1984 (5) TMI 93 - AT - Income Tax

Taxpayer's Set Off Claim Upheld by ITAT: Loss Assessment for 1979-80 & 1980-81 Reconsidered

The Appellate Tribunal ITAT Hyderabad-A ruled in favor of the taxpayer in a case involving the assessment of business loss for the years 1979-80 and ... 1961 Act, Set Off, Supreme Court Issues:Assessment of business loss for the years 1979-80 and 1980-81, entitlement to claim set off of loss from the assessment year 1978-79, validity of filing revised return under section 139(4) of the Income-tax Act, 1961, interpretation of section 139(3) regarding the time limit for submission of loss return, applicability of Supreme Court judgments in CIT v. Khushal Chand Daga and CIT v. Manmohan Das, relevance of CBDT circular dated 20-9-1983, binding nature of earlier circulars, consideration of High Court decisions on set off of losses, implications of the circular on withdrawal of set off, review of circular in light of case law, justification for rejecting additional grounds raised by the department, applicability of Supreme Court decisions on determining losses in the year of set off, conditions for set off under Chapter VI of the Income-tax Act.Analysis:The judgment by the Appellate Tribunal ITAT Hyderabad-A involves two departmental appeals concerning the assessment of business loss for the years 1979-80 and 1980-81 in the case of an individual taxpayer. The taxpayer had initially filed a return declaring business loss and later submitted a revised return, claiming a set off of loss from the assessment year 1978-79 against share income from Hyderabad Trading Co. The Income Tax Officer (ITO) disallowed the claim citing non-determination of the loss, but the first appellate authority accepted the claim based on proof of filing returns within the time allowed under section 139(4) of the Income-tax Act, 1961.The main contention in the departmental appeal was the interpretation of section 139(3) regarding the time limit for submission of loss return and the applicability of Supreme Court judgments in CIT v. Khushal Chand Daga and CIT v. Manmohan Das. The department raised additional grounds challenging the set off based on a CBDT circular dated 20-9-1983, arguing that the return was belated and should not be considered for set off. However, the tribunal rejected these arguments, citing various High Court decisions and the binding nature of earlier circulars supporting the taxpayer's entitlement to set off the loss.The tribunal emphasized the importance of determining the loss in the relevant year and considering the conditions for set off under Chapter VI of the Act. It ruled in favor of the taxpayer, setting aside the assessments to allow for the determination of the loss for the earlier year and a fresh consideration of the set off claim. The judgment highlights the significance of following established case law and circulars in determining tax liabilities and upholding taxpayers' rights to claim set offs within the framework of the Income-tax Act.