Late loss return filed within the extended filing period can still support carry-forward of loss under income-tax law.

A loss return filed under section 139(4) before assessment was treated as a valid return for the purpose of carrying forward and set-off of loss, even though it was filed after the time prescribed in section 139(1). The Court, examining sections 139(1), 139(3) and 139(4) alongside earlier Supreme Court guidance and the corresponding 1922 Act provisions, held that the statutory right to carry forward loss is not defeated by late filing within the extended period allowed by section 139(4). Earlier authorities supporting this view were approved, and the reference question was answered against the Revenue.

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Issues: Whether a return of loss filed under section 139(4) of the Income-tax Act, 1961, before assessment, entitles an assessee to carry forward the loss.

Analysis: The scheme of sections 139(1), 139(3) and 139(4) was examined in the light of the corresponding provisions of the Indian Income-tax Act, 1922 and the principle laid down in the earlier Supreme Court decision on carry forward of loss. The Court held that the right to carry forward loss is not defeated merely because the loss return was filed beyond the time mentioned in section 139(1), so long as it was filed within the period permitted by section 139(4) and before assessment. The return is to be treated as valid in law for the purpose of determining loss and giving effect to the carry-forward provisions, and the earlier authorities taking this view were approved.

Conclusion: A return of loss filed under section 139(4) before assessment does entitle the assessee to carry forward the loss, and the question sought to be referred did not require reference in favour of the Revenue.

Ratio Decidendi: A return of loss filed within the time allowed by section 139(4) and before assessment must be treated as a valid return for the purpose of carrying forward and set-off of loss under the Act.

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