COMMISSIONER OF INCOME TAX Vs. GUNAVATHY DHARMASY

JUDGEMENT

(1.) PURSUANT to the direction given by this court by order dated July 23, 1996, on an application under Section 256(2) of the Income-tax Act, 1961 (in short the "Act"), the following questions have been referred for opinion of this court by the Income-tax Appellate Tribunal, Cochin Bench, at the instance of the Revenue :

(2.) WHETHER, on the facts and in the circumstances of the case, the question of carrying forward of the losses could be considered when it is raised, even though actual carrying forward gets postponed to the subsequent year, when it is specifically pleaded and is a controversy raised in the assessment year in question ?

(3.) THE legislative history of the provision shows that from April 1, 1985, under the Taxation Laws (Amendment) Act, 1984, return of loss must be submitted within the period prescribed by Section 139(1). For that purpose, the words "under Section 139" in the section which stood earlier, the words "within the time allowed under Sub-section (1) of Section 139 or within such further time as may be allowed by the Income-tax Officer" have been substituted with effect from April 1, 1985, Under Section 80, no loss was allowed to be carried forward and set off under Section 72(1) or Section 73(2) or Section 74(1) or Section 74A(3) unless such loss has been determined in pursuance of a return filed by the assessee under Section 139. As a result of this amendment, with effect from April 1, 1985, no such loss would be allowed to be carried forward or set off unless the return under Section 139(1) has been filed within the time allowed under Subsection (1) of Section 139 for filing the return or within such further time as may be allowed by the Income-tax Officer. THEre has been subsequent amendment by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, and the expression "in accordance with the provisions of Sub-section (3) of Section 139" has been substituted for the expression "within the time allowed under Sub-section (1) of Section 139 or within such further time as may be allowed by the Income-tax Officer". THE latter was the provision governing the field for the assessment year in question that is, 1985-86. Prior to the amendment (effective from April 1, 1952) of Section 22 of the 1922 Act, the assessee was entitled to carry forward a loss, whether in business or under the head "Capital gains", even though he had not submitted a return for the year in which the loss had been incurred. After the amendment, Section 22(2A) of the Act required the assessee to file a return if (a) the loss was incurred in business, and (b) the Income-tax Officer had not served him with a notice under Section 22(2) to file a return, in order to be entitled to carry forward such loss. Under the present Act, if no return is filed as required, the right to carry forward the loss would be lost.