TMI Blog1994 (7) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986-87 within the prescribed period under section 139(3), read with sections 80 and 157 will not be denied the benefit of carry-forward of Business Loss for the assessment year 1986-87. (Circular Reported in 162 ITR [1986] Statute page 21) (b) That the Learned Commissioner of Income-tax (Appeals) is not justified in ignoring the beneficial Circular issued by the Central Board of Direct Taxes for the benefit of the assessee as has been held in a number of judicial decisions." 2. In this case, the return was filed on 14-11-1986 and the total loss was determined by the Assessing Officer at Rs. 1,21,700. It is observed that there is no mention in the order that the loss so determined is carried forward, although the assessment was finalised under section 143(3). The matter was carried in appeal and before the CIT(A) it was submitted that undoubtedly it was a belated return but the assessee had prayed for extension of time for filing the return as per applications in Form No. 6, dated 27-6-1986 and 30-9-1986. It was also pleaded that the return of income was filed within the extended time prayed for. The CIT(A) dismissed the appeal on the ground that it is a non est return in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1986-87 under consideration. The learned counsel also drew our attention to the amendment in section 139(3) with effect from 1-4-1987 and pleaded that upto assessment year 1986-87, the provision of extension of time on the basis of an application was available to the assessee and, therefore, the assessee's return should have been treated as filed within the time applied for and extended to. The learned counsel for the assessee, while dealing with new provision of section 139(10)(d), relied on CBDT Circular No. 469, dated 23-9-1986 particularly on para 9.2 of the Circular wherein it is mentioned that the amendment is effective from 1-4-1987 and will accordingly apply to the assessment year 1987-88 and subsequent years. On the basis of Board's Circular, the representative of the assessee contended that the provisions of section 139(10)(d) are not applicable to the assessee's case as the assessment year which is under consideration is assessment year 1986-87. In addition to this, it was also pleaded that the Assessing Officer has not actually rejected the return of assessee as invalid under section 139(10), rather has computed and determined the loss, and therefore, section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, has superseded section 139(3) and section 80. According to the learned counsel for the assessee, provisions of section 139(3) and section 80 of the Income-tax Act are applicable to the present case and the carry forward of loss determined by the A.O. is allowable and that provisions of section 139(10) are not applicable to this case. 8. The issue before us is as to whether on the facts and circumstances of the case the provisions of section 139(10) are applicable as against the provisions of section 139(3) read with section 80 of the Act. To appreciate the rival contentions, it will be useful to reproduce below the relevant sections of the Act as they stood at relevant time: "Sub-section (3) of section 139 after amendment: If any person who has not been served with a notice under sub-section (2) has sustained a loss in any previous year under the head 'Profits and gains of business or profession' or under the head 'capital gains' and claims that the loss or any part thereof should be carried forward 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, he may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them with effect from 1-4-1986, primafacie it appears that provisions of these sections run counter to section 139(10). But it may be noticed that sub-section (10) of section 139 is with a non obstante clause and it has an overriding effect on the other provisions of the Act which include sub-section (3) of section 139 and section 80. Strictly speaking, therefore, there arises no controversy, as new sub-section (10) of section 139 provides that notwithstanding anything contained in other provisions of this Act a return of income below taxable limit shall be treated as non est with an exception in case of loss under clause (c) of provision to section 139(10) when return of loss has been furnished before the 31st day of July of the relevant assessment year. In this case as the return of loss was not filed before 31st July, the CIT(A) has treated the return as non est and there should not arise any problem in the strict sense of interpretation of law. In the case of Palakol Co-operative Sugars Ltd., the Andhra Pradesh High Court while dismissing the petition of assessee held that "the ITO did not grant any extension of time and the petitioner did not file the return within the time al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of assessee or against the assessee. Probably it was done so as the CIT(A) was of the opinion that section 139(10) is overriding provision superseding the provisions of section 139(3) and section 80. Here also we notice that CIT(A) has not considered the consequential effect of the decision of Form No. 6 filed for extension of time, while the Andhra Pradesh High Court has considered the same. There is also another angle to look at the question. In this case although the return was not filed before 31st July of the assessment year, two applications in Form No. 6 were filed on 27-6-1986 and 30-9-1986 respectively praying for the extension of time upto 31st December, 1986 and ultimately the return was filed on 14-11-1986, i.e., within the time applied for. In other words, in the terms of Calcutta High Court decision in the case of Janata Film Exchange (P.) Ltd., the assessee has filed return within the time extended by the ITO. In the case of Janata Film Exchange (P.) Ltd., the High Court held that when no decision on Form No. 6 is taken, presumption is that the ITO has granted extension of time and has allowed the assessee to file return within the extended time and ITO cannot den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 139(3), as it is filed within time applied for and presumed to have been extended. In terms of Andhra Pradesh High Court decision referred to above it should be treated as valid return. But according to the provisions of section 139(10) read with proviso (d) to the sub-section, this return of loss is not a valid return as it is not filed before the 31st July of the assessment year. As this section 139(10) is having overriding and retrospective effect, the apparent conflict and contradiction between section 139(3) and section 139(10) may inevitably result in injustice and hardships for the assessment year 1986-87 if the provisions of this section are not interpreted liberally. 16. In the case of Sirigeri Kanakappa Shetty Sons, Karnataka High Court has held that it is settled that CBDT's Circulars are binding on the assessing authorities and the extract of the Circular No. 469, dated 23rd September, 1986 at para 9.5 categorically says "further keeping in view the fact that the new sub-section (3) comes into force with effect from 1-4-1987, a return of loss filed for the assessment year 1986-87 or earlier years within the prescribed period as per the existing provisions will n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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