1984 (8) TMI 184 - AT - Income Tax

Statutory timelines crucial for loss set off under Income-tax Act

The Tribunal held that the Income Tax Officer was not obligated to compute losses from earlier years for set off if returns were not filed under section ... Set Off Issues:- Whether the Income Tax Officer (ITO) was obligated to set off losses from earlier years even if not determined in returns filed under section 139 of the Income-tax Act, 1961.Analysis:The case involved a dispute regarding the allowance of set off in the assessment year 1980-81 for losses from the firm Indian Fabric Corporation for the assessment years 1976-77, 1977-78, and 1979-80. The ITO allowed the set off for 1976-77 as the loss was determined and carried forward from a filed return, but denied the set off for 1977-78 and 1979-80 as no returns were filed for those years. The AAC upheld the ITO's decision, distinguishing a previous Madras High Court case where returns were filed within an extended time limit. The appellant contended that the ITO should have determined the losses even if no returns were filed, citing Section 80 of the Act and the Madras High Court case. The departmental representative argued that there was no statutory obligation for the ITO to determine losses not filed under section 139.The Tribunal analyzed the relevant provisions of the Income-tax Act, emphasizing Section 139(3) allowing loss returns within the prescribed time for set off under Sections 72, 73, and 74. Section 80 prohibits carrying forward losses not determined in filed returns under Section 139. Referring to the Supreme Court's interpretation in a previous case, the Tribunal clarified that the right to set off loss remains if returns are filed within the extended time under Section 139(4). However, in the present case, no returns were filed even within the extended time limit. Section 80 bars consideration of losses not determined in filed returns for set off in subsequent assessments. The Tribunal highlighted the distinction from the Madras High Court case where returns were filed within the extended time limit, leading to a statutory obligation for loss determination. As the appellant did not file returns for the relevant years, Section 80 applied, barring the set off of losses. The Tribunal dismissed the appeal and upheld the AAC's order, emphasizing the lack of statutory obligation for the ITO to compute losses not filed under section 139 for set off.In conclusion, the Tribunal ruled that the ITO was not bound to compute losses from earlier years for set off if returns were not filed under section 139. The provisions of Section 80 of the Act prohibit carrying forward losses not determined in filed returns, emphasizing the importance of adhering to statutory timelines for filing returns to claim set off. The Tribunal differentiated the present case from a previous decision where returns were filed within an extended time limit, highlighting the statutory obligation in that scenario. The appeal was dismissed, affirming the AAC's decision and emphasizing the lack of statutory obligation for the ITO in the current case.