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TMI Blog1998 (9) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 139(1) of the Act. The original return was processed and the business loss was determined by the Assessing Officer vide its order dated 6th November, 1987. The business loss was also apportioned among the partners for being set off/carried forward in their respective hands by passing a specific order under section 158 of the Act. Subsequently, the Assessing Officer realised his mistake that since the return was not filed within the prescribed period under section 139(1) or within the time allowed by the Assessing Officer, the business loss could not be determined in the hands of the firm and once the determination of the business loss is not possible by virtue of section 80, it cannot be apportioned and allowed to be carried forward in the hands of the partners for being set off against the income of the subsequent years. Accordingly, he modified his order under section 154 of the Act and directed that the business loss of Rs. 2,88,938 shall not be carried forward in the hands of the partners for being set off against the income of the subsequent years. A copy of the order was also sent to the respective Assessing Officer who held jurisdiction over the partners. This rect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of sub-section (4) of section 139 and section 80 of the Act, it follows that, unless the return is filed within the time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income-tax Officer, the loss cannot be determined much less can it be carried forward and set off under the above provisions. Mr. Gupta further contended that admittedly the return was not filed within the period prescribed under section 139 of the Act or time allowed by the Assessing Officer. However in the Act it has been mentioned that the return filed under the Amnesty Scheme can be treated as return filed within the period prescribed under section 139(1) of the Act or the time allowed by the Assessing Officer. Moreover, no circular was issued by the CBDT to this effect. Once it is proved that the return has not been filed within the period prescribed under section 139(1) of the Act or time allowed by the Assessing Officer, the business loss cannot be determined while framing the assessment and when the business loss was not determined, it cannot be allocated in the hands of the partners for its carry forward to subsequent years. 6. On consideration of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989 by substituting the words "in accordance with the provisions of sub-section (3) of section 139" for the words" within the time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income-tax Officer". However, we are not concerned with the amendments brought by the Direct Tax Laws (Amendment) Act, 1987 as the assessment year involved in the instant case is 1986-87. For the sake of brevity we reproduce the relevant provisions of section 80 applicable to the assessee's case :- "Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed within the time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income-tax Officer, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) of section 74 or sub-section (3) of section 74A." 7. From a bare reading of this section, it appears to us that no business loss can be determined and allowed to be carried forward and set off under sub-section (1) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sport Co. (P.) Ltd. (supra) was good law till the assessment year 1988-89. From a careful perusal of the judgment it appears to us that the correct position of the amendment brought in section 80 at different point of time, was not placed before the Hon'ble High Court during the course of arguments. The judgment of the Supreme Court in the case of Kulu Valley Transport Co. (P.) Ltd. (supra) was held to be a good law till the assessment year 1984-85 as from 1985-86 the amendment was brought to this section through Taxation Laws (Amendment) Act, 1984 by substituting the words "within time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Assessing Officer" in place of the words "under section 139". This amendment was brought to the statute to meet the situation created by the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P.) Ltd. (supra). After this amendment, the return filed under section 139(4) cannot be treated to have been filed within the period prescribed under section 139(1) or the extended period allowed by the Assessing Officer. Unfortunately, the attention of the Hon'ble High Court was not invited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of M. K. Venkatachalam, ITO v. Bombay Dyeing Mfg. Co. Ltd. [1958] 34 ITR 143, their Lordships of the Supreme Court have held that a glaring and obvious mistake of law can be rectified under section 35 of the Act para materia with section 154 of the present Act as much as a mistake of fact apparent from record. A similar view was expressed by the Karnataka High Court in the case of Addl CIT v. India Tin Industries (P.) Ltd. [1987] 166 ITR 454. In this case their Lordships have held that if mistake occurred by over-looking mandatory provisions of law, which leaves no discretion to the taxing authorities, it can be rectified under section 154 of the Act. Since in the instant case, the provisions of section 80 are quite unambiguous which were not followed by the Assessing Officer while framing the original assessment, he was well within his rights to make rectification in its order and to frame the assessment compatible with section 80 of the Act. 12. Having regard to the above observations, we do not find any illegality in the order passed under section 154 of the Act. Moreover, we are not convinced with the observation of the CIT(A) who has straight away accepted the argume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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