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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM
This appeal filed by the assessee is directed against the order of CIT(Appeals)-6, Pune dated 08.08.2018 for the assessment year 2015-16.
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The assessee in appeal has raised following grounds:
“On facts and in law,
The Ld. CIT(A) has failed to appreciate that the AO has exceeded his jurisdiction by not following the binding instructions/guidelines issued by the CBDT in respect manner in which 'Limited Scrutiny' is to be handled.
1.1 The Ld. CIT(A) ought to have appreciated that the AO was required to obtain prior approval of relevant authorities as stipulated by CBDT in its instructions, in order to verify the issue beyond the reasons of selection of scrutiny and as no such approval was taken, the assessment was bad in law.
The Ld. ClT(A) erred in holing that the Ld. AO was right in assessing the income of the appellant on the basis of original return and disregarding a valid revised return filed u/s. 139(5) of the Act.
2.1 The Ld. CIT(A) ought to have appreciated that once a valid revised return is filed as per Sec.139(5) of the Act, the original return is automatically withdrawn and revised return steps into the shoes of original return filed u/s.139(1) of the Act for all purposes.
The Ld. CIT(A) is not justified in holding that loss for the year cannot be allowed to be carried forward as revised return was filed within time allowed u/s.139(1) r.w.s. 139(3) r.w.s. 80 without appreciating that original return was filed well within due date.
The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
Briefly stated relevant facts included that the assessee company is
engaged in the business of manufacturing and trading of spare, tools and
equipments. The assessee filed its return of income for assessment year 2015-
16 on 30.11.2015 declaring total income at Rs.5,68,770/-. Subsequently, the
assessee filed revised return of income on 20.09.2016 showing loss of
Rs.79,01,997/-. During the assessment proceedings, the Assessing Officer
completed assessment u/s.143(3) of the Income Tax Act, 1961 (hereinafter
referred to as ‘the Act’) on 28.12.2017 accepting the original return of income
and has not considered the revised return filed subsequent to the issue of
notice u/s.143(2) of the Act.
Aggrieved with the assessment order, the assessee filed appeal before the
Ld. CIT(Appeals). During First Appellate Proceedings, the CIT(Appeals) granted
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partial relief to the assessee by holding that the assessee is not entitled to carry
forward any of these losses as the revised return of loss was not filed within the
time prescribed under sub section 139(1) as per 139(3) r.w.s. 80 of the Act.
Being further aggrieved, the assessee filed appeal before the Tribunal as
per grounds extracted above.
At the outset, the Ld. Counsel for the assessee submitted that this is
case of filing of revised return of income declaring loss beyond the period
provided u/s.139(1) of the Act. However, original return was filed in time and
so is the revised loss return. The Ld. Counsel also submitted that regular
return was filed by the assessee with positive income in time provided
u/s.139(1) of the Act. On this aspect, the Ld. Counsel mentioned that the
Assessing Officer denied the carry forward loss and has not considered the
revised return of loss filed subsequent to the issue of notice u/s.143(2) of the
Act in time. The Ld. Counsel further submitted that the Assessing Officer has
wrongly invoked the provisions of section 80 r.w.s 147(3) of the Act and the
CIT(Appeals) also did not adjudicate the issue properly on the facts and
approved the order of Assessing Officer.
On the other hand, Ld. DR for the Revenue has placed reliance on the
orders of the Authorities below.
Both sides heard. Orders of the Authorities below perused. It is
undisputed fact that the assessee filed return of income on 30.11.2015 against
the due date on or before 31.03.2015. The assessee declared positive income
in this return. Subsequently, during assessment proceedings, the assessee
furnished revised return of loss on 20.09.2016 declaring loss of Rs.79,01,997/-
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. The assessee had time to file the said return or before 31.03.2017. Now, the
issue for adjudication before us is whether the Assessing Officer or
CIT(Appeals) are justified in ignoring the said revised return of loss and
therefore, denying the claim of carry forward loss mentioned in the said
revised return.
It is undisputed fact that the assessee furnished original return of
income u/s.139(1) of the Act with positive income in time. On this aspect, I find
that the similar issue has come up before the Tribunal in the case of Mr.
Ramesh R. Shah Vs. ACIT, in ITA No.4312/Mum/2009 for the assessment year
2005-06 dated 29.07.2011. I also find that the facts are identical qua filing of
return of with positive income and revising return with loss before the specified
date as per provisions of section 139(5) of the Act. I also perused the contents
of Para 10 and 11 of the said Tribunal’s order (supra.) and found that this
decision helps the assessee for carry forward loss though revised return filed by
the assessee which is filed subsequent to the valid original return filed
u/s.139(1) of the Act. For the sake of completeness, the contents of Para 10
and 11 of the Tribunal’s order are extracted as under:
“10. In the present case, the AO has serious reservation for allowing the assessee to carry forward long-term capital loss by interpreting the provisions of s. 80 r/w s. 139(3). In this background, can it be said that the assessee has not fulfilled conditions laid down in s. 80 and hence, it is not permissible to allow to carry forward of the capital loss. In the present case, the assessee filed original return under s. 139(1) in which the positive income was declared. Even as per the assessment order positive income is determined as the assessee could not set off the loss on the sale of the shares of Philox Pharma Ltd. in the year itself. He claimed the same to be carried forward. In our humble opinion correct interpretation of s. 80, as per the language used by the legislature, condition for filing revised return of loss under s. 139(3) is confined to the cases where there is only a loss in the original return filed by the assessee and no positive income and assessee desires to take benefit of carry forward of said loss. Once assessee declares positive income in original return filed under s. 139(1) but subsequently finds some mistake or wrong statement and files revised return declaring loss then can he be deprived of the benefit of carry forward of such loss. In our humble opinion, if we accept interpretation given by the authorities below, it would frustrate the object of s. 80. Sec. 80 is a cap on the right of the assessee, when the assessee claims that he
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has no taxable income but only a loss but does not file the return of income declaring the said loss as provided in sub-s. (3) of s. 139. It is pertinent to note here that legislature has dealt with two specific situations (i) under s. 139(1), if the assessee has a taxable income chargeable to tax then it is a statutory obligation to file the return of income within the time allowed under s. 139(1). So far as s. 139(3) is concerned, it only provides for filing the return of loss if the assessee desires that the same should be carried forward and set off in future. As per the language used in sub-s. (3) of s. 139, it is contemplated that when the assessee files the original return, at that time, there should be loss and the assessee desires to claim said loss to be carried forward and set off in future assessment years. Sub-s. (1) of s. 139 casts statutory obligation on the assessee when there is positive income. In the present case, admittedly, the assessee filed the return of income declaring the positive income and even in the revised return, the assessee has declared the positive income as the loss in respect of the sale of shares, which could not be set off, inter-source or inter-head under s. 70 or 71 of the Act. 11. We have to interpret the provisions of any statute to make the same workable to the logical ends. As per the provisions of sub-s. (5) of s. 139, in both the situations where the assessee has filed the return of positive income as well as return of loss at the first instance as per the time-limit prescribed and subsequently, files the revised return then the revised return is treated as valid return. In the present case, as the assessee filed its original return declaring the positive income and hence, in our opinion, subsequent revised return is valid return also and the assessee is entitled to carry forward of ‘long-term capital loss’. Sub-ss. (1) and (3) of s. 139 provide for the different situations and in our opinion, there is no conflict in applicability of both the provisions as both the provisions are applicable in the different situations. We are, therefore, of the opinion that there is no justification to deny the assessee to carry forward the loss. We, accordingly, direct the AO to allow the assessee to carry forward the loss.”
In view of the above decision, I am of the opinion that there is no
justification to deny the assessee to carry forward the loss and hence, direct
the Assessing Officer to allow the assessee to carry forward the loss.
In the result, appeal of the assessee is allowed. 9.
Order pronounced on 11th day of February, 2019.
Sd/- (डी.क�णाकरा राव/D. Karunakara Rao) लेखा सद�य / ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 11th February, 2019. SB
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आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-6, Pune. 4. The Pr. CIT-5, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.
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Date 1 Draft dictated on 11.02.2019 Sr.PS/PS 2 Draft placed before author 12.02.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order