Joginder Paul (Huf) Throughkarta Rajiv Gupta v. Commissioner Of Income-Tax,Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income-tax Appeal No. 342 of 2004Date of decision: 25.8.2010 Joginder Paul (HUF) throughKarta Rajiv Gupta --- Appellant Versus Commissioner of Income-tax,Ludhiana --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL--- Present:Mr. S.K. Mukhi, Advocate assisted byMs. Jyoti, Advocate for the appellant-assessee. Mr. Rajesh Katoch, Central Government StandingCounsel for the respondent-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the assesseeagainst the order dated 12.7.2004, passed by the Income TaxAppellate Tribunal, Chandigarh Bench “B” Chandigarh, (in short“the Tribunal”) in ITA No. 544/CHANDI/2002, for theassessment year 1999-2000. The present appeal was admitted for determination of the following question of law for the opinion of this Court: “Whether the assessee will be entitled to the benefit forcarry forward of loss to be set off in subsequent yearseven if the return of loss is filed beyond the timeprescribed under section 139(3) of the Income Tax Act,1961?” During the assessment year 1996-97, the assesseedeclared long term capital loss of Rs. 1,66,680/- in the returnfiled on 24.12.1996 whereas in view of provisions of Section 139(1) the return claiming loss was required to be filed on or before31.8.1996. The assessee for the assessment year 1999-2000declared long term capital gains on the sale of shares atRs.2,04,909/- against which the assessee had sought to adjustthe long term capital loss of Rs. 1,66,680/- relating toassessment year 1996-97. According to the assessee, the lossfor the assessment year 1996-97 was carried forward to theassessment years 1997-98 and 1998-99 and in the computationchart of total income filed along with the return for the aforesaidtwo years, a note was appended to carry forward the long termcapital loss of Rs. 1,66,680/- in the subsequent years. Theincome returned in the assessment year 1998-99 was acceptedby the assessing officer and, thus, the loss of Rs. 1,66,680/- wasimpliedly allowed to be carried forward to the current year i.e.assessment year 1999-2000. The assessee was disallowed thesetting off of the loss claimed by him as according to the assessing officer the provisions of Section 80 read with Section139(3) of the Act had not been complied by the assessee,inasmuch as the return for the assessment year 1996-97 wasnot filed within the time allowed under Section 139(1) of the Act. The appellant preferred appeal before theCommissioner of Income-tax (Appeals) {in short “CIT(A)”}challenging the order of the assessing officer. It was contendedthat the assessing officer was not right in disallowing the claim.The CIT(A) did not accept the pleas raised on behalf of theassessee and held that the assessing officer was fully justified innot allowing the set off of the loss claimed by the assessee andconsequently dismissed the assessee’s appeal vide order dated9.5.2002 (Annexure A-4). The assessee preferred second appealbefore the Income-tax Appellate Tribunal Chandigarh Bench ‘A’Chandigarh (in short “the Tribunal”). The Tribunal also did notaccept the submissions raised on behalf of the assessee andconsequently dismissed the appeal of the assessee putting itsseal of affirmation on the findings recorded by the authoritiesbelow. This is how the assessee-appellant is in appeal beforeus. We have heard learned counsel for the parties andhave perused the record. Learned counsel for the appellant submitted that theloss for the assessment year 1996-97 was allowed to be carriedforward by the assessing officer during assessment year 1997-98 This is how the assessee-appellant is in appeal beforeus. We have heard learned counsel for the parties andhave perused the record. Learned counsel for the appellant submitted that theloss for the assessment year 1996-97 was allowed to be carriedforward by the assessing officer during assessment year 1997-98 and 1998-99 and, therefore, the Tribunal was not justified indisallowing the set off of the loss claimed by the assessee in theassessment year 1999-2000 without revising the earlier orderspassed in respect of assessment years 1996-97, 1997-98 and1998-99. Learned counsel in support of the submission placedreliance on various judgments, viz., Commissioner of Income Taxv. H.P. Lohia (2003) 203 ITR 928, Saurashtra Cement & ChemicalIndustries Ltd. V. Commissioner of Income Tax, Gujarat-V, (1980)123 ITR 669, Satyanarayan Bhalotia v. Commissioner of IncomeTax, (1994) 207 ITR 1030, Radhasoami Satsang v. Commissionerof Income-tax (1992) 193 ITR 321, Commissioner of Income-tax v.Lakhani Foodwear Ltd. (2001) 248 ITR 701 and Madan RollerFlour Mills v. Commissioner of Income-tax, (2008) 4 DTRJudgments 41. On the other hand, learned counsel for theRevenue supported the order of the Tribunal. We have given our thoughtful consideration to the submissions made by the learned counsel for the parties andexpress our inability to agree to the submissions raised on behalfof the assessee. The question whether the assessee who failed tofile return of loss within the time prescribed under Section 139 ofthe Act, can be allowed to carry forward the loss to be set off insubsequent years was the subject matter of consideration of thisCourt in Commissioner of Income-tax v. Haryana Hotels Ltd.,(2005) 276 ITR 521, wherein it was held as under:- “An irresistible conclusion on the conjoint reading ofthe aforesaid provisions would be that a business loss cannot be carried forward unless it has beendetermined in pursuance of a return filed undersection 139 of the Act. In order to be entitled to carryforward a business loss, the assessee must submit areturn under section 139(3) of the Act and have anassessment made for the year in which he hasincurred the loss. The Assessing Officer has to notifyto the assessee by an order in writing the amount ofthe business loss as computed by him which theassessee is entitled to have carried forward. Where thebusiness loss determined has not been notified to theassessee by the Assessing Officer, the assessee canhave it determined in a subsequent year in which thebusiness loss is to be set off. It was an admitted fact as is apparent from aperusal of the order of the Commissioner of Income-tax (Appeals) that no valid return for the assessmentyear 1986-87 had been made by the assessee andaccordingly no assessment could be made and thebusiness losses could not be notified to the assessee.Once it is established that no valid return had beenfiled by the assessee for the assessment year 1986-87,the assessee cannot be allowed to set off the businesslosses of earlier years during the assessment year1987-88. The Tribunal, thus, clearly erred in allowingset off of business losses for earlier assessment years 1984-85 and 1985-86 during the assessment year1987-88.” It was an admitted fact as is apparent from aperusal of the order of the Commissioner of Income-tax (Appeals) that no valid return for the assessmentyear 1986-87 had been made by the assessee andaccordingly no assessment could be made and thebusiness losses could not be notified to the assessee.Once it is established that no valid return had beenfiled by the assessee for the assessment year 1986-87,the assessee cannot be allowed to set off the businesslosses of earlier years during the assessment year1987-88. The Tribunal, thus, clearly erred in allowingset off of business losses for earlier assessment years 1984-85 and 1985-86 during the assessment year1987-88.” Admittedly, the assessee had not filed return declaringlong term capital loss for the assessment year 1996-97 in termsof Section 139(3) of the Act within time and, therefore, it shallnot be entitled to carry forward such loss to be set off insubsequent years. The mere filing of returns for assessmentyears 1997-98 and 1998-99 by the assessee depicting that long-term capital loss is to be carried forward, in the absence ofspecific order by the assessing officer, shall not entail any rightin favour of the assessee. The counsel for the assessee wasunable to refer to any assessment order passed by the assessingofficer, i.e. for assessment years 1996-97, 1997-98 and 1998-99wherein benefit of carry forward of long term capital loss wasgranted to the assessee by the assessing officer. Rather on aquery put by the Court, viz., was there any specific order passedby the assessing officer, the counsel for the assessee candidlyadmitted that no such order was passed by the assessing officerin that behalf. The submission of the counsel that when theassessment order was passed by the assessing officer it wouldimpliedly constitute permission to carry forward of long termcapital loss, is against the mandate of Section 80 of the Actwhich prescribes that the losses under Sections 72(1), 73(2), 74(1), 74(3) and 74A(3), if not determined in pursuance of a returnfiled under Section 139(3), shall not be carried forward and setoff. The judgments relied upon by the counsel for the assessee, thus, have no applicability to the facts of the present case.Accordingly, the question of law reproduced earlier is answeredagainst the assessee. Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE August 25, 2010*rkmalik* (ADARSH KUMAR GOEL)JUDGE