TMI Blog2007 (3) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... sment for assessment year 1996-97 determining the income at Rs. 2,29,121. The long-term capital loss was allowed to be carried forward. For assessment year 1997-98, the assessee filed return of income of Rs. 2,53,850 on 13-2-1998. In this return, the assessee has also disclosed long-term capital gain of Rs. 24,608. The said long-term capital gain was set off against the brought forward long-term capital loss of Rs. 2,41,759. The Assessing Officer while framing the assessment under section 143(3) on 26-3-1999 allowed the set off of long term capital loss against the long-term capital gain of Rs. 24,608. The balance capital loss of Rs. 2,17,151 was allowed to be carried forward. There is no information available to us for assessment year 1998-99. However, for assessment year 1999-2000, the assessee had filed the return declaring an income for Rs. 2,88,890 on 30-3-2000. The Assessing Officer has made a mention in the assessment order of assessee having claimed setoff of long-term capital loss of Rs. 2,17,151 against the long-term capital gain on sale of shares and the balance having been invested in construction of house property. Subsequently, the Assessing Officer realized that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31-7-2006]. Reliance was also placed on 'SMC' decision of the Chandigarh Bench of the Tribunal in the case of Smt. Rishwa Rani v. ITO [IT Appeal Nos. 99 to 101 (Chd.) of 2005 for assessment years 1997-98 to 1999-2000, order, dated 10-11-2005] to support the contention that no action under section 154 was permissible without amending the order for assessment year 1996-97. It was accordingly pleaded that the appeals of the assessee may be allowed by quashing the impugned orders passed under section 154 for assessment years 1997-98 and 1999-2000. 6. The learned D.R., on the other hand, contended that the mistake committed by the Assessing Officer for assessment years 1997-98 and 1999-2000 was a patent mistake committed in ignorance of the provisions of the Act. It was contended that the return of income for assessment year 1996-97 was undisputedly filed after the due date for filing the return under section 139(1). As per provisions of section 139(3), read with section 80 no loss under the head "Profits and gains of the business" or "Capital gains" was permissible to be set off in the subsequent assessment years if the loss had not been declared in the return filed within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 74 or sub-section (3) of section 74A. Section 80 of the Income- tax Act, 1961 is reproduced hereunder for the sake of ready reference:- "80. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return Wed [in accordance with the provisions of sub-section (3) of section 139], 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) [or sub-section (3)] of section 74 [or sub-section (3) of section 74A]." 10. Section 74 of the Income-tax Act, 1961 provides for carry forward and set off of losses under the head 'Capital gains'. Section 74 is reproduced hereunder: "74. [(1) Where in respect of any assessment year, the net result of the computation under the head 'Capital gains' is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and- (a) insofar as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head 'Capital gains' assessable for that assessment year in respect of any other capital asset; (b) insofar a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income under the head 'Profits and gains of business' provisions of section 139(3) are not attracted in this case, is bereft of any substance. The language of section 139(3) as well as section 80 is unambiguous. The provisions do not speak of a 'loss return' but a loss suffered under the head 'Profits and gains of business or profession' or under the head 'Capital gains'. In this case, the assessee had declared long-term capital loss in assessment year 1996-97. If the assessee was desirous of carrying forward the said loss to be set off against the long-term capital gains of subsequent year(s), than the return of income for that year was required to be filed within the time allowed under section 139(1). If the loss is declared under the head 'Profits and gains of the business' or under the head 'Capital gains' in a return filed after the expiry of time specified under section 139(1), the same would not be entitled to be carried forward and set-off in accordance with the relevant provisions of the Act. Therefore, it is evident from the provisions of the Act that the assessee in law, was not entitled to the carry forward and set-off of long-term capital loss suffered in assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer. In the present case, the determination of loss is not a matter of dispute. There is no mistake alleged in the computation of long-term capital loss in assessment year 1996-97. Had there been any mistake in the computation of long-term capital loss in assessment year 1996-97, the Assessing Officer undoubtedly could not modify the figure of loss in assessment year 1997-98 or in assessment year 1999-2000 either under section 143(3) or under section 154. So, however, the issue involved in the present appeal is somewhat different. The long-term capital loss has been determined in assessment year 1996-97 the quantum of which is not disturbed. We reiterate that the said loss determined in assessment year 1996-97 cannot be modified in assessment year 1997-98. So, however, the assessee had sought set-off of capital loss suffered in assessment year 1996-97 against the long-term capital gain in assessment year 1997-98 and in assessment year 1999-2000. Originally, the Assessing Officer while framing assessment under section 143(3) for assessment year 1997-98 as well as for assessment year 1999-2000 had allowed the set-off of the said loss against long-term capital gain. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 154. In the present case, the Assessing Officer had committed a mistake of law which was glaring and obvious. Therefore, the Assessing Officer, in our view was justified in rectifying the assessment orders for assessment years 1997-98 and 1999-2000 giving effect to provisions of section 74 read with section 80 and section 139(3). 14. The only issue that remains to be considered is as to whether there was any bar for the Assessing Officer to look into the provisions of sections 80, 74 and 139(3) as in assessment year 1996-97, the Assessing Officer had specifically mentioned in the assessment order that long-term capital loss of Rs. 2,41,759 is allowed to be carried forward. It is undisputed fact that the said order for assessment year 1996-97 has not been modified. This proposition of law is answered by the decision of the Supreme Court in the case of Manmohan Das. In this case, Their Lordships held as under:- "Whether the loss in any year may be carried forward to the following year and set off against the profits and gains of the subsequent year under section 24(2) has to be determined by the Income-tax Officer who deals with the assessment of the subsequent year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for set off to be admissible had to be notified by the Income-tax Officer under section 24(3) of the 1922 Act to the assessee by an order in writing. That not having been done, the claim was not admissible. Thereupon the assessee filed an appeal before the Appellate Tribunal and the latter came to the conclusion that the assessee was entitled to benefit of set-off of loss provided it satisfied that its capital loss was computed under the old Act. In its view, as the assessee had filed its return showing the loss and the Income-tax Officer neither computed the loss nor passed an adverse order, the Income-tax Officer was not entitled to take advantage of his own failure and reject the assessee's claim of carry forward and set-off of loss on the ground that loss had not been determined as required under section 24(3) of the Indian Income-tax Act, 1922. The Tribunal further found that the Income-tax Officer had clearly disallowed the assessee's claim of revenue loss by holding that it was a capital loss. It found that the Appellate Assistant Commissioner had no justification to hold that the claim of loss was not genuine while disposing of the appeal for the assessment year 1957-58 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of Manmohan Das as well as in the case of Beharilal Ramcharan Ltd. the said decision was inconsequential. In assessment year 1997-98 as well as in assessment year 1999-2000 the Assessing Officer had initially allowed the set-off of the said capital loss while making assessments under section 143(3). So, however, subsequently after realizing the mistake disallowed the set-off of loss in assessment year 1997-98 as well as in assessment year 1999-2000. As held by the Hon'ble Supreme Court in the case of Manmohan Das the decision of the Assessing Officer in assessment year 1996-97 was of no consequence. Before making the assessment for assessment year 1997-98, the Assessing Officer was required to decide as to whether the long-term capital loss claimed to be set off against the long-term capital gain was brought forward on the basis of the return filed in accordance with section 139(3) of the Income-tax Act, 1961. Similarly, in assessment year 1999-2000 the Assessing Officer was required to consider as to whether the long-term capital loss was declared in assessment year 1996-97 in accordance with provisions of section 139(3). The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X
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