CHANDIGARH BENCH ASSISTANT COMMISSIONER OF SAT PAL SACHDEVA v. INCOME TAX, CIRCLE- I, LUDHIANA January 11, 2008 JUDGMENT M.A.Bakshi, Vice President. - appeal of assessee for assessment year 2004-05 is directed againstthe order dated 20-9-2007 of Commissioner of Income-tax (A)-I. Ludhiana. Wehave heard parties and perused record. 2.The only issue involved in this case is relating to carry forward ofcapital loss. In this case, return of income for assessment year 2004- 05was due by 31-10-2004. Since 31-10-20004 happened to be Sunday, due datefor filing return was upto 1-11-2004 by virtue ofsection 10 of General Clauses Act. assesseefiled return on 1-11-2004 declaring income Rs. 10,25,480.The return was processed under section 143(1). In original return ofincome, assessee had disclosed loss on sale ofproperty of Rs. 7,21,840 which was set off against theother income. Realizing mistake in original return of setting oft longterm capital loss against other income assesseefiled revised return on 23-12-2004 declaring income of Rs. 1 7,47,320. Thelong term capital loss was declared which was to be carried forward to thesubsequent assessment year. Since assessee's casehad been selected for scrutiny, notice under section 143(2) was issued to theassessee on 1-8-2005. Assessing Office completedthe assessment under section 143(3) at income of Rs. 17,97,320vide order dated 27-9-2006. In assessment order AssessingOfficer though determined loss, yet held that loss on sale of propertyis not allowed, to be carried forward as assesseehad claimed carry forward of loss only in revised return filed on23-12-2004 i.e., in returnfiled beyond time allowed for filing of original return. 3.The assessee appealed to Commissioner of Income-tax(A) but without any success. Hence, this appeal before us. 4.The learned counsel for assessee contended thatthe assessee had filed original return within thetime allowed under section 139(1) of Act and long term capital loss wasduly disclosed in said return. mistake committed by theassesses was only to extent that long term capital loss was setoff against other income in that return. mistake having been realized wasrectified by filing revised return on 23-12-2004 i.e., within timeallowed under section 139(5) of Act. It was contended that once revisedreturn is filed, original return is substituted by it for all purposes. Insupport, reliance has been placed on following decisions:' (i) BecoEngineering Co. Ltd. v. CIT [1984] 148 ITR 478 (Punj.& Har.); (ii) ChiefCIT (Administration) v. Machine Tool Corpn. of India Ltd. [1993] 201 ITR 101 (Kar.); (iii) CITv. Arun Textiles 'C' [1991] (Guj.); 5.It was accordingly pleaded that decision of Assessing Officer and thatof Commissioner of Income-tax (A) in not allowing carry forward ofcapital loss may be set aside and capital loss allowed to becarried- forward. 6.The learned DR, on other hand, relied upon findings of revenue,authorities. It was pointed out by learned D.R. that Assessing Officerin para 5.3 has relied upon following decisionsto support, his view which may be considered by Bench:' (i) Ram Bilas Kedar Nath v. ITO[1963] (All.); (ii) C.P. Sarathy Mudaliar v. CIT[1978] (AP); 7.It was further contended that as per provisions of section 80 of Act assessee is required to file return claiming losswithin time allowed for filing of return under section 139(1) of theAct Admittedly, carry forward of loss relating to sale of property wasclaimed only in revised return. Therefore, Assessing Officer wasjustified in not allowing carry forward of said loss. 8.We have given our careful consideration to rival contentions. It is notdisputed that assessee had filed originalreturn of income within time allowed under section 139(1). It is clarifiedthat due date for filing of return was 31-10-2004 last date being aSunday time allowed was extended to next working day i.e.,1-11-2004 by virtue of section 10 of Genera Clauses Act. In said return,the assessee had claimed loss sustained in thesale of property. However, said loss was set off against other income.The setting off of capital loss was not permissible as per section 74 of theAct as applicable for relevant assessment year. Realizing this mistake assessee filed revised return under section 139(5) of theAct on 23-12-2004. said return has been filed within one year from endof assessment year as provided under section 139(5). 9.The relevant question in this case arises as to whether on above facts assessee is entitled to carry forward of capital losssustained by him in sale of property. In this connection, it will berelevant to refer to provisions of section 80 of Income-tax Act, 1961.The section reads as under:' "80.Notwithstanding anything contained in this Chapter, no loss which has not beendetermined in pursuance of return filed [in accordance with provisions ofsub-section (3) of section 139], shall be carried forward and set off undersub-section (1) of section 72 or sub-section (2) of section 73 or sub- section(1) [or sub-section (3)] of section 74 [or sub-section (3) of section74A]". 10.A perusal of section 80 quoted above reveals that no loss which has not beendetermined in pursuance of return filed in accordance with provisions ofsub-section (3) of section 139 shall be carried forward and set off undersections.....section 74 section 139(3), therefore, becomes relevant which isquoted hereunder:' "139(3)If any person who [***] has sustained loss in any previous year under thehead 'Profits and gains of business or profession' or under head 'Capitalgains' and claims that loss or any part thereof should be carried forwardunder sub-section (1) of section 72, or sub-section (2) of section 73, or sub-section (1) [or sub-section (3)] of section 74 for sub-section (3) of section74A], he may furnish, within time allowed under sub-section (1) [***] areturn of loss in prescribed form and verified in prescribed manner andcontaining such other particulars as may be prescribed, and all provisionsof this Act shall apply as if it were return under sub-section (1)." 11.The aforementioned section reveals that in case of loss inter aliaunder head "capital gains" same has got to be claimed in thereturn filed within time allowed under sub-section (1) of section 139. 12.It would also be relevant to refer to section 74 of Act which reads as under:' "74.[(1) Where in respect of any assessment year, net result of computationunder head "Capital gains" is loss to assessee,the whole loss shall, subject to other provisions of this Chapter, becarried forward to following assessment year, and' (a)in so far as such loss relates to short-termcapital asset, it shall be set off against income, if any, under head"Capital gains" assessable for that assessment year in respect of anyother capital asset; (b)in so far as such loss relates to long-termcapital asset, it shall be set off against income, if any, under head"Capital gains" assessable for that assessment year in respect of anyother capital asset not being short-term capital asset; (c)if loss cannot bewholly so set off, amount of loss not so set off shall be carried forwardto following assessment year and so on.] (2)No loss shall be carried forward under this section for more than eightassessment years immediately succeeding assessment year for which losswas first computed." 13.In this case, it is not disputed that assesseehas filed original return within time allowed under section 139(1) andhas also disclosed loss sustained on sale of immovable property. Assumingthat asses see would not have filed revised return, Assessing Officerwas bound to consider original return filed by assesseein which loss on sale of property was disclosed.While making assessment under section 143(3), Assessing Officer wasbound to compute loss sustained on sale of property as also otherincome liable to tax. In our considered view, assesseewould be entitled to carry forward of capital loss determined in pursuanceto return filed by assessee within timeallowed under section 139(1). Assessing Officer could not refuse carryforward of loss as mandatory condition for carry forward of loss underthe head "capital gains" i.e., sustaining of loss andfiling of return within time allowed under sub-section (1) of section139 is satisfied in this case. Therefore, filing of revised return inthis case does not disqualify assessee from thecarry forward of loss sustained or sale of immovable property and claimed inthe original return filed by assessee. 14.Even otherwise, it is well settled principle of law that once revised returnis filed within time allowed under section 139(5) of Act, it takes theplace of original return. In other words original return is substitutedby revised return. This view is supported by decision of JurisdictionalHigh Court in case of Beco EngineeringCo. Ltd. (supra). In this case, Hon'blePunjab and Haryana High Court held:' "once revised return has been filed under section 139(5),the original is substituted by revised return as result of amendmentsmade in original return by revised return." Similarview has been taken by Karnataka High Court in case of Machine Tool Corpn. of India Ltd. (supra)and by Gujarat High Court in case of ArunTextiles 'C' (supra). 15.In our considered view, since conditions under section 80 of Act readwith section 139(3) are satisfied in this case, revenue was not justifiedin disallowing carry forward of loss sustained by assesseeon sale of immovable property. We accordingly set aside order of theCommissioner of Income-tax (A) as well as that of Assessing Officer andhold that assessee is entitled to carryforward of capital loss determined by Assessing Officer in pursuance tothe return filed by assessee within timeallowed under section 139(1) of Act. We direct Assessing Officer togive effect accordingly. 16.In result, appeal of assessee is allowed. *** Sat Pal Sachdeva v. Assistant Commissioner of Income-tax, Circle-I, Ludhiana