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TMI Blog2014 (8) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed u/s 139(1) and, consequently, not in accordance with the provisions of section 139(3) - the long-term capital loss disclosed in the return of income filed for the AY 1996-97 was not permissible to be carried forward and set off in accordance with the relevant provisions of Act. The AO in exercise of his powers u/s 154 modified the unabsorbed depreciation and carry forward of losses pertaining to earlier years - in the AY 1996-97 the figure of loss/unabsorbed depreciation determined earlier could not be modified without modifying the earlier orders in which such loss or unabsorbed depreciation was determined by the AO - There is no mistake alleged in the computation of long-term capital loss in the AY 1996-97 – the loss determined in the AY 1996-97 cannot be modified in the AY 1997-98 - the assessee had sought set off of capital loss suffered in the AY 1996-97 against the long-term capital loss suffered in the AY 1996-97 against the long term capital gain in the assessment year 1997-98 and in the assessment year 1999-2000 - when the mistake was discovered the AO promptly effected rectification u/s 154 for both the AYs after giving opportunity to the assessee, modified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ites by the company which were to be taken as part of the income. The assessee admitted liability and these perquisites were added to the income of the assessee. Thereafter, the Assessing Officer considered loss under the head Capital gains amounting to ₹ 2,41,799 and allowed the capital loss to be carried forward. The assessee filed income-tax return for the assessment year 1997-98 on February 3, 1998, declaring a total income of ₹ 2,53,850. The assessee claimed deductions and set off of loss as were allowed to be carried forward in the previous return. On May 4, 1998, the Assessing Officer issued notice under section 143(2) of the Act to the assessee and after hearing the assessee, the Assessing Officer adjusted the loss under the head Capital gains amounting to ₹ 24,608 and allowed the balance loss amounting to ₹ 2,17,191 to be carried forward in the next assessment year. On March 13, 2003, the Assessing Officer observed that the return for the assessment year 1996-97 was filed by the assessee on December 24, 1996, and thus was not entitled to the benefit of carrying forward losses. The Assessing Officer issued notice to the assessee as to why the mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng assessment year, and- (i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year : Provided that the business or profession for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year ; and (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on : Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinued in the circumstances specified in that section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so reestablished, reconstructed or revived, and- (a) it shall be set off against the profits and gains, if any, of that business or any other busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fession is a loss and such loss cannot be or is not wholly set off against the income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off, shall be carried forward to the following assessment year and shall be set off against the profits and gains, if any, of any business or profession for that assessment year subject to other provisions of Chapter VI. In sub-section (2) effect is to be given to the provisions of section 72 over any allowance or part thereof under sections 32(2) and 35(4) to be carried forward. Under sub-section (3), the period for which loss can be carried forward is eight years. 9. The mandate under section 80 of the Act is that the losses under sections 72(1), 73(2), 74(1), 74(3) and 74A(3), if not determined in pursuance of a return filed, shall not be carried forward and set off. 10. Section 139(3) of the Act enacts that if the assessee who has sustained a loss under the head Profits and gains of business or Capital gains and claims to carry forward a loss, return can be filed in the prescribed form and verified in the prescribed manner and containing such other particulars as may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated March 20, 2007, annexure A.1 noticed as under : 12. As is evident from section 139(3), if any person has sustained a loss under the head 'Profits and gains of business or profession' or under the head 'Capital gains' and is desirous of carrying forward the said loss, he is required to file the return within the time allowed under sub section (1) of section 139. In this case, it is not disputed that the return of income for the assessment year 1996-97, i.e., the year in which the assessee had declared a long-term capital loss of ₹ 2,41,759 was not filed within the time allowed under section 139(1) and, accordingly, the return for the said assessment year was not filed in accordance with the provisions of section 139(3) were not applicable. In our view, the contention advanced on behalf of the assessee that since the assessee had declared positive income under the head 'Profits and gains of business' provisions of section 139(3) are not attracted in this case, is bereft of any substance. The language of section 139(3) as well as section 80 is unambiguous. The provisions do not speak of a loss return but a loss suffered un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difying the order for the assessment year 1996-97. One of the decisions is in the case of Deputy CIT v. Asia Resorts (supra) (I. T. A. No. 488/Chandi/2002 dated July 31, 2006) (copy of the order is placed on record), a perusal of which reveals that the facts in that case are distinguishable with the facts of the present case. The issue involved in that case was the determination of unabsorbed depreciation to be set off in the assessment year 1996-97. The Assessing Officer in exercise of his powers under section 154 modified the unabsorbed depreciation and carry forward of losses pertaining to earlier years. In that case, it was held that unabsorbed depreciation and unabsorbed losses had been determined by the Assessing Officer, vide order dated April 17, 1995, in the earlier year. The said order had not been modified at any stage. The Tribunal, therefore, held that in the assessment year 1996-97 the figure of loss/unabsorbed depreciation determined earlier could not be modified without modifying the earlier orders in which such loss or unabsorbed depreciation was determined by the Assessing Officer. In the present case, the determination of loss is not a matter of dispute. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record of the previous year as well as the record of the subsequent assessment year pertaining to the assessee. Moreover, in order to give effect to the provisions of section 74 of the Income-tax Act, 1961, the Assessing Officer was required to verify that the loss which was sought to be set off had been determined in pursuance of a return filed in accordance with the provisions of section 139(3). For such verification, it was necessary for the Assessing Officer to look into the record of the assessee for the assessment year 1996-97 in which the loss was disclosed and determined. When the Assessing Officer made assessment under section 143(3) for the assessment year 1997-98 as well as for the assessment year 1999-2000 he did not consider the restriction placed under section 74, section 80 read with section 139(3) of the Income-tax Act, 1961. Subsequently, when the mistake was discovered the Assessing Officer promptly effected rectification under section 154 for both the assessment years after giving opportunity to the assessee, modified the assessment orders for the assessment years 1997-98 and 1999-2000 accordingly. The hon'ble Punjab and Haryana High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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