Carry forward of loss after delayed return remained an arguable question, so refusal to direct a reference was set aside.

A loss return filed beyond the time prescribed under section 139(3) of the Income-tax Act, 1961 raised an arguable question on whether carry forward and set-off of loss could still be claimed, because the earlier precedent relied on by the High Court was based on section 22 of the 1922 Act and was not treated as pari materia with sections 139(3) and 139(4) of the 1961 Act. On that footing, refusal to direct a reference under section 256(2) was held unsustainable, and the question was answerable in favour of the Revenue. The High Court's refusal to order a reference was therefore set aside and the matter was remitted for reference to the High Court on the question of law.

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Issues: Whether the assessee is entitled to carry forward and set off a loss when the return of loss is filed beyond the time prescribed under section 139(3) of the Income-tax Act, 1961, and whether the High Court was justified in refusing to direct a reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The earlier decision relied upon by the High Court had proceeded on the basis of an interpretation of section 22 of the Indian Income-tax Act, 1922. The language of section 22 of the 1922 Act was not treated as pari materia with section 139(3) and section 139(4) of the Income-tax Act, 1961. On that basis, the question raised by the Revenue was held to be an arguable one, and the refusal to exercise jurisdiction under section 256(2) was found unsustainable.

Conclusion: The question was answerable in favour of the Revenue, and the High Court's refusal to direct a reference was set aside.

Final Conclusion: The appeal succeeded, the High Court order was vacated, and the matter was sent back for a reference to be made to the High Court for decision on the question of law.

Ratio Decidendi: Where the statutory language governing carry forward of loss under the 1961 Act is not pari materia with the provision construed under the 1922 Act, the legal issue remains arguable and a reference cannot be refused merely on the strength of the earlier decision.

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