Ita/683/2007 Of The Commissioner Of Income Tax v. M/S Srinivasa Builders

IN THB HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 11[‘T]DAY OF FEBRUARY 2014 PRESENT THE HON'BLE MR.JUSTICE DILIP B.BHOSALE AN D THE HON'BLE MR.JUSTICE B.MANOHAR ITA NO.683/2007 BBRITWRE1. The Commissioner of Income-Tax,Central Circle, C.R Building,Queens Road, Bangalore. 2. The Deputy Commissioner of Income Tax,Central Circle -2(1),C.R Building, Queens Road,Bangalore... Appellant (By Sri.K.V.Aravind, Advocate) ANT) M/s. Srinivasa Builders,No.17, M.G.Road,Bangalore..... Responden(Bypri.S.Parthasarathi,Advocatea/wori.Mallaharao.K., Advocate) This ITA is filed under Sec.260-A ot Income TaxAct 1961, arising out of order dated 13/04/2007 passedin ITA No.314/BNG/2005, for the Assessment Year1997-98, praying that this Hon'ble Court may bepleased to: 1.formulate the substantial questions of lawstated therein,stated therein, ll.allow the appeal and set aside the order|passedby theITATBangalore|in.ITA.No.314/BNG/2005 dated 13/04/2007confirmtheorders|oT|theAssistantCommissioner of Income Tax Circle-2(1),Bangalore.passedby theITATBangalore|in.ITA.No.314/BNG/2005 dated 13/04/2007confirmtheorders|oT|theAssistantCommissioner of Income Tax Circle-2(1),Bangalore. This appeal coming on tor Hearing this day,B.Manohar.J° delivered the following: JUDGMENT The Revenue has preferred this appeal undersection 260A of the Income Tax Act, 1961 (for short °the Act’) challenging the order dated 13[/!]April 2007 madein ITA No.314/Bang/2005 passed by the Income TaxAppellate Tribunal, Bangalore Bench ‘A’ (for short ‘the Tribunal’) for the assessment year 1997-98 whereby the Tribunal allowed the appeal filed by the assesseeand set aside the order passed by the Commissioner ofIncome-Tax (Appeals)-VI, Bangalore, (for short ‘theFirst Appellate Authority’) and quashed the 1054providing initiated by Assessing authority. 2.|The respondent-assessee is a Firm and they filedreturn of income for the assessment year 1997-98 on6-1-1998 declaring income of Rs.90,29,270/-. The|assessment was concluded under Section 143(3) of theAct and assessed the business loss of Rs.74,84,234/-. |The said business loss was allowed to be carried|forward as per the order dated 6.6.2001. Subsequently,the Assessing Officer issued notice under Section 194 ofthe Act to rectify the order dated 6-6-2001, withdrawingthe benefit of carry forward of business loss stating thatthe return filed by the assessee was belated. As persection 80 of the Act, the benefit of carry forward ofbusiness loss is allowed only if the said loss has been determined in pursuance of the return filed within theprescribed time limit under Section 139(1) of the Act. —The respondent-assessee filed objections to the noticeissued under Section 194 of the Act. The AssessingAuthority over-ruling the said objections by its orderdated 10-10-2003 held that the assessee is not entitled|for carry forward of the loss since the returns has notbeen filed within the prescribed time limit under Section139(1) of the Act. Being aggrieved by the order passedby the Assessing Authority, the respondent-assesseepreferred an appeal before the First Appellate Authority. —The Appellate Authority after considering the matter indetail dismissed the appeal filed by the assessee. Beingagerieved by the order passed by the First AppellateAuthority, the assessee preferred an appeal before theTribunal.3.|The Appellate Tribunal after considering thematter in detail found that the assessee is entitled for| benefit of carry forward of the business loss and setaside the order passed by the Assessing Authority as_well as the Appellate Authority. Being aggrieved by theorder passed by the Tribunal, the Revenue has preferredthis appeal. 4The appeal is admitted to consider the followingsubstantial questions of law: benefit of carry forward of the business loss and setaside the order passed by the Assessing Authority as_well as the Appellate Authority. Being aggrieved by theorder passed by the Tribunal, the Revenue has preferredthis appeal. 4The appeal is admitted to consider the followingsubstantial questions of law: 1.Whether the Tribunal twas correct inholding that the rectification proceedings|disallowing carry forward of loss on|account of Section 80 of the Act in view|of the belated filing of the return would|amounttoa debatable.issueandjurisdiction u/s.154 of the Act was notpermissible? |Whether the Tribunal was correct insholding that the original return filed was|not q loss return and there were noviolation of provision of Section 139(3) of|the Act, despite the assessee filing arevised return and approaching the boardbyfilingartapplicationforcondonation of delay to seek permission|to file belated return? 5.|ori.K.V.Aravind, learned counsel appearing for theappellants contended that in view of the amendment ofsection 80 by the Direct Tax Laws (Amendment) Act,1987 w.e.f. 1-4-1989, no loss shall be allowed to carryforward and set off, for and from the assessment year1989-90. Only such loss as determined in pursuance ofreturn filedFwithin the time allowed|under Section139(1) of the ActTherefore, he contended that the|Assessing Officer was justified in invoking Section 154and withdrawing the benefit of carry forward ofbusiness loss. In the instant case, the assessee has notfiled the return showing the business loss within theprescribed time limit. Hence, he is not entitled for carryforward of business loss. The reasoning given by theTribunal is contrary to law and sought for allowing theappeal. 6. On the other hand, Sri.S.Parthasarathi, learnedcounsel appearing for the respondent-assessee arguedin support of the order passed by the Appellate Tribunaland contended that in the return filed on 6-1-1998, the)assessee had declared the income of Rs.5,29,270/-. |The assessment was concluded under Section 143(3) ofthe Act and the Assessing Officer declared the businessloss. Hence, the said business loss has to be carriedforward under Section 80 of the Act. The assessee did|not declare the business loss. In the absence of the!same, the assessee is entitled for the benefit of carryforward of business loss and sought for dismissal of theappeal. T |We have carefully considered the argumentsaddressed by the learned counsel for the parties andperused the order impugned. | 8.|The records clearly disclose that the assessee hadfiled return of income declaring the total income on |6-1-1998. The Assessing Authority assessed the incomeunder Section 143(3) of the Act and declared the totalbusiness loss of Rs.74,85,/743/- and also denied someother benefits. The said order was questioned beforethe FirstsAppellate Authority, wherein the _ FirsAppellate Authority confirmed the order passed by theAssessing Officer. Against the said order, the assesseepreferred an appeal before the Tribunal. The Tribunalallowed the appeal granting partial relief. In order togive elfect to the said order, the Assessing Authorityonce again determined total loss of Rs.74,85,743/- andallowed the same to be carried forward. Subsequently,the said order allowing the loss to be carried forwardwas modified invoking Section 154 of the Act. Thereasoning of the Appellate Authority that the assesseehas not declared the loss within the time specifiedunder Section 139(1) and 139(3) of the Act which is factually incorrect. On the other hand, the assesseehad declared income of Rs.5,29,270/- for the relevantassessment year well in time. During the course ofassessment, it was found that there is business loss. —Accordingly, the said business loss was allowed to becarried forward. The assessee has not violated any ofthe conditions under Section 80 of the Act. The|assessee had shown positive income in the returns, butin the assessment, the business loss was determined bythe Assessing Officer. This being the factual position, inour opinion, the assessee is entitled for the benefit ofcarry forward of business loss. Whether loss ultimatelydetermined by the Assessing Officer was liable to becarried forward or not, is a debatable issue. Invokingthe provision of Section 154 is not available for theAssessing Officer. We find no infirmity or irregularity inthe order passed by the Tribunal. Hence, thesubstantial questions of law framed are held against theRevenue and in favour oft the assessee. >���**#(2%'306.�/!"�,55",0�%&�2%&$%&&"2�*#')%($%'3� /!"�#(2"(�5,&&"2�A6�/!"�,55"00,/"��(%A1',0��� ����������������������������������������������� ����������������������������������$5H�+I�