOSS UNDER INCOME TAX ACT, 1961

[Mr. M. GOVINDARAJAN]

Return of loss

Section 139 of the Income Tax Act, 1961 (‘Act’ for short) provides the procedure for filing income tax returns under the Act.  Section 139(3) of the Act provides that if any person who has sustained a loss in any previous year under the head ‘Profits and gains of business or profession’ or under the head ‘Capital gains’ and claims that the loss or any part thereof should be carried forward under section 72(1), or section 73 (2), or section 73A (2) or sub- section (1) or section 74 (3), or section 74A(3), he may furnish, within the time allowed section 139(1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under Section 139(1).

Section 80 of the Act provides that no loss which has not been determined in pursuance of a return filed in accordance with the provisions of section 139(3), shall be carried forward and set off under sub-section (1) of section 72(1) or 72(2) or section 73 (2) or section 73A(2) or  of section 74 (1) or 74(3) or section 74A(3).

The return of loss shall be filed on or before the due date if there is a business loss, speculation loss, capital loss or loss on account of horse running races.  The set off and carry forward of losses cannot be carried forwarded unless the return of loss is submitted on or before the due date.   The loss on house property cannot be carried forward. 

The Delhi High Court in COMMISSIONER OF INCOME-TAX VERSUS GOVIND NAGAR SUGAR LTD. - 2011 (3) TMI 1023 - DELHI HIGH COURT held that the unabsorbed depreciation can be carried forwarded even if the return of loss is submitted after the due date since it is not covered under Chapter VI of set off or carry forward of losses but covered under Section 32(2).

Delay in filing return of loss

The Board has the power to condone the delay in cases having claim of carry forward of losses.  The same has been confirmed by the Karnataka High Court in ASSOCIATED ELECTRO CERAMICS VERSUS CHAIRMAN, CENTRAL BOARD, OF DIRECT TAXES, AND ANOTHER - 1988 (12) TMI 2 - KARNATAKA HIGH COURT.  No appeal has been filed by the Department before the Supreme Court against this order.  Therefore, the order Delhi High Court attained finality. 

In this regard the Board has issued a circular No. 09/2015, dated 09.06.2015.  In this circular the Board has issued guidelines on the conditions of condonation of delay and the procedure to be followed to decide the same. 

Pecuniary jurisdiction

The said circular fixed pecuniary jurisdiction in accepting or rejecting the application for delay condonation, in respect of the following Officers-

• Principal Commissioner/Commissioner – Not exceeding Rs.50 lakhs for any one assessment year;
• The Chief Commissioner – More than Rs.50 lakhs but not exceeding R.2 crores for any one assessment year;
• Principal Chief Commissioner – More than Rs. 2 crores but not exceeding Rs. 3 crores for any one assessment year;
• Board – More than 3 crores for any one assessment year.

Conditions

The delegation of above powers is subject to following conditions-

• At the time of considering the case under Section 119(2)(b), it shall be ensured that the income/loss declared and /or refund claimed is correct and genuine and also that the case is of genuine hardship on merits.
• The Pr.CCIT/CCIT/Pr.CIT/CJT dealing with the case shall be empowered to direct the jurisdictional assessing officer to make necessary inquiries or scrutinize the case in accordance with the provisions of the Act to ascertain the correctness of the claim.

The powers of acceptance/rejection within the monetary limits delegated to the Pr.CCsIT/CCsIT/Pr.CsIT/CsIT in case of returns claiming refund and supplementary claim of refund would be subject to the following further conditions-

• The income of the assessee is not assessable in the hands of any other person under any of the provisions of the Act.
•  No interest will be admissible on belated claim of refunds
• The refund has arisen as a result of excess tax deducted/collected at source and/or excess advance tax payment and/or excess payment of self-assessment tax as per the provisions of the Act.

Time limit

No condonation application for claim of refund/loss shall be entertained beyond six years from the end of the assessment year for which such application/claim is made. This limit of six years shall be applicable to all authorities having powers to condone the delay as per the above prescribed monetary limits, including the Board.

The period, for which any such proceedings were pending before any Court of Law, shall be ignored while calculating the said period of 6 years, provided such condonation application is filed within 6 months from the end of the month in which the Court order was issued or the end of financial year whichever is later.

In the case of an applicant who has made investment in 8% Savings (Taxable) Bonds, 2003 issued by Government of India opting for scheme of cumulative interest on maturity but has accounted interest earned on mercantile basis and the intermediary bank at the time of maturity has deducted tax at source on the entire amount of interest paid without apportioning the accrued Interest/TDS, over various financial years involved, the time limit of six years for making such refund claims will not be applicable.

Disposal of application

A condonation application should be disposed of within 6 months from the end of the month in which the application is received by the competent authority, as far as possible.

Power of Board

The Board reserves the power to examine any grievance arising out of an order passed or not passed by the authorities mentioned above and issue suitable directions to them for proper implementation of the said Circular. However, no review of or appeal against the orders of such authorities would be entertained by the Board.

Case laws

In THE TRAVANCORE CEMENTS EMPLOYEES CO-OPERATIVE BANK LTD. VERSUS THE COMMISSIONER OF INCOME TAX - 2014 (11) TMI 183 - KERALA HIGH COURT the High Court held that where the assessee society failed to file its return within the due date on account of delay in getting audit report, in view of facts that said delay was attributable to assessee as it did not supply necessary statements to auditors in time, the Commissioner was justified in rejecting application seeking condonation of delay filed under Section 119(2)(b) of the Act.

In M/S REGEN INFRASTRUCTURE & SERVICES PVT. LTD. (FORMERLY) M/S. RENEWABLE ENERGY GENERATION PVT. LTD. VERSUS THE CENTRAL BOARD OF DIRECT TAXES, THE COMMISSIONER OF INCOME TAX, CHENNAI- VERSUS , THE INCOME TAX OFFICER - 2016 (3) TMI 875 - MADRAS HIGH COURT the assessee approached the Board seeking condonation of delay in filing of return.  Due to the last hour rush on last date the assessee could not file the return in time and further there were technical snags in website of the department.  The return could be uploaded only in midnight.  The Department took the return filed on the next day and therefore there was a delay of one day.  The Board rejected the claim of the assessee.  The High Court held that since the petitioner had not gained anything from delay and had satisfactorily explained reason for delay in filing return, CBDT should have condoned delay of one day in filing return by assessee; mere delay should not defeat the claim of the assessee.

In MANJULABEN BIPINBHAI PATEL LEGAL HEIR OF LATE BIPINBHAI P. PATEL C/O. APEX EXTRUSIONS PVT. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, VADODARA, SMT. MANJULABEN B. PATEL C/O. APEX EXTRUSIONS PVT. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, VADODARA AND (VICE-VERSA) AND DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, VADODARA VERSUS SMT. MANJULABEN BIPINCHANDRA PATEL - 2024 (9) TMI 1052 - ITAT AHMEDABAD, the assessee has contended that the return for the block period was filed within the time. The provision of Section 139(3) of the Act stipulates that in order to carry forward a loss under the head ‘business’ or ‘capital gain’, the return of income has to be filed within the time as allowed under Section 139(1) of the Act. Thus, according to this provision, the assessee must file his original return of income within the time stipulated under Section 131(1) in order to carry forward the loss. In the present cases, no return of income was filed claiming any loss within the time limit as prescribed under section 139(1) of the Act. Therefore, the direction of the Commissioner of Income Tax (Appeals) that the assessee was not eligible for carry forward of loss, is found to be in accordance with the provisions of the Act and correct. The ground taken by the assessee in respect of allowing carry forward of losses is, therefore, rejected.