COMMISSIONER OF INCOME TAX Vs. SRINTVASA BUILDERS

JUDGEMENT

(1.) THE Revenue has preferred this appeal under section 260A of the Income -tax Act, 1961 (for short "the Act"), challenging the order dated April 13, 2007, made in I.T.A. No. 314/Bang/2005 passed by the Income -tax Appellate Tribunal, Bangalore Bench "A" (for short "the Tribunal") for the assessment year 1997 -98 whereby the Tribunal allowed the appeal filed by the assessee and set aside the order passed by the Commissioner of Income -tax (Appeals) -VI, Bangalore (for short "the first appellate authority") and quashed the section 154 proceeding initiated by the assessing authority. The respondent -assessee is a firm and they filed return of income for the assessment year 1997 -98 on January 6, 1998, declaring income of Rs. 5,29,270. The assessment was concluded under section 143(3) of the Act and assessed the business loss of Rs. 74,84,234. The said business loss was allowed to be carried forward as per the order dated June 6, 2001. Subsequently, the Assessing Officer issued a notice under section 154 of the Act to rectify the order dated June 6, 2001, withdrawing the benefit of carry forward of business loss stating that the return filed by the assessee was belated. As per section 80 of the Act, the benefit of carry forward of business loss is allowed only if the said loss has been determined in pursuance of the return filed within the prescribed time limit under section 139(1) of the Act. The respondent -assessee filed objections to the notice issued under section 154 of the Act. The assessing authority overruling the said objections by his order dated October 10, 2003, held that the assessee is not entitled for carry forward of the loss since the returns has not been filed within the prescribed time limit under section 139(1) of the Act. Being aggrieved by the order passed by the assessing authority, the respondent -assessee preferred an appeal before the first appellate authority. The appellate authority, after considering the matter in detail, dismissed the appeal filed by the assessee. Being aggrieved by the order passed by the first appellate authority, the assessee preferred an appeal before the Tribunal.

(2.) THE Appellate Tribunal, after considering the matter in detail, found that the assessee is entitled for benefit of carry forward of the business loss and set aside the order passed by the assessing authority as well as the appellate authority. Being aggrieved by the order passed by the Tribunal, the Revenue has preferred this appeal.

(3.) SRI K.V. Aravind, learned counsel appearing for the appellants, contended that in view of the amendment of section 80 by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, no loss shall be allowed to carry forward and set off, for and from the assessment year 1989 -90. Only such loss as determined in pursuance of return filed "within the time allowed" under section 139(1) of the Act. Therefore, he contended that the Assessing Officer was justified in invoking section 154 and withdrawing the benefit of carry forward of business loss. In the instant case, the assessee has not filed the return showing the business loss within the prescribed time limit. Hence, he is not entitled for carry forward of business loss. The reasoning given by the Tribunal is contrary to law and sought for allowing the appeal.