M/S HEMYOG HOTEL(P) LTD. vs. CIT PATIALA

At the instance of the assessee, following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 7.10.1994 in ITA No.1474/Chandi/1989, for the assessment year 1985-86:- “Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the application for extension of time having been filed on 30.9.1985 on the date of filing of the return itself, the return was a belated return and the loss of Rs.8,26,150/- determined could not be carried forward?”

The assessee filed return on 30.9.1985 declaring loss including carried forward loss. The time for filing return had earlier expired and extension had been allowed upto 31.8.1985 vide order dated 27.7.1985. The return was not filed within the stipulated time nor any application was made upto the stipulated date. Application made on 30.9.1985 was not considered and assessment was made ignoring the return which has been upheld by the CIT(A) as well as the Tribunal.

We have heard learned counsel for the parties.

Learned counsel for the assessee submits that even after expiry of stipulated date, application for extension of time could be filed which had to be dealt with on merits or time should be taken to have been extended. He relies upon judgment of this Court in Karam Singh v. CIT, Patiala II, (1977) 110 ITR 726 and Harmanjit Trust v. CIT, Patiala I, (1984) 148 ITR 214 and judgment of Patna High Court in CIT, Bihar v. Ramdas and Sons, (1980) 123 ITR 889 in support of his submission..

On the other hand, learned counsel for the revenue submits that mere making of application does not entitle the assessee to extension of time unless there are valid reasons for extension. It is submitted that even if application filed after stipulated date could be entertained, valid reasons were required to be disclosed. In the present case, the assessee has not put forward any valid reasons nor any question of law has been sought on validity or otherwise of the reasons. There could not be any automatic extension of time when order had been once passed giving extension upto a particular date. There could not be endless applications. In absence of return having been filed within time, the assessee could not carry forward the loss. Reliance has been placed on CIT v. Smt.Gunavathy Dharmasy, (2000) 241 ITR 168 (Kerala) and CIT v. KC Bezbarua, (1992) 195 ITR 321 (Guwahati).

We are of the opinion that since power to extend time was available under Proviso to Section 139(1) read with Rule 13 of the Rules, the Assessing Officer was bound to consider the same and convey his decision thereon to the assessee. There may not always be automatic extension of time for failure to convey decision on the prayer for extension of time and it may depend on a fact situation whether deemed extension is to be presumed. In the present case, reasons put forward for seeking extension should have been considered before disregarding the return filed beyond time, alongwith application for extension of time. Ignoring the application for extension of time and the belated return, without passing any order on the said application and without considering the reasons for seeking extension of time, could not be a part of fair procedure.

Accordingly, the question is answered in favour of the assessee to the effect that the Tribunal was not justified in ignoring the return without looking into the reasons and justification for seeking extension of time. If application was not traceable, the assessee could have been required to give another copy. The Tribunal may consider the matter, afresh, accordingly.

Reference is disposed of. (Adarsh Kumar Goel) Judge November 10, 2009 (Gurdev Singh) ‘gs’ Judge 4