TMI Blog2003 (1) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... section 139(3) and therefore by virtue of section 80 the assessee was not entitled to claim the benefit of carry forward and set off. In first appeal, the CIT(Appeals) held that the assessment having been completed with reference to section 115J resulting in a positive income at 30 per cent of the book profits of the assessee, the return filed by the assessee need to be deemed as a return declaring positive income and therefore there is no basis for the finding of the Assessing Officer to treat the return filed by the assessee as a loss return and invoke the provisions of section 80 thereto. The relevant observation of the CIT(Appeals) is reproduced below for better understanding of his reasoning: "The case of the appellant is that the return for the assessment year 1989-90 was filed under section 115J and hence the question of filing the loss return before 31-12-89 did not arise. Hence, it is claimed that the appellant was entitled to carry forward loss of Rs. 1,17,538 pertaining to the assessment year 1989-90. I agree with the contention of the appellant for the following reasons: sub-section (1) of section 115J provides that in the case of assessees to which section 115J appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in this section applies for this limited purpose only and it is established law that legal fiction cannot be extended beyond the purpose for which it was created. It is not in dispute that there was loss according to the return of income filed, and therefore the assessee ought to have filed the return of income within the time allowed under section 139(1) of the Act to have the benefit of carry forward of loss for the succeeding years. 1.3 The CIT(A) should have seen that carry forward of loss against the income of a subsequent year is a benefit to the assessee and as such it is incumbent upon the assessee to fulfil the statutory requirements to avail of the benefit. 1.4 It is submitted that the CIT(A) failed to appreciate the spirit of sections 80 139(3) and in the proper perspective." 5. Shri R. Venkataraman, the learned Departmental Representative appearing for the Revenue contended that the order of the Assessing Officer on this point has to be reinstated, in view of the decision of the Hon'ble Madras High Court in CIT v. Fab Exports (P.) Ltd. [2002] 258 ITR 56. Relying on the said judgment, the learned Departmental Representative submitted that section 115J of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 115J income determined for the impugned assessment year. 8. Shri V.D. Gopal, the learned counsel appearing for the assessee submitted that the contention of the Revenue regarding the consequence of the belated return is against the principles of interpretation relating to legal fiction. The learned counsel submitted that section 115J creates a fiction regarding the existence of income in particular cases, and because of the operation of the said section even loss returns filed by assessees in the normal course would become returns of positive income. The learned counsel submitted that in the return form itself the assessee has the duty to choose between either 30 per cent of the book profit or the adjusted income, whichever is higher, and the higher amount has to be offered as the income for assessment. When the fiction under section 115J creates such an obligation on the part of the assessee, the said fiction should be extended to its logical conclusion so that in all such cases the returns filed by the assessees need to be construed or deemed as returns of positive income. If those returns are not deemed as returns of positive income, the fiction created by section 115J w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143(1)(a) and the Assessing Officer was prohibited from making such adjustment, and allowed the appeal filed by the assessee. The learned counsel for the assessee relied on the above decision of the Tribunal and held that even if the recent decision of the Madras High Court in Fab Exports (P.) Ltd.'s case supports the argument of the revenue on the merit of the issue, it could not be made applicable in this case, as section 154 proceedings were initiated years back in 1993, at which time no such decision was available before the Assessing Officer and the issue was squarely debatable. 10. Shri Venkataraman, the learned Departmental Representative, on the other hand, relied on the decision of the Hon'ble Madhya Pradesh High Court in Nav Nirman (P.) Ltd. v. CIT [1988] 174 ITR 574 and contended that if the subsequent decision of the High Court is directly on the point in dispute, then rectification of the same is permissible under law. The learned Departmental Representative also relied on the decision of the Hon'ble Andhra Pradesh High Court in B.V.K. Seshavataram v. CIT [1994] 210 ITR 633 where the Court has held that a subsequent decision can validly form the basis for rectif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. But on the alternate ground raised by the Revenue in the appeal filed before us, we have to state that in spite of our findings in the above paragraphs, we will have to make a retreat and accept the contentions of the Revenue. This is because of the recent judgment pronounced by the jurisdictional High Court in the case of Fab Exports (P.) Ltd. wherein the Court has held that the unabsorbed business loss of an earlier assessment year could not be set off against the deemed income computed under section 115J of the impugned assessment year. The Court has held that such unabsorbed business loss need to be set off against the profit computed without taking into consideration the provisions of section 115J. Therefore, the law on the subject has been declared by the Hon'ble jurisdictional High Court. When a proceeding is pending before the Tribunal for disposal, the Tribunal is bound to take note of the latest decisions pronounced by the higher Courts on the subject. It might not be possible sometimes, as argued by the learned counsel for the assessee that a rectification could not be initiated in the light of a recent judgment, but in the present case the matter is resting with t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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