Court allows carry forward of loss for assessee-company, citing timely extension request. Tribunal decision overturned.

The court ruled in favor of the assessee-company, allowing the carry forward of the loss computed for the assessment year 1985-86. The court emphasized that if an application for extension of time is submitted before the Assessing Officer and not rejected, the time is presumed to be extended. As the returns showing the loss were filed before the extended deadline, the court held that the Tribunal erred in disallowing the claim of the assessee. The decision favored the assessee and went against the Revenue, resulting in the reference being disposed of in favor of the assessee.

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Issues:
Whether the assessee-company was entitled to carry forward a loss computed for the assessment year 1985-86.

Analysis:
The case involved a limited company that applied for an extension of time to file its return, which was due on June 30, 1985. The company claimed a loss of Rs. 25,82,740, but the assessment only computed a total loss of Rs. 9,71,561. The Income-tax Officer refused to allow the carry forward of the determined loss due to the late filing of returns. Both the Commissioner of Income-tax (Appeals) and the Tribunal upheld this decision. The main argument presented was that since the returns were filed before the extended deadline of September 30, 1985, the company should be allowed to carry forward the losses.

The counsel for the assessee contended that once an application for extension of time is submitted before the Assessing Officer and not rejected, the time is presumed to be extended. Referring to the decision of the Calcutta High Court, it was argued that if the return is filed before the extended time sought, it should be considered as filed on or before the due date. The court noted that the application for extension was submitted on June 28, 1985, and the returns showing the loss were filed on August 5, 1985, before the extended deadline of September 30, 1985. The court emphasized the presumption that time is extended if the application is pending and not rejected.

The court criticized the Tribunal for disallowing the claim of the assessee based on the returns not being filed on or before the due date. It highlighted the consistent view of various High Courts that if an application for extension is not rejected, the time is presumed to be extended. Since the returns were filed before the extended deadline, the court ruled in favor of the assessee, stating that the Tribunal erred in its decision. Consequently, the question was answered in the negative, favoring the assessee and against the Revenue. The reference was disposed of accordingly.

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