As per the provisions of Sec 80 of Income Tax Act, 1961 (‘Act’) assessee has to file return as per Section 139(3) of the Act to carry forward Business Loss/ Loss from Speculative Business/ Loss under the head Capital Gains etc.
Sec 139(3) requires the assessee to file return of loss to carry forward the losses referred above within in the time limit prescribed under Section 139(1).
In case, if search is conducted under Section 132 of the Act, then the provisions of the Section 139 will apply subject to modifications mentioned in Section 153A. In other words, the provisions of Section 153A suspend the operation of provisions of Section 139 to the extent indicated therein.
The issue of carry forward of loss by filing a return in pursuance of notice issue under Section 153A(1) (a) which is beyond the time limit specified under Section 139(3) was dealt with by Honourable High Court1 recently.
Facts of the case:
During the previous year (PY)2004-05 search and seizure operations were carried out in the offices of the assessee. Books and records remained seized by the income tax authorities pursuant to search and seizure operations. As a consequence of the search and seizure operations and in view of section 153A of the Act, no return under Section 139 for the assessment year (AY) 2004-05was filed within the statutory mandated date.
Assessee has filed return of income in pursuance of notice issued under Section153A (1)(a) for AY 2004- 05 and claimed loss that assessee intend to carry forward to subsequent year. The AO did not expressly record the losses to be carried forward for the AY 2004-05. However, AO later rectified the order and allowed the carry forward of loss.
In the AY 2006-07 the same AO allowed carry forward of previous year’s loss and computed the total income accordingly.
Commissioner in exercise of the powers under Section 263 set aside the assessment order by stating that assessee was not entitled to the benefit of carry forward of his loss incurred in AY 2004-05 as he has not filed the return in accordance with provisions of Section 139(1) of the Act. The appellate tribunal endorsed view of the commissioner.
1SHRIKANT MOHTA vs CIT- 95 Taxmann.com 224 ( HC CAL)
Two questions were posed before the High Court is (pertaining to loss):-
- Whether loss return filed within the time specified in the notice under Section 153A(1)(a) is required to be treated as return filed in accordance with the provisions of Section 139(3) for the purpose of carry forward of loss under Section 72?
- Whether return filed under Section 153A (1)(a) is required to be treated as a return under Section 139?
Honourable High Court held that the non-obstante clause in Sec 153A of the Act suspends for the purpose and to the extent as indicated in such provision the operation of several other provisions of the Act including section 139.When a search is initiated under Section 132 the assessee is not required to file return till such time the assessee receives a notice under Section 153A (1)(a) .
The operation of Sec 139(3) qua the time available for filing a return in order to avail benefit of carry forward of loss stands extended till a return is called under Section 153A(1)(a) of the Act in case such return is filled within in the time indicated in relevant notice.
In case where search operations have conducted under Section 132 the time to file the return within the meaning of sec 139(3) has to be regarded as reasonable time afforded by the provisions under Section 153A(1)(a).
In case the return is filed by the assessee within the reasonable time permitted by notice under Section 153A (1)(a) such return would then be deemed to have been filed within the time permitted under Section 139(1) for the benefit of Section 139(3) to be availed of by the assessee.
Comments:
This Judgement made it clear in case of Search and Seizure the other provisions of the Act will apply subject to modifications mentioned therein.
Finance Act, 17 has made an amendment to Sec 153A (1)(a) by providing that notice and assessment or reassessment under the said section can also be made for an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not beyond ten assessment years from the assessment year relevant to the previous year in which search is conducted or requisition is made subject to condition that AO has in possession of books or documents or evidence to reveal that income escaped assessment amounts to in aggregate of Rs. 50 Lakhs in one or more year or in aggregate of relevant assessment years.
