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TMI Blog1991 (5) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee subsequently on 15-10-1985 for assessment year 1984-85 and on 3-2-1986 for assessment year 1985-86, since filed beyond the prescribed time limit provided under s.139, the loss computed in the assessments in pursuance thereto, was refused to be carried forward. 3. The CIT(A) held that the original returns filed by the assessee for the two years under consideration were not invalid but mere defective returns and, therefore, the loss determined could not be denied to be carried forward. Reference in this connection was made to the decision of the Calcutta High Court in the case of CIT v. Garia Industries (P.) Ltd. [1983] 140 ITR 636. He accordingly directed the ITO to carry forward the loss determined and to allow the same subject to other provisions of the Act. Feeling aggrieved, the revenue is in appeal before us. 4. The learned Departmental Representative, Sri Keshav Prasad, submitted that after introduction of section 139(9) of the Act with effect from 1-9-1980, the returns, unless annexed with the audited accounts and other statements of accounts, would not be valid returns and were, therefore, rightly ignored by the ITO. No extension was sought for by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Bombay High Court in the case of Telster Advertising (P.)Ltd. v. CIT [1979] 116 ITR 610 they were to be treated as having been filed on the day when the original returns were filed. He also referred to the provisions of section 292B and submitted that the returns were for the purposes of the Act and should not be deemed as invalid merely because a defect existed. In any case, he submitted that in view of the aforesaid judgment of the Bombay High Court in Telster Advertising (P.) Ltd.'s case the loss for assessment year 1984-85 was to be allowed even if the first return was to be ignored as the subsequent return would be a return filed under sub-section (4) of section 139, of the Act, and the loss determined in pursuance of any return filed under s. 139 was to be allowed to be carried forward. 6. We have heard the parties and considered their rival submissions. Section 80 of the Act, as it was existing in the relevant period, provided that no loss which has not been determined in pursuance of a return filed under section 139 would be carried forward and set off under sub-sec. (1) of sec.72, etc. This section was amended by the Taxation Laws (Amendment) Act, 1984 with effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 for assessment year 1985-86 without those being annexed with profit & loss account and balance-sheet would not be invalid returns. It could at best be termed as either incomplete return or a defective return, but certainly not an invalid return. This view also finds support from the Explanation to section 139(9) which reads as under : " Explanation : For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :-- (a) the Annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in ; (b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return ; (c) the return is accompanied by proof of-- (i) the tax, if any, claimed to have been deducted at source and the advance-tax and tax on self-assessment, if any, claimed to have been paid ; (ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974) ; (d) wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but before the assessment is made, the Income-tax Officer may condone the delay and treat the return as a valid return. " [Emphasis supplied] On a bare reading of this sub-section, it appears that in a case where the assessing officer considers a return to be invalid, he has to issue a notice. In other words, the issuance of a notice for treating a return as invalid is a must. No notice has been given by the assessing officer to the assessee to rectify the defect, and, therefore, the returns filed by the assessee in June 1984 for the assessment year 1984-85 and in June 1985 for the assessment year 1985-86, which were defective or incomplete, could not be treated as invalid. The subsequent returns filed would take place of the original returns and the assessee would be entitled to carry forward the loss determined in pursuant thereto. 8. We may look to the problem from another angle. The proviso to sec. 139(9) provides that if the defect is rectified before the assessment was made, the ITO has the discretion to condone the delay and treat the return as valid. The circumstances under which the assessee filed the returns on estimated loss would justify the condonation of the delay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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