2000 PLP 929 (PTD)

A. K. MATHUR, C. J.

This is a reference under section 256(1) of the Income Tax Act, 1961, (for short "the Act"), at the instance of the Revenue and the following two questions have been referred for answer by this Court: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the order passed by the Commissioner of Income-tax under section 263 of the Act restoring the order of Assessing Officer? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law to hold that the assessee was entitled to carry forward of losses to later years in spite of the amendment made to section 80 of the Income-tax Act with effect from the assessment year 1985-86?" The brief facts giving rise to this reference are these: The assessee, in its return, declared a loss of Rs.8,45,

397. This return was not filed within the time allowed under section 139(1) of the Act. It was due to be filed on June 30, 1985, but was filed on August 29, 1986. The loss was computed on assessment by the Assessing Officer at Rs.1,93,

390. The Assessing officer did not make any direction regarding its carry forward to later years. The Commissioner, after examining the records, invoked his jurisdiction under section 263 of the Act and after providing an opportunity to the assessee of being heard, set aside the assessment for the reason that the assessee was not entitled to carry forward the loses, as the return was filed beyond the time limit prescribed under section 139(1) and no notice under section 139(2) was served. The Commissioner held that in view of the provisions of section 80 of the Act, such carry forward of losses was not permissible under law. On appeal, the Tribunal cancelled the order under section 263 of the Act and restored the order of the Assessing Officer for the reason that the decision of the Supreme Court in Kulu Valley Transport Co. (Pvt.) Ltd. (1970) 77 ITR 518 was good law till the assessment year 1988-89 and the Commissioner of Income-tax erred in setting aside the order of the Assessing Officer on the ground that it was erroneous and prejudicial to the interests of the Revenue. The Tribunal, after considering the matter, came to the conclusion that in fact the Supreme Court in the case the CIT v. Kulu Valley Transport Co. (Pvt.) Ltd. (1970) 77 ITR 518, with reference to the old section 24(2) of the Indian Income-tax Act, 1922, read with section 22, has held that though the return was not filed within the time specified and notice was not given and time had not been extended by the Assessing Officer, losses had to be determined and carried forward. Therefore, this judgment was good law till the section was amended by the Amending Act of 1987-88 with affect from April 1, 1989. In the present case, in fact, in section 139(4), as it stood at the relevant time, the period prescribed was more than two years from the end of the assessment year in cases where assessment was not done. Now admittedly in this case the return was filed in 1986 before the assessment for the relevant year was made on November 11, 1987. Therefore, the Tribunal held that the view taken by the Commissioner is not correct as the loss of the assessee had to be carried forward according to the unamended provisions of section 139(4) as well as section 80, as they stood prior to the amendment of 1987 which came into effect from April 1, 1989. We, therefore, answer both the questions in favour of the assessee and against the Revenue. M.B.A./3261/FC Reference answered.