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TMI Blog1995 (4) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income-tax (Appeals) should have held that in the facts and circumstances of the case, the appellant-company was entitled to the carry-forward of the business loss of Rs. 4,41,944 as assessed by the Assessing Officer for the year under appeal. 2. Briefly stated, the facts of the case are that the assessee is a private limited company and in this case the return was due on 31-3-1987. As the return was not filed within the time prescribed, a notice under section 139(2) was issued on 2-3-1988 and was served on the assessee on 7-3-1988. The assessee applied for extension of time in Form No. 6 dated 23-6-1987 and requested for the extension of time for filing the return up to 30-9-1987. The assessee also filed a second application in Form No. 6 dated 28-9-1987 requesting for the extension of time for furnishing the return up to 31-3-1988. Ultimately, the assessee filed the return of loss amounting to Rs. 4,70,580 on 8-3-1988. The assessee claimed carry-forward of loss suffered by it in the previous year ending on 31-3-1987 relevant to the assessment year 1987-88. Although the Assessing Officer determined the loss at Rs. 4,41,940 he did not allow the carry-forward of the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the assessment year 1987-88 earlier than 9-11-1987. (c) The assessee-company was duly served with a notice dated 2-3-1988 under section 139(2) of the Income-tax Act, 1961, requiring it to file a return of its total income for the assessment year 1987-88. This notice was served on 7-3-1988 and the assessee company duly furnished its return for the said year in compliance to the said notice on 8-3-1988. This notice in original was produced before the Learned CIT (Appeals) in the presence of the Assessing Officer in the course of heating of this appeal. The Assessing Officer did not doubt the genuineness of the said notice. In view of the admitted position that a notice under section 139(2) was issued to the assessee-company asking it to file a return of its total income for the year under appeal within 30 days from the date of receipt of the said notice and the return of total income having been filed by the assessee-company for the said year after the receipt of the said notice within 30 days from the receipt thereof, the return must be deemed to have been filed in compliance with the said notice issued under section 139(2). 5. The return filed by the assessee-company has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer did not reject the applications filed by the assessee-company praying extension of date to furnish the return. In fact, the issue of notice under section 139(2) on 2-3-1988 permitting the assessee-company to file the return within 30 days from the date of service of the said notice amounts to asking the assessee to file the return by 5-4-1988 since the notice was admittedly served upon the assessee-company on 7-3-1988. In any event, as laid down by their Lordships of the Patna High Court in CIT v. Ramdas Sons [1980] 123 ITR 889, it must be presumed that assessee's request for extension of time had been granted by the Income-tax Officer when he did not send any reply to the assessee. The same view was taken by the Gujarat High Court in CIT V. Gordhanbhai Jethabhai [1943] 142 ITR 84 as well as by the Patna High Court in CIT v. Bishwanath Khirwal 161 ITR 382. In the last case, their Lordships observed as under : 'Once the assessee applies for extension of time and the Income-tax Officer does not reject the prayer for extension of time for filing a return and does not communicate it to the assessee, then it has to be presumed that the assessee is right in assuming that exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sustained. This provision appears to be clearly contradictory to the provisions of section 139(3) as well as section 80 as these sections stood at the relevant time. The contradiction is in the following respects : (a) Section 139(3) permitted the loss return to be filed within the time allowed under section 139(1), of the Act. This condition is absent in section 139(10). (b) Section 80 dealing directly with carry-forward of loss clearly permits a loss to be carried forward where an assessment is made in pursuant to a return filed within the time allowed under section 139(1) or within such further time as may be allowed by the Income-tax Officer. This section is also contrary to what is contained in section 139(10). (c) The strict conditions of section 139(3) do not apply to those cases where notice under section 139(2) is issued to the assessee-company. This is also very logical because an assessee cannot ignore the notice issued by an Income-tax Officer under section 139(2). This condition is also not mentioned in section 139(10). It may, however, be noted that section 139(10) does not appear in respect of any return furnished in response to a notice issued under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Ultimately, he came to the conclusion that the provisions of section 139(10) were applicable and the return showing loss filed by the assessee had to be deemed never to have been furnished. He, therefore, held that under these circumstances the question of determination of loss and carrying forward of the same for this year did not arise. 6. Being aggrieved by this order of the CIT (Appeals), the assessee has preferred this appeal before the Tribunal. The ld. counsel for the assessee Sri S. Bhattacharya submitted that the assessee is not contending that the return is filed under section 139(1). According to him, as the return filed by the assessee has been treated by the CIT (Appeals) as a return under section 139(2)/119(10) of the Act, the provisions of section 139(10)(a) and are clearly applicable to this case. Sri Bhattacharya, further explained that although the return is not in the form of claim for refund, the return of loss filed by the assessee was accepted by the department and as the tax was deducted at source, the assessee was entitled to refund. The learned counsel further pointed out that the Assessing Officer has processed the return of loss, acted upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion without it. It cannot be assumed that Parliament has given with one hand what it has taken away with the other. But it is impossible to construe absolute contradictions. Consequently, if the provisions of a later Act are so inconsistent with, or repugnant to, those of an earlier Act that the two cannot stand together, the earlier stands impliedly repealed by the later". (e) At line 2, page 183 - " It is obvious that the intention which appears to be most in accord with convenience, reason, justice and legal principles, should, in all cases of doubtful significance, be presumed to be the true one". At line 4, page 193 - " Whenever the language of the Legislature admits of two constructions and, if construed in one way, would lead to obvious injustice, the courts act upon the view that such a result could not have been intended, unless the intention has been manifested in express words". (g) At page 221 - " The Intention - Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily implied the missing words". (k) 1st Para of Omissions not supplied - Page 264 - " The general principle of strict construction is well-exemplified by comparing the manner in which an omission which, it was inferable from the text, was the result of accident, has been generally dealt with in penal and in remedial Acts. Thus, where the owner of mines was required, under a penalty, in case (1) of loss of life in the mine by accident, or (2) or personal injury arising from explosion, to send notice of such accident to an inspector within twenty-four hours ' from the loss of life ' (omitting the case of personal injury), the court refused to supply, in order to make the defendant liable to a conviction, the obvious omission in the latter branch of the sentence, and held that notice was not necessary when personal injury, from explosion short of loss of life had occurred although the mention of such injury in the earlier part of the sentence was idle and insensible without such an interpolation ". Encroachment on Rights - Pages 275-276 - " Statutes which encroach on the rights of the subject, whether as regards person or property, are similarly subject to a strict constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the assessee admitted the same. According to Sri Sinha, therefore, this return of loss is not covered by exception (f) too. He again emphasised on the contention that as the return of loss is fully governed by the mischief of provisions of section 139(10) which is non obstante clause giving overriding title and effect over other provisions of the Act, the loss cannot be determined and carried forward as the return is non est. Sri Sinha further argued that section 80 is also a bar to the claim of the assessee. In order to support his contention he placed reliance on Andhra Pradesh High Court decision in the case of Palakol Co-operative Sugars Ltd v.ITO [1993] 202 ITR 681. 9. In reply, Sri Bhattacharya, ld. counsel for the assessee submitted that there is no new information in Form No. 30 so the word " shall" is not much effective. As regards the contention of ld. departmental representative that the claim under section 237 was never argued before the CIT(A), he replied that since no new facts are brought on record and the provisions of law were already there, in section 139(10), the case can be argued on the basis of that provisions of law too. As regards section 80, Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39(10). Both the clauses, ie., (a) and (f) of the proviso to section 139(10) are reproduced as under for the sake of convenience : " (a) a return furnished in response to a notice under sub-section (2) of section 148 ; (f) a return furnished in support of a claim for refund under section 237." 12. According to Sri Bhattacharya, proviso (f) to section 139(10) is clearly applicable as the return of loss has been acted upon by the Assessing Officer in determining the loss and as the assessee applied for refund of tax deducted at source and the department has granted the same. The ld. departmental representative, on the other hand, pointed out that this argument was not placed before the CIT(A) and that clause (f) is not applicable as the claim is not made in the prescribed form and verified in prescribed manner. 13. Having scrutinised the facts and having gone through the provisions of sections 237 and 239 of the Income-tax Act, 1961 and the provisions of Rule 41 of the Income-tax Rules, 1962 we came to the conclusion that the claim of refund under Chapter XIX has not been made by the assessee in the prescribed Form No. 30 and the same has not been verified in prescribed ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall, before issuing any notice under this section, record his reasons for doing so". 16. From above section we find that in sub-section (1) of section 148, nature, form and service of notice is mentioned and issuance of notice as envisaged in section 148(2), precedes service of notice. Therefore, it is a notice under section 148(1). In sub-section (2) of section 148, the emphasis is only on recording of reasons before issuing such notice and no notice as such can be envisaged or visualised in sub-section (2) of section 148. Then in Taxmann's Income-tax Act, 1961, 1989 edition, we notice that according to Taxmann in clause (a) of proviso to section 139(10), the word " of " should be read as " or". If it is so, the clause (a) will run and read as under : " a return furnished in response to a notice under sub-section (2) or section 148." According to this interpretation of clause (a), it definitely covers both notices, ie., notice issued under section 139(2) as well as notice issued under section 148 and consequently, return filed in response to notice under section 139(2) and under section 148 will also be covered by this exception. 17. In this case, a return of loss is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be received at the counter." 18. If this circular is followed and applied to the instant case, the relevant facts which emerge are as under : (i) Assessee being a company has filed return of loss in Form No. 1 and it has rightly been accepted by the department originally as a valid return ; (ii) The assessee furnished return of loss in response to notice under section 139(2) within time allowed in the notice and, therefore, such return has correctly been identified and rightly been accepted by the department ; and (iii) The return of loss has been identified as valid return at receipt counter, otherwise it would not have been accepted at the receipt counter at all. 19. It is pertinent to note that while reaching the conclusion and while declaring the return as non est under section 139(10), the CIT(A) has completely ignored the Board Circular No. 493 dated 21-8-1987, which had binding effect on him, as per Karnataka High Court decision in the case of Sirigeri Kankappa Shetty Sons v. Dy. CIT [1992] 198 ITR 711. In fact, we find that the Assessing Officer has correctly followed the Board's circular and has rightly acted upon the return of loss in determining the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss cannot be allowed to be carried forward. To appreciate the rival contentions, it will be useful to reproduce below section 80 as it stood at the relevant time : " 80. Submission of return for losses.-- 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]." 21. On critical analysis of facts and judicial scrutiny of legal position, we find that the Assessing Officer's power of extension of time in section 139(3) and section 80 continued up to 31-3-1987 and 31-3-1989 respectively and, therefore, while section 80 helps the cause of assessee in submission of the return for loss, section 139(3) does not empower the Assessing Officer to extend the time for filing the return on the basis of applications in Form No. 6 filed by the assessee. But we find that the assessee's case is not covered under section 139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as within the time contemplated in section 139(4), it had no right to have such loss determined on the said return and carried forward the loss, if any, to the subsequent assessment years to be set off against the income of those years ". We find that the ratio of the Andhra Pradesh High Court decision in the case of Palakol Co-operative Sugars Ltd. is not applicable to the instant case as the facts and circumstances of this case are altogether different. In that case, the provisions of section 139(10) were applicable but in the instant case, the proviso (a) to section 139(10) is applicable and the return is valid as per Board's circular. While in that case, the return was not filed within the time prescribed under section 139(1), in this case the return was filed within time applied for. In that case application in Form No. 6 for extension of time was rejected but in the instant case, both applications remain unanswered. Lastly, no notice under section 139(2) was issued in the case of Palakol Co-operative Sugars Ltd. but in this case a notice under section 139(2) was issued and return was filed within time, ie., within 30 days. Thus we find that this decision also does not help th ..... 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