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TMI Blog2002 (9) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... 987-88 is ineligible for being carried forward for set off against incomes, if any, of the subsequent years. However, assessee's income tax return for the assessment year 1990-91, which reflected a positive income in the relevant previous year, claimed set-off of the loss returned by the assessee in the assessment year 1987-88. During the course of scrutiny assessment proceedings of assessee's this income tax return, i.e. for the assessment year 1990-91, the Assessing Officer rejected assessee's claim for set-off of business loss, returned by the assessee in the assessment year 1988-89, against this year's income. In doing so, the Assessing Officer observed as follows: "The assessee's income is set off with the loss which is carried forward from the earlier years but the loss is actually originated during the assessment year 1987-88, but the return of the assessment year 1987-88 was not filed in time as specified in section 139(3). So the business loss is not allowed to be set off for the assessment year 1988 89 and onwards." Aggrieved inter alia by the set-off of the loss thus declined, the assessee carried the matter in appeal before the CIT(A). The CIT(A) took note of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself. In other words, according to revenue, on the facts of this case, CIT(A) was denuded of his powers to decide as to whether or not loss incurred in earlier years can be set off against income of the present year. In case assessee was aggrieved of Assessing Officer's not allowing carry forward of loss for the assessment year 1987-88, this grievance could have been adjudicated in appellate proceedings for that assessment year itself. We were thus urged to vacate the impugned directions of the CIT(A) on this ground itself. On the other hand, on this issue of jurisdiction, learned counsel for the assessee placed his reliance on the order of the CIT(A). 6. To resolve this controversy, we find guidance from a judicial precedent directly on the issue. Hon'ble Supreme Court, in the case of CIT v. Manmohan Das [1966] 59 ITR 699, were in seisin of a materially identical situation. The question that came up for the consideration of their Lordships was "whether the assessee could claim a set-off of the loss suffered by him in the preceding year 1950-51 against the profits in the year under consideration, i.e. 1951-52, having failed to prefer an appeal against the refusal by the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will fall for determination in relevant later year or years. 8. We, therefore, reject the revenue's plea that CIT(A) was denuded of the powers, while dealing with an appeal for the assessment year 1990-91, to adjudicate on the question as to whether the loss incurred in previous year relevant to the assessment year 1987-88 could be set off against the income in the assessment year 1990-91. Accordingly, we proceed to examine the claim on merits. 9. We may mention that section 80, as it stood at the relevant point of time, provided as follows: 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. It is very important to note that the expression "time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income-tax Officer" was substituted for "return filed under section 139" with effect from 1st Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when this amendment in section 80 came in force. We are of the considered view that Their Lordships of Hon'ble Supreme Court, in the case of Kulu Valley Transport Co. (P.) Ltd., and Their Lordships of Hon'ble Calcutta High Court, in the case of Presidency Medical Centre (P.) Ltd., were dealing with the legal provisions which are not in pari materia with the legal position, after amendment in section 80 of 1961 Act by Taxation Laws (Amendment) Act, 1984 with effect from 1st April, 1985, and, accordingly, these judgments have no application on the issue in appeal before us. 12. While dealing with the pre-amendment law and referring to the Hon'ble Supreme Court's judgment in the case of Kulu Valley Transport Co. (P.) Ltd., Sampat Iyengar's commentary on the Income-tax Law observes that "the decision of minority (sic) will govern and be applicable even under the 1961 Act, as the provisions of section 139 are materially identical with those of section 22 of the 1922 Act and as, further, there is nothing in the language of section 80 to lead to a different conclusion". However, once the amendment is brought about in section 80 and this amendment substitutes 'return filed under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1). 15. The implications of section 22(2A) of the 1922 Act and of section 139(3) of the 1961 Act being identical, and the restriction on carry forward of losses under section 80 restricted to rather broad category of "returns filed under section 139", the observations of Their Lordships in the context of section 2(22A) continued to be valid, with respect to returns filed under section 139(4), till the amendment in section 80 was brought about with effect from 1st April, 1985. The case before the Hon'ble Calcutta High Court in Presidency Medical Centre (P.) Ltd. 's case, being for the assessment year 1964-65 was also of pre-amended section 80 (assessment years earlier than 1985-86) and, therefore, the restriction brought in force in section 80, to allow carry forward of losses only for returns filed under section 139(1) as against the return filed in any of the sub-sections of section 139 till that point of time, had not come to be effective. As far as Kulu Valley Transport Co (P.) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 22(2A) places any limitation on that right. [Emphasis supplied to highlight its contrast with the applicable legal position under section 80 of 1961 Act whereby right to carry forward is restricted to the returns filed under sub section (1) of section 139]. This sub-section which has been reproduced before simply says that in order to get the benefit of section 24(2) the assessee must submit his loss return within the time specified by section 22(1). That provision must be read with section 22(3) for the purpose of determining the time within which return has to be submitted. It can well be said that section 22(3) is merely a proviso to section 22(1). Thus a return submitted at any time before the assessment is made is valid return. In considering whether a return made is within time sub-section (1) of section 22 must be read along with sub-section (3) of that section. A return whether it is a return of income, profits or gains or of loss must considered as having been made within the time prescribed of it is made within the time specified in section 22(3). In other words, if section 22(3) is complied with, section 22(1) also must be held to have been complied with. If com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss determined on the basis of a return under section 139 is entitled to the benefit of the carry forward and set off. The amendment has not affected the position of law as declared by the said decision in respect of loss arising from assessment year earlier than the assessment year 1985-86. Our attention was brought to an instruction of the Board [Instruction No. 1607 (F.No. 225/240/78-II/A-II), dated March 14,1985], wherein the Board has directed that the disqualification for carry forward and set-off of loss determined in pursuance of a belated return shall be effective in respect of the assessment year subsequent to the assessment year 1984-85. Our attention has also been drawn to paragraphs 14.1, 14.2 and 14.3 of Circular No. 397, dated October 16, 1984. The extract of the relevant portion of the said Circular is set out below: Submission of return for losses--Section 80 '14.1 Under the existing provisions of section 80 relating to submission of return for losses, no loss is allowed to be carried forward and set off under section 72(1), 73(2), 74(1) or 74A(3) unless such loss has been determined in pursuance of a return filed under section 139. 14.2 The Amending Act ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment) Act, 1987. 22. Direct Taxes (Amendment) Bill, 1987 describes this amendment as in the category of 'amendments of a consequential nature'. Similarly, 'Notes on Clauses' also observe that this amendment is' of a consequential nature'. It may also be recalled that by the virtue of the amendment brought about by this very legislation, amongst other things, clause (c) was inserted in proviso to section 139(10) and this clause (c) was worded as "(c) a return of loss which has been furnished in accordance with the provisions of sub-section (3) (of section 139)". It may also be recalled that by the virtue of section 139(10), as it stood prior to the aforesaid insertion of clause (c), a loss return was not to be treated as non est, being a return disclosing income lower than the maximum amount not chargeable to tax, unless it was 'a return of loss furnished before the 31st day of July of the assessment year relevant to the previous year during which loss was sustained'. In other words, whereas a definite date was given in earlier proviso to section 139(10) itself, because of staggering of dates of filing of returns for various classes of assessee, which was done by the virtue of Di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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