Carry forward of business loss allowed despite late return filing where extension was sought and no penalty proceedings were initiated.

A return filed after the due date under section 139(1) did not bar carry forward of business loss where the assessee had sought extension of time in Form No. 6 before filing. As no penalty proceedings under section 271(1)(a) were shown in the assessment order, section 139(3) was held inapplicable to deny the loss carry forward. The Calcutta High Court ruling on the point was treated as binding and favourable to the assessee, so the business loss was allowed to be carried forward.

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Issues: Whether the assessee, having filed the return of income beyond the time prescribed under section 139(1) of the Income-tax Act, 1961 but after seeking extension of time in Form No. 6, was entitled to carry forward the business loss under section 72.

Analysis: The return was filed after the original due date, but the assessee had applied for extension of time before filing the return. The assessment order did not show initiation of penalty proceedings under section 271(1)(a). In these circumstances, section 139(3) was held inapplicable to deny the benefit of carry forward of loss. The decision of the Calcutta High Court on the point was also treated as binding and favourable to the assessee.

Conclusion: The assessee was entitled to carry forward the business loss, and the Revenue's challenge failed.

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