Question: when the Assessee filed the income tax return after the Prescribed period u.s 139 (1) and declared the income but in the Assessment proceedings loss has been determined by the Assessing Officer , Whether the Assesse can carry forward the Loss in view of the provision that as per Section 80 of the Act, the benefit of carry forward of business loss is allowed only if the said loss has been determined in pursuance of the return filed within the prescribed time limit under Section 139(1) of the Act?
Answer Where original return filed was not a loss return but loss was determined in assessment proceeding, carry forward of loss on account of violation of section 80 could not be denied. Therefore the Assessee can carry forward the loss determined by the Assessing Officer in Assessment proceedings.
HIGH COURT OF KARNATAKA
Commissioner of Income-tax, Central Circle
IT APPEAL NO. 683 OF 2007
FEBRUARY 11, 2014
Section 80, read with sections 139 and 154, of the Income-tax Act, 1961 – Loss Return – (Conditions precedent) – Assessment year 1997-98 – Assessee had filed its return declaring total income – However, Assessing Officer computed business loss and said business loss was allowed to be carried forward – Subsequently, Assessing Officer invoked rectification proceeding under section 154 on ground that assessee was not entitled for carry forward of loss since returns had not been filed within time limit prescribed under section 139(1) and disallowed carry forward on account of section 80 – Whether since in assessment proceeding, business loss was determined by Assessing Officer, assessee had not violated section 80 and, thus, it was entitled for benefit of carry forward of business loss – Held, yes – Whether further, issue as to whether loss ultimately determined by Assessing Officer was liable to be carried forward or not, being a debatable issue, Assessing Officer could not invoke provisions of section 154 – Held, yes [Para 8] [In favour of assessee]
■ The assessee had filed its return declaring certain income.
■ However, the assessing authority determined the business loss which was allowed to be carried forward.
■ Subsequently, the Assessing Officer issued notice under section 154 to rectify the order allowing carried forward of loss and withdrew the benefit of carry forward of business loss on ground that the assessee filed belated return.
■ The Commissioner (Appeals) confirmed Assessing Officer’s order.
■ Tribunal allowed benefit of carry forward of business loss on ground the original return filed was not a lossreturn and, thus, there were no violation of provision of section 139(3).
■ On further appeal:
■ The records clearly disclose that the assessee had filed return of income declaring the total income on 6-1-1998. The Assessing Authority assessed the income and computed the total business loss of Rs. 74,85,743 and also denied some other benefits. The said order was questioned before the first Appellate Authority, wherein the first Appellate Authority confirmed the order passed by the Assessing Officer. Against the said order, the assessee preferred an appeal before the Tribunal. The Tribunal allowed the appeal granting partial relief. In order to give effect to the said order, the Assessing Authority once again determined total loss of Rs. 74,85,743 and allowed the same to be carried forward. Subsequently, the said order allowing the loss to be carried forward was modified invoking section 154. The reasoning of the Appellate Authority that the assessee has not declared the loss within the time specified under section 139(1) and 139(3) is factually incorrect. On the other hand, the assessee had declared income of Rs. 5,29,270 for the relevant assessment year well in time. During the course of assessment, it was found that there is business loss. Accordingly, the said business loss was allowed to be carried forward. The assessee has not violated any of the conditions under section 80. The assessee had shown positive income in the returns, but in the assessment, the business loss was determined by the Assessing Officer. The assessee was entitled for the benefit of carry forward of business loss. Whether loss ultimately determined by the Assessing Officer was liable to be carried forward or not, being a debatable issue, invoking the provision of section 154 was not available for the Assessing Officer. Court found no infirmity or irregularity in the order passed by the Tribunal. Hence, the substantial questions of law framed are held against the revenue and in favour of the assessee. [Para 8]