Commissioner of Income Tax vs Pigments India Ltd.

V.V. Kamat, J.—The Revenue, u/s 256(2) of the Income Tax Act, 1961, desires reference of the following questions :

"1. Whether, on the facts and in the circumstances of the case and also in the light of the relevant provisions, the assessee is entitled to carry forward any loss ?

Whether, on the facts and in the circumstances of the case and also considering the relevant provisions and the provision contained in Sub-section (10) of Section 139 which retrospectively came into force from April 1, 1986, the Tribunal is right in law in holding that the assessee is entitled to have the loss carried forward ?

Whether, on the facts and in the circumstances of the case and since the Assessing Officer had extended time only up to September 30, 1986, and return filed on October 19, 1986, being one within the further extension of time applied for by the assessee (and on which no order was passed by the officer), the Tribunal is right in law in holding that therefore, in view of the proviso to Section 139(1) as it stood then, the assessee is entitled to have the loss carried forward ?"

The factual matrix takes us to the situation as to whether the Income Tax Officer has discretion in the matter and whether the discretion has been properly ordered by the Tribunal to have applied to the facts and circumstances of the case.

The question relates to the assessment year 1986-87 in regard to which in the first instance a return was filed on October 10, 1986. Obviously, the Assessing Officer acting u/s 143(1) accepted the loss shown in the return amounting to Rs. 34,54,499 to be carried forward. However, it was held that the assessee would not be entitled for the benefit of carry forward of the loss because the return of income was not furnished within the time allowed u/s 139(3) of the Act. This was with regard to the assessment year 1986-87.

For the assessment year 1987-88 also the Assessing Officer refused to allow carry forward of loss on the same ground that the return was filed beyond the due date.

The matter was taken up before the first appellate authority-the Commissioner of Income Tax (Appeals). The authority has found that, for the assessment year 1986-87, the assessee had been granted extension of time up to September 30, 1986. As the return was filed beyond the time allowed u/s 139(3) of the Act, it was held that the assessee was not entitled to carry forward the loss determined in the assessment. For the assessment year 1987-88 also, the first appellate authority confirmed, the order of the Assessing Officer on the ground that in terms of Section 139(3) read with Section 139(10), the loss could not be carried forward and set off.

The matter came up before the Income Tax Appellate Tribunal. Factually, the Tribunal has recorded that initially extension of time till September 30, 1986, was granted and the assessee had again applied for extension of time up to October 15, 1986, and it was within this time, in regard to which extension was applied for, the return in question came to be filed on October 10, 1986, it was within the further extension of time applied for by the assessee. The Tribunal took the view that on the facts and circumstances stated above, the assessee would be entitled to have the loss carried forward. The Tribunal has observed that it is the Assessing Officer who is in seisin of the assessment proceedings having positive income to decide whether the loss of the previous year is to be carried forward for set off and pass appropriate orders bearing in mind the facts and circumstances of the case.

With regard to the assessment year 1987-88, the Tribunal also has recorded that although the assessee had to file the return on or before July 31, 1987, an application for extentsion of time for filing the return up to September 30, 1987, was also made and actually the return showing the loss was also filed on September 30, 1987. This was also not allowed to be carried forward by the Assessing Officer in regard to the assessment proceedings u/s 143(1) of the Act, holding that the loss return was filed beyond the time allowed u/s 139(3) of the Act.

In the process of reasoning reliance is placed by the Tribunal on the decision of the Supreme Court Commissioner of Income Tax, Uttar Pradesh Vs. Manmohan Das (Deceased), and two other decisions of the Bombay High Court for the proposition that the Assessing Officer is to be considered to be in seisin of the situation.

Learned senior tax counsel brought to our notice the later decision of the Supreme Court Commissioner of Income Tax, Madras and another Vs. M/s. Dalmia Cement (Bharat) Ltd., , wherein, according to learned counsel, the earlier decision in Commissioner of Income Tax, Uttar Pradesh Vs. Manmohan Das (Deceased), of the apex court has been taken up for consideration. In Commissioner of Income Tax, Madras and another Vs. M/s. Dalmia Cement (Bharat) Ltd., , the apex court was concerned with regard to the question of quantification of the losses for the purpose of set off and the provisions of Section 24 of the Indian Income Tax Act, 1922, in regard thereto. The assessees therein had applied for extension of time and had, in fact, obtained extension from the Income Tax Officer himself and the question was not at all res Integra. In the process of reasoning in relation to Commissioner of Income Tax, Uttar Pradesh Vs. Manmohan Das (Deceased), , it is tersely observed in the context of the question under consideration of the apex court that the principle of the said decision is of no relevance to the facts and circumstances of the cases before the Supreme Court. Even then, it is observed that the question whether the loss determined for the previous year is to be carried forward or set off against the income of the succeeding year would be a matter to be decided by the Income Tax Officer dealing with the assessment relating to the subsequent year in which year the loss is sought to be set off by carrying it forward from the previous year (see pp. 90 and 91 in, the paragraph at the bottom of 216 ITR 90).

In ouv judgment these observations are in perfect consonance with the statutory provision of Section 139(3) of the Income Tax Act, 1961. The language speaks of the Income Tax Officer acting "in his discretion" and dealing with a situation where an application is presented by the assessee within the time allowed u/s 139, Sub-section (1), of the Act specifying a return of loss. In our judgment, the assessee had applied for extension of time. It was to be considered and could not be stated to have been rejected. If the Income Tax Appellate Tribunal has considered the position as a proper case for use of discretion in the matter, and accordingly what has been done is carrying forward of the loss of the previous year, no question of law can be said to have flown from the factual matrix and the situation dealt with by the Tribunal.

For the above reasons the petition stands dismissed.