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2016 (4) TMI 246 - AT - Income TaxEntitled to set off and carry forward of losses incurred in the derivative transactions - assessee did not furnish return of income u/s 139(3) - Held that - We have noticed that the assessee has omitted to disclose the loss arising on F & O transactions in the original return of income filed u/s 139(1) of the Act. Upon discovery of such omission, it was incumbent upon the assessee to file a revised return of income within the time limit prescribed u/s 139(5) of the Act. The effect of filing of revised return of income is that it shall substitute the original return of income and accordingly, the AO shall proceed to assess the total income on the basis of revised return of income. In the instant case, as noticed earlier, the assessee has not filed any revised return of income upon discovering his omission to disclose the loss incurred in F & O transactions. The assessee brought to the notice of the AO for the first time on 20-09-2011 through a revised computation of income. We have noticed earlier that the assessee was entitled to furnish a revised return of income on or before 31.03.2011, which the assessee has failed to do. There should not be any doubt that the assessee could not have filed any revised return of income after 31.3.2011, meaning thereby, the assessee has lost his right to file revised return of income for the year under consideration. Having lost the right so, in our view, the assessee could not have made good the same by filing revised computation of income and thus claim carry forward of loss. The said action of the assessee, in our view, defeats the statutory mandate prescribed in sec. 139(5) read with section 139(3) of the Act. The assessment order that the assessing officer has considered the revised computation of income and assessed the income declared therein, but refused to consider the loss occurred in F&O transactions. We have noticed that the revised computation of income has been filed beyond the time limit prescribed for filing revised return of income u/s 139(5) of the Act and we have held that the assessee is not entitled to make good his omission to file revised return of income by filing the revised computation of income, since the said action of the assessee would defeat the statutory mandate of the provisions of sec. 139(5) r.w.s. 139(3) of the Act. Accordingly, we are of the view that the assessing officer was justified in ignoring the loss occurred in F & O transactions and declared in the revised computation of income, since the said claim has been made beyond the time limit prescribed u/s 139(5) of the Act. - Decided against assessee.
Issues Involved:
1. Entitlement to set off and carry forward of losses incurred in derivative transactions. 2. Validity of claims made through revised computation of income instead of filing a revised return. 3. Applicability of the statutory time limits for filing revised returns under Section 139(5) of the Income Tax Act. 4. Interpretation of Section 80 of the Income Tax Act regarding the carry forward of losses. Issue-wise Detailed Analysis: 1. Entitlement to Set Off and Carry Forward of Losses Incurred in Derivative Transactions: The revenue challenged the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] that the assessee was entitled to set off and carry forward losses from derivative transactions, despite not filing the return of income under Section 139(3) of the Income Tax Act. The assessee, a consultant cardiologist, filed his return on 30-09-2009, declaring a total income of Rs. 9,06,310/-. During assessment, the assessee submitted a revised computation of income on 20-09-2011, claiming a loss of Rs. 1.49 crores from Futures & Options (F&O) transactions as a business loss and requested to carry forward the unabsorbed loss. 2. Validity of Claims Made Through Revised Computation of Income Instead of Filing a Revised Return: The Assessing Officer (AO) relied on the Supreme Court decision in Goetze (India) Ltd Vs. CIT (284 ITR 323), asserting that claims must be made through a revised return, not merely a revised computation of income. The AO held that the loss could not be carried forward as the assessee did not file a revised return as mandated by Section 139(3) of the Act. The CIT(A), however, considered the revised computation as equivalent to filing a return within the stipulated time, citing Circular No.14 (XL-35) dated 11/04/1995 and decisions from the Bombay High Court and ITAT. 3. Applicability of the Statutory Time Limits for Filing Revised Returns under Section 139(5) of the Income Tax Act: The Tribunal emphasized the statutory time limits for filing revised returns under Section 139(5). The assessment year involved was AY 2009-10, and the deadline for filing a revised return was 31-03-2011. The assessee failed to file a revised return within this period, instead submitting a revised computation on 20-09-2011, beyond the permissible time limit. The Tribunal held that the assessee lost the right to file a revised return and could not substitute it with a revised computation, thus defeating the statutory mandate of Section 139(5) read with Section 139(3). 4. Interpretation of Section 80 of the Income Tax Act Regarding the Carry Forward of Losses: The Tribunal referred to Section 80, which states that no loss shall be carried forward unless determined in a return filed in accordance with Section 139(3). Since the assessee did not file a revised return and the AO did not admit the loss from F&O transactions, the Tribunal concluded that the question of carrying forward the unabsorbed loss did not arise. The Tribunal set aside the CIT(A)'s order directing the AO to allow the set off and carry forward of the F&O loss. Conclusion: The Tribunal allowed the revenue's appeal, restoring the AO's order and denying the assessee's claim for set off and carry forward of the F&O loss. The Tribunal underscored the importance of adhering to statutory time limits for filing revised returns and upheld the AO's decision to ignore the loss claimed in the revised computation of income. The Tribunal also clarified that the provisions of Section 80 prohibit the carry forward of losses not determined in a return filed under Section 139(3).
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