COMMISSIONER OF INCOME-TAX VS P. R. DEVARAJ
2000 P T D 559
[232 I T R 249]
[Madras High Court (India)]
Before K. A. Thanikkachalam and N. V Balasubramanian, JJ
COMMISSIONER OF INCOME-TAX
versus
P. R. DEVARAJ
T. C. No.238 of 1982 (Reference No.150 of 1982), decided on /01/.
th
September, 1996. Income-tax---
----Loss---Carry forward---Return disclosing loss ought to have been filed by 31-7-1975, but filed only on 9-10-1975---Though return filed belatedly it was within time specified under S.139(4)(b)---Assessee entitled to carry forward loss---Indian Income Tax Act, 1961, Ss.80 & 139.
The assessee, who was a partner of a firm, should have filed his return by July 31, 1975, for the relevant year but filed the same .on October 9, 1975, disclosing a loss of Rs.61,730 which included the assessee's share of loss of Rs.82.825 from the firm. After setting off the loss against the income from the business and after making certain disallowances, the net loss was determined by the Income-tax Officer at Rs.60,019. The Income-tax Officer declined to carry forward the loss on the ground that though the return of income was due on July 31, 1975, in accordance with the provisions of section 139(1) of the Income Tax Act, 1961, yet it was filed only on October 9, 1975, that the assessee had not produced any evidence to show that extension of time for filing the return of income belatedly was asked for and granted by the Income-tax Officer and that, therefore, the loss could not be carried forward. On appeal, the Appellate Assistant Commissioner held that though no application for extension of time was filed by the assessee, the assessee had reasonable cause for the delay in filing the return because the particulars of share income from the firm were not available to the assessee till the firm itself filed its return of income, that the firm applied for extension of time to file its return of income and that, therefore, the delay in the filing of the return by the firm constituted reasonable cause for the assessee to delay the submission of his return. The Appellate Assistant Commissioner observed that the Income-tax Officer should have, on the merits, appreciated the reasons for the delay in the filing of the return and carried forward the loss. The Appellate Assistant Commissioner held that a return filed within the time specified under section 139 of the Act was still a valid return and the loss had to be determined and carried forward as a matter of course under section 72(1) read with section 80 of the Act even though the return was not filed within the time provided under section 139(1). On further appeal, the Tribunal confirmed the order of the Appellate Assistant Commissioner on the ground that the return filed by the assessee must be taken to have been filed under section 139(4). Ova reference:
Held, affirming the decision of the Tribunal, that section 139(4), as it stood at the relevant time, enabled the assessee to file a return at any time before an assessment was made but within the particular time limit prescribed in section 139(4)(b) of the Act. In the instant case, there was no dispute that the return was filed under section 139(4) of the Act, before an assessment was made. Subsection. (4) of section 139 would be applicable both to returns filed under sections 139(1) and 139(2) as well as section 139(3). Therefore, subsection (4) of section 139 would be applicable even if the return filed was under subsection (3) of section 139. Therefore, the return filed under section 139(4), before the assessment was made; should be considered and the assessee was entitled to carry forward the loss even though he had submitted the return of income belatedly.
Presidency Medical Centre (P.) Ltd. v. CIT (1977) 1.08 ITR 838 (Cal.); CIT v', Kulu Valley Transport Co. (P.) Ltd. (1970) 77 ITR 518 (SC); CIT v. Pratapgarh Cold Storage and Ice Factory (1980) 3 Taxman (Sh.N) 61; (1982) UPTC 129 (All.); C.P. Sarathy Mudaliar v. CIT (1978) 114 ITR 687 (AP); Telster Advertising (Pvt.) Ltd. v, CIT (1979) 116 ITR 610 (Bom.); CIT v. Nagpur Steel and Alloys (P.) Ltd. (1988) 169 ITR 466 (Cal.); Cooperative Marketing Society Ltd. v. CIT (1983) 143 ITR 99 (MP); CIT v. R. Chandran (1991) 191 ITR 328 (Ker.); CIT v. K.C. Bezbarua (1992) 195 ITR 321 (Gauhati) and CIT v. Bankipur Iron Works Ltd. (1980) 3 Taxman 484 fol.
C. V. Rajan for the Commissioner.
P.P.S. Janarthana Raja for the Assessee.
JUDGMENT
K. A THANIKKACHALAM, J.---At the instance of Department, the Tribunal referred the following question for the opinion of this Court under section 256(1) of the Income Tax Act, 1961:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the assessee is entitled to carry forward the loss even though it has submitted the return of income belatedly?"
The assessee is a partner in a firm called Orvee Construction Company. The return for the year under reference should have been filed by July 31, 1975, but it was filed on October 9, 1975, disclosing a loss of Rs.61,730. That included the assessee's share of loss from Orvee Construction of Rs.82,S25: After setting off the income from business and after making certain disallowances, the net loss was determined by the Income-tax Officer at Rs.60,019 by his order, dated January 16, 1979. Instead of carrying forward this loss to be set off against the income of future years, the Income-tax Officer declined to carry forward .that loss on the ground that though the return of income was due on July 31, 1975, as per the provisions for section 139(1) it was filed only on October 9, 1975, and the assessee had not produced any evidence to show that extension of time for filing the return belatedly was asked for and granted by the Income-tax Officer and that, therefore, the loss cannot be carried forward.
Against such refusal to carry forward the loss to the subsequent years, the assessee filed an appeal before the Appellate Commissioner. The Appellate Assistant Commissioner held that though no application for extension of time was filed by the assessee, the assessee had reasonable cause for the delay in filing the return because the particulars of share income from the firm Orvee Constriction Company were not available to the assessee till the firm itself filed its return of income, that the firm applied for extension of time to file its return of income and that therefore, the delay in the filing of the return by the firm constituted reasonable cause for the assessee to delay the submission of his return. The Appellate Assistant Commissioner observed that the Income-tax Officer should have, on the merits, appreciated the reasons for the delay in the filing of the return and carried forward the loss. He held that a return filed within the time specified under section '139 of the Act is still a valid return and the loss has to be determined and carried forward as a matter of course under section 72(1) read with section 80 of the Income-tax Act even though the return was not filed within the time provided under section 139(1). He relied upon a decision of the Calcutta High Court in Presidency Medical Center (P.) Ltd. v. CIT (1977) 108 ITR 838.
Aggrieved, the Department filed a second appeal before the Tribunal. The Tribunal following the decision of the Supreme Court in the case of CIT v. Kulu Valley Transport Co. (P.) Ltd. (1970) 77 ITR 518 and the decision of the Calcutta High Court in Presidency Medical Centre's case (1977) 108 ITR 838 confirmed the order passed by the Appellate Assistant Commissioner.
Before us, learned standing counsel for the Department, submitted that Tribunal was not correct in accepting the return filed by the assessee belatedly without any application for condoning the delay. According to learned standing counsel, the Tribunal cannot suo motu condone the delay in filing the return, when there was no request made by the assessee in that behalf. On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal submitted that the order of the Tribunal is in accordance with the various decisions including that of the Supreme Court in Kulu Valley Transport Corporation (P.) Ltd. (1970) 77 ITR 518.
We have heard learned standing counsel for the Department and learned counsel appearing for the assessee. In the present case, for the Assessment Year 1975-76, a return was filed disclosing a loss of Rs.61,720 The return ought to have been filed by July 31, 1975; but it was filed only on October 9, 1975. There was no request from the assessee to condone the delay in filing the return. The assessee wanted the Department to determine the loss and permit the assessee to carry forward the loss to the subsequent years, to be set off against the income of future years. The Income-tax Officer was of the view that since the return was filed belatedly and the delay in filing the return was not condoned, the assessee will not be permitted to carry forward the loss to the subsequent years. The Tribunal was of the view that the return filed by the assessee must be taken to have filed under section 139(41 of the Income Tax Act, 1961. Section 139(4) of the Income Tax Act, 1961, as it stood then, enabled the assessee to file a return at any time before an assessment is made but within a particular time limit prescribed in section 139(4)(b) of the Act. In the present case, there is no dispute that return was filed under section 139(4) of the Act, before an assessment was made, Subsection (4) of section 139 would be applicable both to the return, filed under sections 139(1) and 139(2) as well as well a section t3c)(31. Therefore, subsection (4) of section 139 would be applicable even if the return filed is under subsection (3) of section 134 While considering the provisions of section 139(4) of the Income-tax Act, read alongwith section 80 of the Act, as it stood at the relevant time, the High Courts of Allahabad, Andhra Pradesh, Bombay, Calcutta, Delhi and Madhya Pradesh have taken the view that the returns filed or deemed to have been filed under section 139(4) of the Act; before the assessment is made, should be considered anti the assessee is entitled to carry forward the loss determined by the Income-tax Offices : vide, CIT v. Pratapgarh Cold Storage and Ice Factory (1980) 3 Taxman (Skit. N) 61; (1982) UPTC 129 (All); C. P. Sarathy Mudaliar v. CIT (1978) 114 ITR 687 (AP); Telster Advertising (Pvt.) Ltd. v. CIT (1979) 116 ITR 60 (Bom); Presidency Medical Center (P.) Ltd. v. CIT (1977) 108 ITR 838 (Cal); CIT v. Nagpur Steel and Alloys (P.) Ltd. (1988) 169 ITR 466 (Cal): Co-operative Marketing Society Ltd. v. CIT (1983) 143 ITR 99 (MP); and CIT v. Bankipur Iron Works Ltd. (1980) 3 Taxman 484. In CIT v . R. Chandrn (1991) 191 ITR 328, the Kerala High Court also took the same view. Lastly, the Guwahatt High Court has also taken the same view to CIT v. K. C. Bezbarua (1992) 195 ITR 321. All these cases were based upon the decision of the Supreme Court in Kulu Valley Transport Company (P.) Ltd. (1970) 77 ITR 518. In view of the foregoing reasons, we see that there is no infirmity in the order passed by the Tribunal in affirming the order passed by the Appellate Assistant Commissioner in directing the Assessing Officer to process the return filed by the assessee belatedly, but within the time specified under section 139(4)(b) of the Income Tax Act, 1961, and allowing the assessee to carry forward the loss to the subsequent years. Accordingly, we answer the question referred to us in the affirmative and against the Department. No. costs.
M.B.A/3222/FCReference answered