2001 (3) TMI 64 - HC - Income Tax

Court Allows Carry Forward & Set Off of Loss Despite Section 148 Notice

The court allowed the carry forward and set off of loss for the assessment year 1983-84 to subsequent years, even though the return was filed in response ... Return, Loss, Time-Limit For Filing Issues Involved:1. Whether the Appellate Tribunal is justified in allowing the carry forward and set off of loss for the assessment year 1983-84 to subsequent assessment years, even though the return was filed by the assessee in response to a notice issued under section 148 of the Income-tax Act, 1961.2. Whether the return filed by the assessee in response to a notice issued under section 148 could be treated as a return filed under section 139(3) of the Income-tax Act for the purpose of allowing carry forward and set off of loss to subsequent assessment years.Issue-wise Detailed Analysis:Issue 1: Carry Forward and Set Off of LossThe primary question is whether the assessee can carry forward and set off the loss for the assessment year 1983-84 to subsequent years, given that the return was filed in response to a notice under section 148. The Tribunal allowed the carry forward, citing that the return was filed within the time allowed under section 139(4) of the Act. The Tribunal relied on the Madhya Pradesh High Court's decision in Co-operative Marketing Society Ltd. v. CIT and the Supreme Court's decision in CIT v. Kulu Valley Transport Co. Pvt. Ltd., which supported the assessee's case. The Tribunal directed the Income-tax Officer to make assessments and compute the loss.Issue 2: Treatment of Return Filed under Section 148The second issue is whether a return filed in response to a notice under section 148 can be treated as a return filed under section 139(3) for the purpose of allowing carry forward and set off of loss. The Revenue contended that the return must be filed within the time specified under section 139(1) or within the extended time allowed by the Income-tax Officer to avail the benefit of loss carry forward. They argued that the legislative intention restricts the time limit for filing loss returns. The Revenue also contended that the return filed under section 148 is not for the benefit of the assessee but for the Revenue.The court examined the relevant provisions of section 139 and section 80 of the Act. It noted that section 139(4) allows filing a return within two years from the end of the relevant assessment year, and section 80 requires the loss to be determined in pursuance of a return filed under section 139. The court referred to the Supreme Court's decision in Kulu Valley Transport Co. Pvt. Ltd., which held that a return filed within the time specified in section 139(4) should be treated as a return filed under section 139(1), thus entitling the assessee to carry forward the loss.The court rejected the Revenue's argument that a return filed under section 148 cannot be treated as a return under section 139(4). It held that the statutory right to file a return within the time allowed under section 139(4) is not negated by the issuance of a notice under section 148. The court also referenced the Madhya Pradesh High Court's decision in Co-operative Marketing Society Ltd., which supported the view that a return filed under section 148 within the time allowed under section 139(4) should be treated as a return under section 139(4).The court distinguished the Calcutta High Court's decision in Koppind Pvt. Ltd. v. CIT, noting that in that case, the return was filed after the expiry of the period prescribed under section 139(4). In contrast, in the present case, the return was filed within the time allowed under section 139(4).ConclusionThe court concluded that the assessee is entitled to the benefit of the loss to be determined and carried forward for setting off against the income of subsequent years. It answered the questions referred for its opinion in the affirmative, against the Revenue and in favor of the assessee.