COMMISSIONER OF INCOME TAX vs. DHATU SANSKAR LATD.

ITR/181/1995HC GujaratGJHC24022504199515 June 2006Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE SMT. JUSTICE ABHILASHA KUMARI13 pages
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What did the High Court hold?

The High Court held that the Appellate Tribunal was right in law and on facts in directing the Assessing Officer to allow the carry forward of the assessed loss. The Court reasoned that the proviso to Section 139(1) of the Income Tax Act, 1961, vests the Income Tax Officer with discretion to extend the filing date, but this discretion must be exercised judiciously and communicated to the assessee. The Court relied on the principles of natural justice and Supreme Court judgments in A.K. Kraipak & Ors. vs. Union of India & Ors. and Bachhitar Sing vs. State of Punjab & Another. These judgments establish that an order, especially one detrimental to an assessee, is ineffective and incomplete if not communicated. In this case, the non-communication of the AO's rejection of the extension application precluded the assessee from taking effective steps. Therefore, the AO's denial of carry forward of loss based on an ineffective order was unjustified. The Court answered the reference in the affirmative, in favour of the assessee.

What were the facts?

The assessee, Dhatu Sanskar Pvt. Ltd., engaged in manufacturing fluxes, filed its return for assessment year 1984-85 late. The assessee had applied for an extension of time to file the return until August 30, 1984. The Assessing Officer (AO) refused the extension, but this refusal was not communicated to the assessee. The assessee subsequently filed its return on July 30, 1984, disclosing a loss of Rs. 2,50,310/-. The AO disallowed the carry forward of this loss on the grounds that the return was filed late. The Commissioner of Income Tax (Appeals) directed the AO to allow the carry forward, relying on the non-communication of the refusal. The Income Tax Appellate Tribunal upheld this decision, leading to a reference to the High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to allow carry forward of the assessed loss even though the return was filed late, in view of the specific provisions of Section 80 of the Income Tax Act, 1961? Assessee's contentions: The judgment does not record specific contentions made by the assessee before the High Court, as the assessee remained unrepresented. However, the reasoning of the lower appellate authorities, which the Tribunal upheld, suggests the assessee relied on the principle that the refusal of extension was not communicated, making the AO's subsequent action based on a late filing invalid. The assessee also relied on the case of Presidency Medical Center (Pvt.) Ltd. vs. CIT, (1977) 108 ITR 38 Calcutta, for carrying forward loss even if filed within the time given under Section 139(4). Revenue's contentions: The Revenue contended that the assessed loss could not be carried forward because the return was filed late, implying that the AO's refusal to grant an extension was effective despite non-communication. The Revenue's appeal to the Tribunal was based on challenging the CIT(A)'s order allowing the carry forward.

Which sections of the Income-tax Act were involved?

Section 139(1),Section 80

AI-generated summary — verify with the full judgment below

ITR/181/1995 1/13 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.181 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE J.M.PANCHAL AND THE HON'BLE SMT. JUSTICE ABHILASHA KUMARI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment? 2 To be referred to the Reporter or not? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder? 5 Whether it is to be circulated to the Civil judge? ========================================================= COMMISSIONER OF INCOME TAX - APPELLANT Versus DHATU SANSKAR PVT. LTD. - RESPONDENT ========================================================= Appearance : MS MONA BHATT for Applicant.

None- for Respondent SERVED BY RPAD - (N). ========================================================= CORAM : HONOURABLE MR.JUSTICE J.M.PANCHAL and THE HON'BLE SMT. JUSTICE ABHILASHA KUMARI Date : 15/06/2006 ORAL JUDGMENT (Per : HON'BLE SMT. JUSTICE ABHILASHA KUMARI)

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