2002 (9) TMI 250 - AT - Income Tax

Appeal partially allowed: Loss disallowed for late filing, interest & premium upheld for previous resolution

Sbm Engg. Products (P.) Ltd. Versus Assistant Commissioner Of Income-Tax.

The Tribunal partly allowed the appeal, upholding the disallowance of carrying forward the loss as the return was not filed within the prescribed time. ... Loss Return, Return Of Income Issues Involved:1. Disallowance of carry forward of loss.2. Disallowance of interest and proportionate insurance premium relevant to plant and machinery.Issue-wise Detailed Analysis:1. Disallowance of Carry Forward of Loss:The assessee filed a return declaring a loss of Rs. 56,60,000 on 27-6-1988, which was marked as provisional due to the absence of audited profit and loss account, balance sheet, and auditor's report. The Assessing Officer (AO) issued a notice under section 139(9) on 22-9-1988, requiring the assessee to rectify these defects within 15 days. The assessee failed to comply, leading the AO to treat the return as invalid. A subsequent notice under section 139(2) was issued, and the assessee filed another return on 19-12-1988 declaring a loss of Rs. 48,69,000, followed by a revised return on 30-12-1989 declaring a loss of Rs. 46,85,264.The AO cited section 139(3), stating that the return of loss must be filed within the time allowed under section 139(1) to claim the loss carry forward. Since the original return was invalid, the AO held that the loss could not be carried forward. The CIT(A) upheld this view, referencing section 80, which bars carrying forward the loss if not determined in a return filed within the time allowed under section 139(1) or further time allowed by the AO.The assessee argued that section 139(3) applies only when no notice under section 139(2) is issued and that the AO should consider the return filed in response to the section 139(2) notice. However, the CIT(A) noted that section 139(9) requires the AO to treat a return as invalid if defects are not rectified within the prescribed period. The CIT(A) also dismissed the relevance of sections 144 and 292B, emphasizing the overriding effect of section 139(9).The Tribunal considered the amendments to section 80, which now require the return of loss to be filed within the time allowed under section 139(1) or an extended period by the AO. The Tribunal found that the assessee's case, involving the assessment year 1988-89, fell under the amended section 80, which does not allow loss carry forward if the return is filed beyond the specified period. Thus, the Tribunal upheld the findings of the tax authorities, denying the carry forward of the loss.2. Disallowance of Interest and Proportionate Insurance Premium:The assessee contested the disallowance of Rs. 17,96,757 in interest and Rs. 52,254 in proportionate insurance premium related to plant and machinery. The learned counsel for the assessee pointed out that these issues were decided in favor of the assessee for the assessment year 1987-88 by the CIT(A), and the Department did not appeal against these decisions before the Tribunal.The Tribunal reviewed the CIT(A)'s order for the assessment year 1987-88 and confirmed that the Department had not contested these issues at the Tribunal level. As a result, these issues had reached finality in favor of the assessee. Consequently, the Tribunal decided these issues in favor of the assessee for the assessment year 1988-89 as well.Conclusion:The appeal was partly allowed. The Tribunal upheld the disallowance of the carry forward of loss due to the return not being filed within the time allowed under section 139(1) or an extended period by the AO. However, the Tribunal decided in favor of the assessee regarding the disallowance of interest and proportionate insurance premium, as these issues had already been resolved in the assessee's favor for the previous assessment year and were not contested by the Department.