2017 (9) TMI 170 - HC - Income Tax

Submission of return for losses u/s 80 - Set-off/carry forward losses of earlier years if the return had been filed after due date - section 80 creating an absolute bar debarring the assessee from claiming set-off/carry forward - bonafide reasons for delay - Held that - The embargo in section 80 cannot be treated as a straitjacket one which could be applied without reference to different provisions included in section 139 of the Act and elsewhere to enlarge the time for filing the return. It will also be open to the assessee to take recourse to the powers of the Central Board of Direct Taxes in obtaining clarifications or directions and orders which may enable a particular assessee to seek indulgence where the returns were not filed in time for bona fide reasons. We are of the view that in the case in hand, the appellant which is a public sector body, stands to plead that its accounts would be audited only under the control of the Comptroller and Auditor General of India and without such exercise being carried out, it will be disabled from filing its return with the requisite documents including the auditor s certificate and audit statement. Ends of justice, therefore, requires that the appellant has to be given an opportunity to meet the situation by placing before the Assessing Officer appropriate application as may be permissible in law or by moving the Central Board of Direct Taxes within the time prescribed in terms of the circulars for relief as may be available to the appellant. To enable this process, the impugned decisions are liable to be set aside without expressing anything on the merits of the claim of the appellant s eligibility for carrying forward the losses. Appeal is allowed answering the question formulated as above and resultantly, setting aside the decision of the Tribunal and that of the Commissioner of Income-tax (Appeals) as also the Assessing Officer.

Summary

Issues:
1. Interpretation of section 80 of the Income-tax Act, 1961 regarding the carry forward and set-off of losses.

Analysis:
The case involved an appeal under section 260A of the Income-tax Act, 1961, where the primary issue was whether section 80 of the Act creates an absolute bar debarring the assessee from claiming set-off/carry forward losses of earlier years if the return had been filed after the due date. The appellant, Chhattisgarh State Civil Supplies Corporation, challenged the assessment order for the assessment year 2006-07, which disallowed the set-off/carry forward of business loss under section 80 of the Act due to the late filing of the return. The Commissioner of Income-tax (Appeals) and the Tribunal upheld this view, leading to the appeal by the assessee.

The court delved into the construction of section 80 of the Act, emphasizing that the provision restricts the carry forward and set-off of losses based on the timing of filing the return. The court highlighted the evolution of the provision from April 1, 1985, and the significance of timely filing as per section 139 of the Act. It was noted that different instructions and circulars by the Central Board of Direct Taxes provided avenues for condonation of delay in filing returns for carrying forward losses. The court opined that the embargo in section 80 cannot be applied rigidly without considering provisions in section 139 and other related sections that allow for an extension of the time for filing returns.

The court acknowledged the appellant's status as a public sector body and the necessity for its accounts to be audited by the Comptroller and Auditor General of India before filing returns with the required documents. In light of this, the court directed the appellant to submit an appropriate application to the Assessing Officer or seek relief from the Central Board of Direct Taxes within the prescribed time for enabling the filing process. Consequently, the court allowed the appeal, set aside the decisions of the Tribunal and the Commissioner of Income-tax (Appeals), and remitted the matter to the Assessing Officer for a fresh consideration after granting the appellant a six-month time limit to provide any decision issued by the Central Board of Direct Taxes.

In conclusion, the judgment focused on the interpretation of section 80 of the Income-tax Act, 1961, highlighting the importance of timely filing of returns for carrying forward losses and the flexibility provided by related provisions and circulars issued by the Central Board of Direct Taxes. The court emphasized the need for procedural fairness, especially in cases involving public sector entities, and directed the appellant to follow the prescribed procedures for seeking relief and reevaluation of the claim for carrying forward losses.