1994 (6) TMI 33 - AT - Income Tax

Tribunal Upholds Commissioner's Order on Carry Forward of Losses & Allowances

The Tribunal upheld the Commissioner of Income Tax (Appeals)'s order, directing the Assessing Officer to allow the carry forward of unabsorbed losses and ... Assessing Officer, Assessment Order, Carry Forward, Mistake Apparent From Record, Unabsorbed Depreciation Issues Involved:1. Whether the Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to allow the carry forward of assessed losses.2. Whether the return of income was filed within the prescribed time limits under section 139(3) of the Income Tax Act.3. Whether the Assessing Officer had the authority to refuse the carry forward of past losses and allowances under section 143(1).4. The distinction between 'loss' and unabsorbed depreciation and other allowances.5. Applicability of section 139(10) to the case.Issue-wise Detailed Analysis:1. Whether the Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to allow the carry forward of assessed losses:The CIT(A) directed the Assessing Officer to entertain the assessee's claim regarding the carry forward of unabsorbed depreciation and unabsorbed investment allowance for the year under appeal and to allow the carry forward of past losses to subsequent years. The CIT(A) found that the return was filed within the extended time, and therefore, the losses should be carried forward. The Tribunal upheld this view, stating that the Assessing Officer did not have the power to refuse the carry forward of losses already determined in previous assessments.2. Whether the return of income was filed within the prescribed time limits under section 139(3) of the Income Tax Act:The assessee filed the return on 28-12-1987, after applying for an extension of time up to 31-12-1987. The CIT(A) and the Tribunal noted that the Assessing Officer did not reject the application for an extension, implying that the return was filed within the extended time. Therefore, the return should be considered as filed under section 139(3), and the losses should be carried forward accordingly.3. Whether the Assessing Officer had the authority to refuse the carry forward of past losses and allowances under section 143(1):The Tribunal concluded that section 143(1) did not authorize the Assessing Officer to reject the carry forward of past losses and allowances determined in earlier years. The section allowed only limited adjustments of an arithmetical nature and for giving effect to the carry forward of past losses and allowances. The Tribunal emphasized that the power to refuse the carry forward of past losses and allowances was alien to section 143(1) and that the Assessing Officer acted beyond his authority.4. The distinction between 'loss' and unabsorbed depreciation and other allowances:The Tribunal highlighted the distinction between 'loss' and unabsorbed depreciation and other allowances, referencing various judicial authorities. It noted that sections 80 and 139(3) referred only to losses under sections 72, 73, 74, and 74A, and did not include unabsorbed allowances such as depreciation and investment allowance. Therefore, the assumption by the Assessing Officer that losses and unabsorbed allowances could be treated on par was unwarranted in law.5. Applicability of section 139(10) to the case:The Tribunal sustained the objection to the reference to section 139(10) by the departmental representative, as the Assessing Officer did not invoke this provision but referred only to section 139(3). Even if section 139(10) were considered, the Tribunal noted that the proviso (d) to section 139(10) applied only to losses sustained during the relevant accounting year and did not refer to unabsorbed allowances. Therefore, the proviso did not apply to the unabsorbed depreciation of Rs. 11,78,263 for the current year, which was not a 'loss' but unabsorbed depreciation.Conclusion:The Tribunal upheld the CIT(A)'s order, directing the Assessing Officer to rectify the mistake and allow the carry forward of unabsorbed losses and allowances. The appeal filed by the revenue was dismissed.