Income Tax Appeal No., 342 of 2004 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income-tax Appeal No. 342 of 2004 Date of decision: 25.8.2010 Joginder Paul (HUF) through Karta Rajiv Gupta --- Appellant Versus Commissioner of Income-tax, Ludhiana --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. S.K. Mukhi, Advocate assisted by Ms. Jyoti, Advocate for the appellant-assessee. Mr. Rajesh Katoch, Central Government Standing Counsel for the respondent-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the assessee against the order dated 12.7.2004, passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B” Chandigarh, (in short “the Tribunal”) in ITA No. 544/CHANDI/2002, for the assessment year 1999-2000. Income Tax Appeal No., 342 of 2004 2 The present appeal was admitted for determination of the following question of law for the opinion of this Court: “Whether the assessee will be entitled to the benefit for carry forward of loss to be set off in subsequent years even if the return of loss is filed beyond the time prescribed under section 139(3) of the Income Tax Act, 1961?” During the assessment year 1996-97, the assessee declared long term capital loss of Rs. 1,66,680/- in the return filed on 24.12.1996 whereas in view of provisions of Section 139 (1) the return claiming loss was required to be filed on or before 31.8.1996. The assessee for the assessment year 1999-2000 declared long term capital gains on the sale of shares at Rs.2,04,909/- against which the assessee had sought to adjust the long term capital loss of Rs. 1,66,680/- relating to assessment year 1996-97. According to the assessee, the loss for the assessment year 1996-97 was carried forward to the assessment years 1997-98 and 1998-99 and in the computation chart of total income filed along with the return for the aforesaid two years, a note was appended to carry forward the long term capital loss of Rs. 1,66,680/- in the subsequent years. The income returned in the assessment year 1998-99 was accepted by the assessing officer and, thus, the loss of Rs. 1,66,680/- was impliedly allowed to be carried forward to the current year i.e. assessment year 1999-2000. The assessee was disallowed the setting off of the loss claimed by him as according to the Income Tax Appeal No., 342 of 2004 3 assessing officer the provisions of Section 80 read with Section 139(3) of the Act had not been complied by the assessee, inasmuch as the return for the assessment year 1996-97 was not filed within the time allowed under Section 139(1) of the Act. The appellant preferred appeal before the Commissioner of Income-tax (Appeals) {in short “CIT(A)”} challenging the order of the assessing officer. It was contended that the assessing officer was not right in disallowing the claim. The CIT(A) did not accept the pleas raised on behalf of the assessee and held that the assessing officer was fully justified in not allowing the set off of the loss claimed by the assessee and consequently dismissed the assessee’s appeal vide order dated 9.5.2002 (Annexure A-4). The assessee preferred second appeal before the Income-tax Appellate Tribunal Chandigarh Bench ‘A’ Chandigarh (in short “the Tribunal”). The Tribunal also did not accept the submissions raised on behalf of the assessee and consequently dismissed the appeal of the assessee putting its seal of affirmation on the findings recorded by the authorities below. This is how the assessee-appellant is in appeal before us. We have heard learned counsel for the parties and have perused the record. Learned counsel for the appellant submitted that the loss for the assessment year 1996-97 was allowed to be carried forward by the assessing officer during assessment year 1997-98 Income Tax Appeal No., 342 of 2004 4 and 1998-99 and, therefore, the Tribunal was not justified in disallowing the set off of the loss claimed by the assessee in the assessment year 1999-2000 without revising the earlier orders passed in respect of assessment years 1996-97, 1997-98 and 1998-99. Learned counsel in support of the submission placed reliance on various judgments, viz., Commissioner of Income Tax v. H.P. Lohia (2003) 203 ITR 928, Saurashtra Cement & Chemical Industries Ltd. V. Commissioner of Income Tax, Gujarat-V, (1980) 123 ITR 669, Satyanarayan Bhalotia v. Commissioner of Income Tax, (1994) 207 ITR 1030, Radhasoami Satsang v. Commissioner of Income-tax (1992) 193 ITR 321, Commissioner of Income-tax v. Lakhani Foodwear Ltd. (2001) 248 ITR 701 and Madan Roller Flour Mills v. Commissioner of Income-tax, (2008) 4 DTR Judgments 41. On the other hand, learned counsel for the Revenue supported the order of the Tribunal. We have given our thoughtful consideration to the submissions made by the learned counsel for the parties and express our inability to agree to the submissions raised on behalf of the assessee. The question whether the assessee who failed to file return of loss within the time prescribed under Section 139 of the Act, can be allowed to carry forward the loss to be set off in subsequent years was the subject matter of consideration of this Court in Commissioner of Income-tax v. Haryana Hotels Ltd., (2005) 276 ITR 521, wherein it was held as under:- “An irresistible conclusion on the conjoint reading of the aforesaid provisions would be that a business loss Income Tax Appeal No., 342 of 2004 5 cannot be carried forward unless it has been determined in pursuance of a return filed under section 139 of the Act. In order to be entitled to carry forward a business loss, the assessee must submit a return under section 139(3) of the Act and have an assessment made for the year in which he has incurred the loss. The Assessing Officer has to notify to the assessee by an order in writing the amount of the business loss as computed by him which the assessee is entitled to have carried forward. Where the business loss determined has not been notified to the assessee by the Assessing Officer, the assessee can have it determined in a subsequent year in which the business loss is to be set off. It was an admitted fact as is apparent from a perusal of the order of the Commissioner of Income- tax (Appeals) that no valid return for the assessment year 1986-87 had been made by the assessee and accordingly no assessment could be made and the business losses could not be notified to the assessee. Once it is established that no valid return had been filed by the assessee for the assessment year 1986-87, the assessee cannot be allowed to set off the business losses of earlier years during the assessment year 1987-88. The Tribunal, thus, clearly erred in allowing set off of business losses for earlier assessment years Income Tax Appeal No., 342 of 2004 6 1984-85 and 1985-86 during the assessment year 1987-88.” Admittedly, the assessee had not filed return declaring long term capital loss for the assessment year 1996-97 in terms of Section 139(3) of the Act within time and, therefore, it shall not be entitled to carry forward such loss to be set off in subsequent years. The mere filing of returns for assessment years 1997-98 and 1998-99 by the assessee depicting that long- term capital loss is to be carried forward, in the absence of specific order by the assessing officer, shall not entail any right in favour of the assessee. The counsel for the assessee was unable to refer to any assessment order passed by the assessing officer, i.e. for assessment years 1996-97, 1997-98 and 1998-99 wherein benefit of carry forward of long term capital loss was granted to the assessee by the assessing officer. Rather on a query put by the Court, viz., was there any specific order passed by the assessing officer, the counsel for the assessee candidly admitted that no such order was passed by the assessing officer in that behalf. The submission of the counsel that when the assessment order was passed by the assessing officer it would impliedly constitute permission to carry forward of long term capital loss, is against the mandate of Section 80 of the Act which prescribes that the losses under Sections 72(1), 73(2), 74 (1), 74(3) and 74A(3), if not determined in pursuance of a return filed under Section 139(3), shall not be carried forward and set off. The judgments relied upon by the counsel for the assessee, Income Tax Appeal No., 342 of 2004 7 thus, have no applicability to the facts of the present case. Accordingly, the question of law reproduced earlier is answered against the assessee. Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) August 25, 2010 JUDGE *rkmalik*