INCOME TAX OFFICER v. KRISHAN DIST. CO-OPERATIVE MARKETING SOCIETY LTD
[Citation -1986-LL-0313-1]

Citation 1986-LL-0313-1
Appellant Name INCOME TAX OFFICER
Respondent Name KRISHAN DIST. CO-OPERATIVE MARKETING SOCIETY LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 13/03/1986
Assessment Year 1981-82
Judgment View Judgment
Keyword Tags carry forward and set off • determination of loss • procedural in nature • co-operative society • extension of time • service of notice • valid assessment • fresh assessment • cold storage • actual date • loss return • form no. 6
Bot Summary: Rs. 4,75,000 for the assessment year 1975-76, Rs. 1,80,000 for the assessment year 1976-77 Rs. 1,45,000 for the assessment year 1977-78, Rs. 9,54,000 for the assessment year 1978-79 and Rs. 11,66,880 for the assessment year 1979-80 should be carried forward to the next year, i.e., for the assessment year 1980- 81. Inasmuch as the returns for those two assessment years were filed below two years from the close of the last date of each of those assessment years the returns filed for those two assessment years can legitimately by called as returns filed under section 139(4). Section 139(4) reads as follows: The period referred to in clause shall be - where the return relates to a previous year relevant to any assessment year commencing on or before the 1st days of April, 1967, four years from the end of such assessment year; where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968, three years from the end of the assessment year; where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year. According to these provisions, where the return is made for the assessment year 1967-68 or any earlier assessment year, the time limit is four years from the end of the relevant assessment year. Finally, if the return is made for the assessment year 1969-70 or any later assessment year, the time limit will be two years from the end of the relevant assessment year ...... The learned author also stated that the return filed after the expiry of the period provided in section 139(4) is an invalid return and in support thereof the cited the decision of the Punjab High Court in Auto Metal Engineers v. Union of India 1978 111 ITR 161 and Vijay Kumar Jain v. CIT 1975 99 ITR 349 and also CIT v. S. Raman Chettiar 1965 55 ITR 630. The above decision aptly applies to the returns filed for the assessment years 1975-76 and 1976-77 in the case before us and in view of our above discussion of the true legal position inasmuch as the returns for these two assessment years are not filed within two years from the last day of each of the assessment years and that the intendment of section 147 of the Act is not to determine losses but only to rope in the escaped income, if any, the assessment determining loss for the assessment years 1975-76 and 1976-77 cannot to taken to be valid assessment at all. The consequence of our above discussion is that the loss assessments for the assessment years 1975-76 and 1976-77 are non est in law and so the ITO is perfectly justified while framing the assessments for the assessment year 1981-82 in not carrying forward the loss of the said two assessment years, despite the fact that the previous ITO agreed to carry forward and adjust the losses in the assessment year 1979-80.


HYDERABAD BENCH KRISHAN DIST. CO- OPERATIVE INCOME TAX OFFICER v. MARKETING SOCIETY LTD. March 13, 1986 JUDGMENT ORDER Per Shri T. V. Rajagopala Rao, Judicial Member - This is departmental appeal and it is directed against order of Commissioner (Appeals), dated 29-11-1984 and it relates to assessment year 1981-82. 2. subject-matter of this appeal is carry forward of losses of earlier years. In order to property appreciate point at issue due date of filing return, actual date of filing return and revised return, section under which filed, amount of loss returned, date of assessment as well as amount of loss determined for assessment years 1975-76 to 1980-81 are left essential and, hence, they are given in tabular form below: ----------------------------------------------------------------------------- Assess- Due date Date of fil- Section Loss ret- Date of Loss ment for return ing return/ under urned assessment deter- year revised which mined return filed Rs. Rs. ----------------------------------------------------------------------------- 1975-76 30-6-1975 31-10-1979 139(4) 2,41,885 23-2-1981 4,75,000 30-6-1980 139(5) 4,81,033 1976-77 30-6-1976 31-10-1979 139(4) 1,10,686 23-2-1981 1,80,000 1-7-1980 139(5) 2,26,691 1977-78 30-6-1977 31-10-1979 139(4) 3,25,775 23-2-1981 1,45,000 30-6-1980 139(5) 1,55,972 1978-79 30-6-1978 3-11-1979 139(4) 12,86,480 23-2-1981 9,54,000 30-6-1980 139(5) 10,30,504 1979-80 30-6-1979 8-7-1981 139(4) 11,81,883 19-2-1982 11,66,880 1980-81 30-6-1980 8-6-1980 139(4) 4,54,433 29-3-1983 4,00,000 --------------------------------------------------------------------------- As can be seen from above table in all assessment years right from 1975-76 to 1980-81 assessee co-operative society, had only returned losses sustained by it and ITO also while completing assessment determined losses though amounts of losses determined may not exactly tally with returned losses. ITO framed assessment under section 143(3) of Income-tax Act, 1961 ('the Act') for assessment year 1979-80 by this order dated 19-2-1982. In said assessment ITO not only determined loss sustained by assessee, co-operative society, for assessment year, 1979- 80 at Rs. 11,66,880 but also ordered that losses of earlier years, viz., Rs. 4,75,000 for assessment year 1975-76, Rs. 1,80,000 for assessment year 1976-77 Rs. 1,45,000 for assessment year 1977-78, Rs. 9,54,000 for assessment year 1978-79 and Rs. 11,66,880 for assessment year 1979-80 should be carried forward to next year, i.e., for assessment year 1980- 81. assessment order dated 19-2-1982 for assessment year 1979-80 was filed before us at time of hearing of this appeal. However, while completing assessment for assessment year 1981-82 ITO proposed to reject assessee's claim for carry forward and set off of losses determined for assessment years 1975-76 to 1980-81 against income for assessment year 1981-82. After giving due opportunity to assessee to submit its case against proposed action of ITO, he held ultimately that losses determined for abovesaid years should not be carried forward and set off. ITO found that for assessment years 1975-76 to 1978-79 no income- tax returns were filed by assessee in first instance. ITO issued notices under section 148 of Act on 4-8-1979. According to terms of said notice, income-tax returns for those four assessment years should have been filed on or before 8-9-1979. However, they were filed on 31-10-1979 for first three assessment years and on 3-11-1979 for fourth assessment year. For assessment years 1979-80 and 1980-81 no notices were issued but returns were filed voluntarily within two years from last day of each of assessment years. Under circumstances ITO held that loss returns filed for all assessment years under consideration should be deemed to have been filed under section 139(4) of Act. ITO further found that none of returns were filed within time allowable under section 139(3). No petition for extension of time in Form No. 6 was applied for any of assessment years. ITO held that provision under section 139(3) is restrictive in sense that it requires loss return to be filed within time allowed under section 139(1) if assessee wants benefit of carry forward of loss. assessee relied upon decision of Andhra Pradesh High Court in C. P. Sarathy Mudaliar v. CIT [1978] 114 ITR 687 and also wording of section 80 of Act. It was argued to assessee that words used in section 80 of Act clearly disclose that loss-return can be filed under any of sub- sections of section 139 and in order to get benefit of carry forward and set off of loss return need not necessarily be filed within time allowed under section 139(1) or (3). However, ITO considering combined effect of section 80 and 139 held that return contemplated under section 80 is one filed in accordance with sub-section (3) of section 139 and that unless loss is determined by ITO in pursuance of such return case would be hit by section 80 and assessee will not be entitled to benefit of carry forward and set off of loss. He relied upon Calcutta High Court decision in Sun Engg. Works. (P.) Ltd. v. CIT [1978] 111 ITR 166. He held that ratio of said decision directly applies to facts of present case before him. Thus, having rejected contentions put forward on behalf for assessment years 1975-76 to 1980-81 and computed total income of assessee at Rs. 5,78,680 after giving deduction under section 80P (2) of Act. 3. Aggrieved, assessee went in appeal before learned Commissioner (Appeals). It was argued before him that in assessment years 1975-76 to 1980-81 ITO already determined losses and directed them to be carried forward. That being position, ITO while framing assessment for 1981-82 again reversed finding of those years on ground that returns of those years are filed under section 139(4). It was further submitted that return filed under section 139(4) before last day for completion of assessment is valid return and loss determined pursuant to said return should be carried forward and set off against income of subsequent years. It was also argued once loss is determined and ordered to be carried forward claim for set off of same in subsequent years cannot be rejected on ground that loss was wrongly carried forward in earlier years. learned Commissioner (Appeals) saw sufficient merit in this contention. learned Commissioner (Appeals) relied upon following decision - Presidency Medical Centre (P.) Ltd. v. CIT [1977] 108 ITR 838 (Cal.) Telster Advertising (P.) Ltd. v. CIT [1979] 116 ITR 610 (Bom.), C. P. Sarathy Mudaliar's case (supra) and CIT v. Pratapgarh Cold Storage & Ice Factory [1980] 3 TAXMAN 61 (All.). He also held as regards filing of loss-return, determination of loss, order to carry forward and set off of loss determined, position obtaining under 1961 Act is not quite different from position obtaining under Indian Income-tax Act, 1922 ('the 1922 Act'). For this purpose he relied on decision of Hon'ble Supreme Court in CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518. Ultimately, he directed ITO to carry forward losses for assessment years 1975-76 to 1980-81 to assessment year 1981-82 and held also ordered that loss computed for assessment year 1981-82 should be carried forward to next assessment year 1982-83 as it obviously remains unabsorbed. 4. Aggrieved against impugned order of Commissioner (Appeals) dated 29-11-1984, present second appeal is filed before us. 5. We have heard Shri B. Kailashnath and Shri P. Radhakrishna Murthy, learned departmental representatives and Shri D. Suryanarayana Murthy, then learned counsel for assessee. It is contended on behalf of revenue that in impugned orders it should have be held that assessee was not entitled to carry forward of business losses of earlier years. learned Commissioner (Appeals) ought to have held that decision in Presidency Medical Centre (P.) Ltd.'s case (supra) is not applicable to facts of assessee's case. It is also argued that in impugned orders it should have been held that no reversal to findings of ITO given in earlier years that losses determined would be carried forward to next year is necessary to negative claim of assessee. Ultimately, it is argued that provisions of section 80 is procedural in nature and they do not contemplate passing of any order in writing. Shri D. S. Murthy, learned counsel for assesseee, very much relied upon Commissioner (Appeals)'s order. 6. After hearing both sides we decide matter as follows: section 139(4) (b) (iii ) empowers assessee to file his income-tax return within two years from close of assessment year in question. facts before us are for assessment year 1977-78, two years would be complete from last day of that assessment year by 31-3-1980. So also for assessment year 1978-79 two years from last date of said assessment year would fall on 31-3- 1981. In this case, ITO issued notice under section 148 , inter alia, for assessment years 1977-78 and 1978-79 on 4-8-1979 calling upon assessee to file is return within 35 date from receipt of said notice. That is, under section 148 notice assessee was called upon to file its return, inter alia, for assessment years 1977-78 and 1978-79 on or before 8-9-1979. If assessee, in fact, had filed its returns for those two assessment years on or before 8-9-1979 then it can be said that returns were filed in pursuance of notice under section 148. But in fact, assessee did not comply with directions contained in notice. It had filed its returns much beyond date prescribed under section 148 on 31-10-1979 for assessment year 1977-78 and 3-11-1979 for assessment year 1978-79. Therefore, returns for assessment years 1977-78 and 1978-79 cannot be said to have been filed in pursuance of notice under section 148. But inasmuch as returns for those two assessment years were filed below two years from close of last date of each of those assessment years returns filed for those two assessment years can legitimately by called as returns filed under section 139(4). 7. But as far as assessment years 1975-76 and 1976- 77 are concerned, returns were filed both beyond time prescribed under section 148 notice as well as beyond two years from close of each of those assessment years. Section 139(4) (b) reads as follows: "(4) (b) period referred to in clause (a) shall be - (i) where return relates to previous year relevant to any assessment year commencing on or before 1st days of April, 1967, four years from end of such assessment year; (ii) where return relates to previous year relevant to assessment year commencing on 1st day of April, 1968, three years from end of assessment year; (iii) where return relates to previous year relevant to any other assessment year, two years from end of such assessment year." As can be seen from above provision income-tax returns from assessment year 1969-70 onwards should be filed within two years from end of assessment year even under section 139(4). When income-tax return was filed beyond two years from end of assessment year can it still be held to be return filed under section 139(4) is question which falls for our determination. 8. In Chaturvedi and Pithisaria's Income-tax Law, Third edn., Vol. 3, following is stated: "A return filed by assessee after expiry of period mentioned in section 139(4) (b) is non est in law and invalid. No assessment can be made on basis of such return. Where assessment made on basis of such return is cancelled or set aside by appellate or revisional authority with direction to make fresh assessment, fresh assessment made in pursuance of such direction would still be invalid and without jurisdiction ...." (p. 2701) Authorities cited under this proposition of law are stated to be Calcutta High Court decision in CIT v. Smt. Minabati Agarwalla [1971] 79 ITR 278 decision of same High Court in CIT v. Bissessar Lal Gupta [1976] 105 ITR 684. same legal position is also obtaining in Sampath Iyengar's Law of Income-tax, Seventh edn., Vol. 4, learned author stated as follows: "A return to be valid under sub-section (4) should be filed not only before assessment for year is made but also within maximum time limit fixed in section. In regard to maximum time within which return can be made, provision is made in clauses (a) and (b) of sub-section (4) of this section. According to these provisions, where return is made for assessment year 1967-68 or any earlier assessment year, time limit is four years from end of relevant assessment year. If return is made for assessment year 1968-69, time limit is three years from end of assessment year 1968-69. Finally, if return is made for assessment year 1969-70 or any later assessment year (1970-71 and onwards), time limit will be two years from end of relevant assessment year ......" (p. 3297) learned author also stated that return filed after expiry of period provided in section 139(4) (b) is invalid return and in support thereof cited decision of Punjab High Court in Auto & Metal Engineers v. Union of India [1978] 111 ITR 161 (Punj. & Har.) and Vijay Kumar Jain v. CIT [1975] 99 ITR 349 (Punj. & Har.) and also CIT v. S. Raman Chettiar [1965] 55 ITR 630 (SC). 9. Further in X v. ITO [1984] 9 ITD 715, Bangalore Bench of this Tribunal at p. 721 held that return under section 139 can be filed only within period of two years from last day of assessment year. Once this limit is crossed, no return under section 139 can be filed by assessee. same Bench held considering scope and ambit of section 148 that it is clear that enquiry under section 148 is confined to such income, profits or gains which has escaped assessment or which was under-assessed or which was assessed at too low rate or was subject of excessive relief under Act. proceeding under that section cannot be used for finding out true total income of assessee afresh. In other words, in enquiry under section 34 of Act, no duty is cast upon ITO to start enquiry with reference to total income of assessee during assessment year. ITO has no such power. They have also held that notice under section 148 is only for purpose of roping in escaped income and not for benefit of assessee including carry forward of losses. 10. In Kalpan Lok Ltd. v. ITO [1984] 10 ITD 361, Bombay Bench held as follows as per head-note: "..... Even person who has not furnished return within time allowed under section 139(1) or 139(2) can furnish return before assessment is made, but then returns had to be filed before expiry of two years from end of assessment years in question. assessee, in instant case, had not obviously filed returns within any of these time limits and was not entitled to determination and carry forward of losses which were admittedly claimed for first time in returns filed in response to notices under section 148 read with section 147(a). assessment proceedings under section 147 are evidently intended for charging to tax income which has escaped assessment in sense that it has been underassessed, assessed at too low rate, etc. said provision are certainly not intended to grant relief to assessee by way of determination of loss and carry forward thereof." (p. 362) above decision aptly applies to returns filed for assessment years 1975-76 and 1976-77 in case before us and in view of our above discussion of true legal position inasmuch as returns for these two assessment years are not filed within two years from last day of each of assessment years and that intendment of section 147 of Act is not to determine losses but only to rope in escaped income, if any, assessment determining loss for assessment years 1975-76 and 1976-77 cannot to taken to be valid assessment at all. We also hold that no valid grounds existed for issuing notice under section 148 as far as assessment years 1975-76 and 1976-77 are conceded. assessee's counsel on decisions in Presidency Medical Centre (P.) Ltd.'s case (supra), Telster Advertising (P.) Ltd.'s case (supra), C. P. Sarathy Mudaliar's case (supra) and Pratapgarh Cold Storage & Ice Factory's case (supra) in order to buttress his arguments that returns filed in pursuance of section 148 notice for assessment years 1975-76 and 1976- 77 should be taken to be returns under section 139(4) especially when they were filed before completion of assessments of those years. case cited of not come to aid of assessee. In each of case cited, returns were filed within time allowed under section 139(4) and in none of cases any return was filed beyond time prescribed under section 139(4). This factor makes ocean of difference between case on hand and those decided by respective High Courts in those cases. As returns as well as assessment for assessment years 1975-76 and 1976-77 are to be held as non est in law, losses determined under those assessments cannot be carried forward or set off. However, assessments for year 1977-78 to 1980-81 stand on different footing. We have already found that for assessment years 1977-78 and 1978-79 returns were filed within two years from last day of respective assessment years and so they should be deemed to be returns filed under section 139(4) though time limit set out under section 148 notice (viz., 8-9-19 79) was transgressed. No notice under section 148 was issued so far as assessment years 1980-81 and 1981-82 are concerned. Obviously, returns for those two assessment years are filed within two years from last day of each of those assessment years and so returns should be deemed to be returns filed under section 139(4) though returns were filed beyond time limit prescribed under section 139(1). When returns were filed under section 139(4) , in our opinion, losses should be computed and they should be carried forward and set off in view of fact that provisions of section 80 do not mention any particular section 139 but mention section 139 in general. 11. In this connection, we should do not better than citing Madhya Pradesh High Court decision in Co-operative Marketing Society Ltd. v. CIT [1983] 143 ITR 99. In that case facts as well as decisions rendered thereon are succinctly stated in head-note of decision as follows: "For assessment years 1972-73 and 1973-74, assessee filed returns declaring losses in response to notices issued by ITO under section 148 of Income-tax Act, 1961. assessee had not filed any return nor was it assessed for relevant assessment years before notices were issued under section 148. ITO computed losses for relevant years but declined to carry them forward for purpose of set off in subsequent years on ground that returns were not filed within time allowed by section 139. AAC affirmed order of ITO. On further appeal, Tribunal held that since returns for years were filed by assessee after service of notice under section 148 , they could not be treated as returns filed in pursuance of provisions of section 139. Tribunal also rejected contention of assessee that returns were filed under section 139(4) (a) and hence dismissed appeal of assessee. On reference: Held, that returns had been filed within time allowed under sub- section (4) of section 139. Hence, loss determined by ITO for relevant assessment years could be said to be loss determined in pursuance of returns filed under section 139. Therefore, Tribunal was not justified in declining to allow benefit of carry forward and set off of losses computed by ITO in respect of assessment years 1972-73 and 1973-74." (p. 99) Therefore, humbly following ratio of above decision we have to hold that simply because income-tax returns were filed for assessment years 1977-78 and 1978-79 in pursuance of section 148 notices issued to assessee they cannot be held to be invalid returns inasmuch as returns were filed within two years from last day of each of those assessment years and following said decision losses should not only be computed but should be ordered to be carried forward and set off from business income of later years. As for assessment years 1979-80 and 1980-81 are concerned, they present no difficulty inasmuch as returns were filed not in pursuance of any notice but voluntarily. So also they are filed within two years from end of each of those assessment years. Hence, no difficulty is felt to conclude that income-tax returns were filed under section 139(4) with reference to those two assessment years. 12. In ITO v. Ratanlal Bhangadia [1984] 10 ITD 182 (Hyd.), we have already held that provisions regarding determination and carry forward of losses are in pair materia under 1922 Act and under 1961 Act. We have also held that decision of Supreme Court in Kulu Valley Transport Co. (P.) Ltd.'s case (supra) holds good even under 1961 Act. We have also held following Andhra Pradesh High Court decision in C. P. Sarathy Mudaliar's case (supra) that loss return filed beyond time limit under section 139(3) can be entertained. We have further held that circular of CBDT dated 28-8-1970 and, not one dated 20-9-1983 represents correct legal position and ultimately, we held that though loss return was filed beyond time limit prescribed under section 139(3) provided if it is filed within time limit prescribed under section 139(4) loss can be validly determined and can be carried forward and set off to later years. We hold that our previous decision noted above applies fully to assessment years 1977-78 to 1980-81. 13. consequence of our above discussion is that loss assessments for assessment years 1975-76 and 1976-77 are non est in law and so ITO is perfectly justified while framing assessments for assessment year 1981-82 in not carrying forward loss of said two assessment years, despite fact that previous ITO agreed to carry forward and adjust losses in assessment year 1979-80. What is non est cannot be validated. However, ITO while framing assessment for assessment year 1981- 82 is not justified in not carrying forward and adjust losses determined for assessment years 1977-78 to 1980-81. Therefore, impugned order of learned Commissioner (Appeals) is set aside as regards carrying forward and adjustment of loss for assessment years 1975-76 and 1976-77; but it is confirmed with regard to grant of same relief for assessment years 1977-78 to 1980-81. 14. In result, appeal is partly allowed. *** INCOME TAX OFFICER v. KRISHAN DIST. CO-OPERATIVE MARKETING SOCIETY LTD.
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