Timely return filing and accepted capital loss set-off defeated later contrary tax adjustments and late fee levy.

A later adjustment disallowing brought forward long-term capital loss could not be sustained where the claim had already been accepted in rectification proceedings and the revised processing produced an inconsistent computation of income; the disallowance was deleted. Fee under section 234F was also not leviable because the return had been filed within the prescribed due date under section 139(1), so the levy rested on an incorrect assumption of belated filing; the fee was deleted. The appellate order was therefore set aside in full, granting the assessee relief on both connected issues.

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Issues: (i) Whether the assessee was entitled to set off brought forward long-term capital loss, notwithstanding the later disallowance made while processing the revised return; (ii) Whether fee under section 234F was leviable when the return was filed within the prescribed due date applicable to the assessee.

Issue (i): Whether the assessee was entitled to set off brought forward long-term capital loss, notwithstanding the later disallowance made while processing the revised return.

Analysis: The assessee had claimed the set-off in the return initially processed under section 143(1) of the Income-tax Act, 1961. In rectification proceedings under section 154 of the Income-tax Act, 1961, the processing authority accepted the claim and allowed the set-off. The subsequent disallowance while processing the revised return was found to be inconsistent and to amount to an erroneous computation of income.

Conclusion: The disallowance of brought forward long-term capital loss was deleted, in favour of the assessee.

Issue (ii): Whether fee under section 234F was leviable when the return was filed within the prescribed due date applicable to the assessee.

Analysis: The return of income was filed under section 139(1) of the Income-tax Act, 1961 within the prescribed time applicable to the assessee. On the facts verified from the return, there was no delay in filing, and the levy was based on an incorrect assumption that the return was belated.

Conclusion: The fee under section 234F was deleted, in favour of the assessee.

Final Conclusion: Both the additions sustained in the appellate order were set aside, and the assessee obtained full relief in both connected appeals.

Ratio Decidendi: Where the factual record shows timely filing and the processing authority itself has accepted a claim in rectification, a later contrary adjustment on the same issue cannot be sustained as a valid computation.

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