PUREWAL ASSOCIATES vs. COMMR.INCOME TAX

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ITR/7/1995HC Himachal PradeshHPHC01002376199510 March 2008Author: HONOURABLE MR. JUSTICE DEEPAK GUPTA,HONOURABLE MR. JUSTICE RAJIV SHARMA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court answered the first question in favour of the revenue. It reasoned that Section 139(10) stipulated that a return showing total income below the maximum amount not chargeable to tax would be deemed never to have been furnished if not filed within the prescribed time, unless it fell under one of the six provisos. The court noted that the assessee's return, showing a loss, was a return of income below the taxable limit. It found that the assessee's return did not fall under any of the exceptions listed in the provisos to Section 139(10). Therefore, the return was rightly held to be nonest. Regarding the second question, the court held that it was not a question of law. It stated that a return of loss, whether from business profits or depreciation, remains a return of loss, and the mere inclusion of depreciation loss does not exempt it from the rigors of Section 139(10). Thus, the second question was also answered against the assessee.

What were the facts?

The assessee, M/s Purewal & Associates, filed its income tax return for assessment year 1988-89 on February 1, 1989, showing a loss of Rs. 66,62,817/-. The due date for filing the return was July 31, 1988. The Assessing Officer treated the return as 'nonest' (invalid) under Section 139(10) of the Income Tax Act, 1961, as it stood at the time. The Commissioner of Income Tax (Appeals) affirmed this order. The Income Tax Appellate Tribunal also ruled in favour of the revenue. The High Court of Himachal Pradesh was considering a reference of two questions of law arising from the Tribunal's decision.

What were the issues?

1. Whether, under the facts and circumstances, the Income Tax Appellate Tribunal was justified in law in upholding the return filed beyond the time allowed under Section 139(1) for assessment year 1988-89 as nonest, on the basis that Section 139(10) also applies to loss returns? 2. If the answer to the first question is affirmative, whether, under the facts and circumstances, the Income Tax Appellate Tribunal was justified in upholding the return as nonest, which return contains carried forward losses, unabsorbed depreciation, and depreciation or other benefits of the year under consideration claimed in the amount of loss returned? Assessee's Contention: The assessee implicitly argued that the return, even if filed late, should be considered valid, particularly as it represented a loss and potentially included depreciation benefits. The assessee relied on the fact that the return contained carried forward losses and unabsorbed depreciation. Revenue's Contention: The revenue contended that Section 139(10), as it stood, rendered a return showing total income below the maximum amount not chargeable to tax, if filed beyond the prescribed time, as never having been furnished, unless it fell under specific exceptions. The revenue argued that the assessee's return did not meet any of these exceptions.

Which sections of the Income-tax Act were involved?

Section 139(1),Section 139(10),Section 139(3),Section 148,Section 237

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA

ITR No. 7 of 1995

Date of Decision: 10.3.2008 _______________________________________________________________

M/s Purewal & Associates

…Petitioner

Versus

Commissioner of income Tax

… Respondent.

_______________________________________________________________ Coram:

The Hon’ble Mr. Justice Deepak Gupta, Judge.

The Hon’ble Mr. Justice Rajiv Sharma, Judge.

Whether approved for reporting?

For the Petitioner (s): Mr. Amit S.Chandel, Advocate vice Mr. Sunil Kumar

Mukhi, Advocate.

For the Respondent(s) : Mr. Vinay Kuthiala & Ms. Vandana Kuthiala,

Advocates. _______________________________________________________________ Deepak Gupta, J. (Oral)

The following questions have been referred for the opinion of this Court:- i) “Whether under facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in upholding the return filed beyond the time allowed u/s 139(1) for the assessment year 1988-89 as nonest on the basis that section 139(10) also applies to loss returns; ii) In case the answer to the above question is in affirmative, whether under the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in upholding the return as nonest which return contains carried forward losses and unabsorbed depreciation and also depreciation or other benefits of thee year under consideration claimed in that amount of loss returned.”

The brief facts of the case are that the assessee was to submit the return for the assessment year 1988-89 on or before 31.7.1988. This return was actually filed on 1.2.1989 wherein loss of Rs. 66,62,817/- was shown. The Assessing Officer held that the return was nonest in view of the provisions of Section 139(10) of the Income Tax Act, 1961 as it stood at the relevant time. The CIT(A) affirmed the order of the Assessing Officer and the loss return was treated to be invalid return and the appeal was dismissed. The learned Tribunal also rejected the contention of the assessee and decided the case in favour of the revenue. Section 139(10) was amended by the Taxation Laws (Amendment &Miscellaneous Provisions) Act, 1986 w.e.f. 1.4.1986. After the amendment, the said section reads as follows:-

“(10) Notwithstanding anything contained in any other provision of this Act, a return of income which shows the total income below the maximum amount which is not chargeable to tax shall be deemed never to have been furnished.

Provided that nothing hereinbefore contained shall apply to- (a) a return furnished in response to a notice under sub-section (2) of section 148; (b) a return of a firm or a partner of a firm; (c) a return of loss which has been furnished in accordance with the provisions of sub- section (3); (d) a return of a person who has claimed exemption of income from property held for charitable or religious purposes; (e) a return furnished under sub –section (4B) in respect of a political party; and (f) a return furnished in support of a claim for refund under Section 237.”

This provision now stands omitted from the Act.

Before the amendment of Section 139(10), the Assessing Officer had the power to grant extension of time. This power was specifically taken away by the amendment. The Section as reproduced above only provides for six situations in which the return filed after the due date can be taken into consideration.

The return filed by the petitioner was not in response to notice under sub-section (2) of Section 148; (ii) the petitioner firm is a company and not a partnership firm; (iii) the return in question is not in terms of Section 139(3) which also prescribes that the return should be filed in time; (iv) the assessee is not holding property for charitable or religious purposes; (v) the assessee has not furnished the return under sub-section (4B) in respect of a political party and (vi) the return has not been filed claiming refund under Section 237. The language of Section 139 (10) is ambiguous. It clearly states that a return for an amount less than the minimum taxable amount shall not be considered to be a valid return, if not filed within the time prescribed. The return of loss is also a return showing income less than the taxable income. Since the return was not filed within the time prescribed, in terms of Section 139(10), the said return was rightly held to be nonest. The question No.1 is answered accordingly in favour of the revenue and against the assessee.

As far as question No.2 is concerned, in our opinion, the said question is not a question of law at all. The return of loss whether on account of depreciation or loss of business profits remains a return of loss. The mere fact that the losses also include depreciation loss does not take away the rigors of Section 139(10). This question is also answered against the assessee and against the revenue. A copy of this judgment under the signature of the Registrar General of this Court be forwarded to the Tribunal.

( Deepak Gupta ), J.

March 10, 2008. ( Rajiv Sharma ), J. s.

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