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M.M. Paul Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Cochin
Decided On
Judge
Reported in(1984)8ITD879(Coch.)
AppellantM.M. Paul
Respondentincome-tax Officer
Excerpt:
.....a fishing boat. the claim of the assessee for carrying forward the depreciation/loss from the earlier assessment year of 1976-77 was rejected by the ito.3. the aac found that for the earlier assessment year of 1976-77, the assessee had on 7-7-1976 filed a return of loss and that the return was within the time prescribed. the fact was not disputed before us by the learned departmental representative. but the return seems to have been misplaced. the ito did not frame the assessment for the assessment year 1976-77 and the assessment has become barred by limitation. although the assessee was not at fault for the situation and although the aac had all the sympathy for the assessee, he found that the claim of the assessee to carry forward the loss and to set off the same cannot be allowed.....
Judgment:
1. This appeal by the assessee relates to the assessment year 1977-78, for which the accounting period ended on 31-3-1977.

2. The assessee is owning a fishing boat. The claim of the assessee for carrying forward the depreciation/loss from the earlier assessment year of 1976-77 was rejected by the ITO.3. The AAC found that for the earlier assessment year of 1976-77, the assessee had on 7-7-1976 filed a return of loss and that the return was within the time prescribed. The fact was not disputed before us by the learned departmental representative. But the return seems to have been misplaced. The ITO did not frame the assessment for the assessment year 1976-77 and the assessment has become barred by limitation. Although the assessee was not at fault for the situation and although the AAC had all the sympathy for the assessee, he found that the claim of the assessee to carry forward the loss and to set off the same cannot be allowed in view of Section 80 of the Income-tax Act, 1961 ('the Act').

Aggrieved by the same, the assessee has now come up in appeal.

4. The grounds taken by the assessee are to the following effect. The assessee cannot be penalised and denied the benefits due to him under Sections 32(2), 72 and 73 of the Act for the dereliction by the ITO of his statutory duty to complete the assessment for the earlier assessment year. Section 80 has no application at all to the facts of the case and Section 153(1)(a)(iii) of the Act is no bar for the determination of the loss/unab-sorbed depreciation allowance of the earlier year for the purpose of carry forward and set off. In any case Section 153 cannot operate to bar the statutory right of an assessee to set off the loss/unabsorbed depreciation allowance.

5. The first contention advanced by the learned counsel for the assessee was that in any case Section 80 applies only to the carry forward of the loss, that it does not apply to the carry forward of the unabsorbed depreciation and that the claim of the assessee in the present case is to carry forward the unabsorbed depreciation of the earlier assessment year. Section 80 provides that notwithstanding anything contained in Chapter VI of the Act, 'no loss which has not been determined in pursuance of return filed under Section 139 of the Act shall be carried forward and set off under Sub-section (1) of Section 72 or Sub-section (2) of Section 73 or Sub-section (1) of Section 74 or Sub-section (3) of Section 74A of the Act'. The carry forward of depreciation is governed by Sub-section (2) of Section 32.

It is, therefore, clear that Section 80 can in any case apply only to the carry forward of the loss as per the provisions set out in the section and that it cannot apply to the carry forward of depreciation under Section 32(2). Section 80 cannot, therefore, stand in the way of the claim of the assessee for carry forward and set off of the unabsorbed depreciation.

6. Even if the claim of the assessee is to carry forward and set off the loss, the same cannot, in our view, be defeated by the failure on the part of the ITO to frame the assessment for the earlier assessment year. It will be highly inequitable to defeat the rights conferred on the assessee to have the loss carried forward for no fault of his. It is, therefore, necessary to give a reasonable interpretation to the provisions of Section 80. The purpose of Section 80, in our view, is not to debar the carrying forward of a loss which has not been determined. The purpose of the section can only be to debar the carrying forward of a loss which has not been determined in pursuance of a return filed under Section 139. If so, the claim of the assessee for carry forward will be defeated only if he had not filed a return under Section 139. In the present case as already stated, the assessee had filed a return under Section 139 within the time prescribed. The Supreme Court in the case of CIT v. Manmohan Das [1966] 59 ITR 699 held that whether the loss in any year may be carried forward to the following year and set off against the profits of a subsequent year under Section 24(2) of the Indian Income-tax Act, 1922 ('the 1922 Act'), has to be determined by the ITO who deals with the assessment of the subsequent year and that the decision recorded by the ITO who computes the loss in the earlier year that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. It is, therefore, clear that the claim for set off of the loss of the earlier year is entirely within the jurisdiction of the ITO who deals with the assessment for the subsequent year. The Supreme Court has held that the right of the assessee will not be affected even by the finding recorded by the ITO with regard to the earlier assessment year that no set off can be allowed. In our view, an assessee whose assessment for the earlier assessment year was not completed by the ITO cannot be in a worse position. If the loss has not been computed in the earlier assessment year and if the same is not likely to be computed in the earlier assessment year as the assessment is barred by limitation, it should be open to the ITO doing the assessment for the subsequent year to determine the loss for the earlier assessment year and to allow the set off. This of course will be subject to the condition that the loss for the earlier assessment year can be determined only if the assessee had filed the return under Section 139. As, in the present case, it is admitted that the assessee had filed a return under Section 139, we would direct the ITO to determine the loss on the basis of the return and to allow set off of the same in the assessment year under appeal according to the provisions of the Act.


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