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S.K.V Selvaraj v. Commissioner Of Income-Tax
Structured Summary of the Opinion (N.V. Balasubramanian, J.)
Factual and Procedural Background
The assessee sought to carry forward a loss from the assessment year (AY) 1978-79 and adjust it against income in AY 1979-80. For AY 1979-80 the assessee filed a return on 31 March 1982 claiming adjustment of carry-forward loss of Rs. 75,711. The Income-tax Officer rejected the claim on the ground that no valid assessment had been completed for AY 1978-79 because the return for AY 1978-79 itself had been filed belatedly (on 31 March 1982).
The Income-tax Officer's order-sheet contained an entry noting that the belated return dated 31 March 1982 admitting loss was received and that the return may be lodged. The ITO concluded that the time limit for completion of assessment under section 153(1) had expired and, therefore, the assessee's claim for carry forward of the AY 1978-79 loss could not be considered.
The assessee appealed to the Commissioner of Income-tax (Appeals), who agreed with the ITO that because the return was filed after the statutory period under section 153(1), the ITO was precluded from proceeding under section 143 and thus no loss had been determined for carry-forward purposes. The assessee further appealed to the Appellate Tribunal, which concurred with the Commissioner and dismissed the appeal. The order of the Appellate Tribunal was referred to this court on two questions of law posed by the assessee.
Legal Issues Presented
- Whether the Appellate Tribunal was right in law and had sufficient material to hold that the applicant would not be entitled to claim the carry forward and set off of the loss as per the return filed for the assessment year 1978-79?
- Whether, on the facts and in the circumstances, the Tribunal was right in holding that the entry made by the Income-tax Officer in the order sheet for the assessment year 1978-79 would not amount to a computation and determination of the loss as per the return filed in view of the decision of the Supreme Court in Esthuri Aswathiah v. Income Tax Officer, Mysore State, [1961] 41 ITR 539?
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Esthuri Aswathiah v. Income Tax Officer, Mysore State, [1961] 41 ITR 539 | Referenced in relation to whether an entry in the Income-tax Officer's order sheet can amount to a computation/determination of loss. | The court concluded, on the facts of this case, that the ITO had merely recorded that the belated return was lodged and had not determined the loss as contemplated under section 143 of the Income-tax Act, 1961; thus the order-sheet entry did not amount to a determination permitting carry-forward. |
| Commissioner Of Income-Tax v. Dalmia Cement (Bharat) Ltd., [1995] 216 ITR 79 (supreme court) | The Supreme Court considered analogous questions under the Indian Income-tax Act, 1922 and explained that the controversy under the 1922 Act would not arise under the Income-tax Act, 1961; under the 1961 Act the Income-tax Officer under section 143 must determine not only income but also loss, and an assessee can question the amount of loss by appeal against the assessment order. | The court cited the Supreme Court's observations to explain the legal framework under the 1961 Act (that determination of loss requires action under section 143 and is challengeable by appeal). The opinion also records that an earlier decision of this court in 1976 (104 ITR 337) was reversed by the Supreme Court in the 1995 Dalmia Cement decision. |
Court's Reasoning and Analysis
The court's analysis proceeded in the following steps, based solely on the material before it:
- Admissibility of the return for AY 1978-79: The court noted that the return for AY 1978-79 was filed belatedly on 31 March 1982 and therefore fell beyond the time limit for completion of assessment prescribed by section 153(1) of the Income-tax Act, 1961 (an order of assessment must be made within two years from the end of the assessment year).
- Legal consequence of filing beyond the time limit: Because the return was filed after the statutory period under section 153(1), the court held that the return could not be regarded as a valid return for the purposes of compelling the Income-tax Officer to determine loss under section 143(3). The court treated the belated return as not invoking the statutory machinery that would lead to the determination of loss under section 143.
- Nature of the ITO's order-sheet entry: The court examined the ITO's remark on the order sheet ("...return dated March 31, 1982, admitting loss...filed belatedly...return may be lodged.") and concluded that this was merely a record that the return was lodged, and not an exercise of the statutory function of determination of loss under section 143.
- Consequence for carry-forward: Since there was no determination of loss under section 143 as contemplated by the Act, the court concluded that the assessee could not claim the benefit of carrying forward and setting off that loss against income in AY 1979-80.
- Precedential context and finality: The court referred to the Supreme Court's decision in Commissioner of Income-Tax v. Dalmia Cement (Bharat) Ltd. to explain the legal position under the 1961 Act (that losses are to be determined under section 143 and are challengeable by appeal). The court noted that the assessee had not appealed the order lodging the return for AY 1978-79 and that that order had therefore become final; on that basis the assessee could not claim the loss for carry-forward in subsequent assessment proceedings.
Holding and Implications
Holding:
Both questions of law referred to this court are answered in the affirmative and against the assessee; the order of the Appellate Tribunal is upheld.
Implications:
- The direct effect is that the assessee's claim to carry forward and set off the loss of AY 1978-79 against income of AY 1979-80 is disallowed because the return for AY 1978-79 was filed beyond the statutory period under section 153(1) and no determination of loss was made under section 143.
- The court concluded that the ITO's order-sheet entry simply recorded lodging of the belated return and did not constitute the statutory determination necessary to enable carry-forward. Therefore, on the facts of this case, carry-forward is not permissible.
- The opinion does not purport to lay down a broader new precedent beyond applying the statutory provisions and the cited Supreme Court authority; the decision upholds the Appellate Tribunal's order and no costs were ordered ("there will be no order as to costs").
All content in this summary is drawn exclusively from the provided opinion and does not add or infer information beyond that text.
N.V Balasubramanian, J.:— The questions of law relating to assessment of income for the assessment year 1979-80 for the opinion of this court at the instance of the assessee are as follows:
“1. Whether the Appellate Tribunal was right in law and had sufficient material to hold that the applicant would not be entitled to claim the carry forward and set off of the loss as per the return filed for the assessment year 1978-79?
2. Whether, on the facts and in the circumstances, the Tribunal was right in holding that the entry made by the Income-tax Officer in the order sheet for the assessment year 1978-79 would not amount to a computation and determination of the loss as per the return filed in view of the decision of the Supreme Court in Esthuri Aswathiah v. Income Tax Officer, Mysore State, [1961] 41 ITR 539?”
2. The assessee filed its return of income for the assessment year 1979-80 on March 31, 1982, claiming adjustment of the loss for the assessment year 1978-79. The Income-tax Officer rejected the claim of the assessee holding that such an assessment was not made for that year and the assessee's claim for adjustment of carry forward of loss of Rs. 75,711 cannot be allowed.
3. It is seen that the return for the assessment year 1978-79 was filed belatedly by the assessee on March 31, 1982, and the Income-tax Officer, mentioned in the order sheet as follows:
“Please see volume, return dated March 31, 1982, admitting loss of Rs. 71,831 received and filed. The assessee has filed the return belatedly. Hence, the return may be lodged.”
4. On the basis of the above remarks, the Income-tax Officer, came to the conclusion that the time limit for completion of the assessment for the assessment year 1978-79 would expire within two years from the end of the assessment year and since the assessee filed the return beyond the expiry date for completion of assessment, the assessee's claim for adjustment of loss pf the assessment year 1978-79 could not be considered. Aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), as his claim for adjustment of carry forward of loss of Rs. 75,711 was not allowed. The Commissioner of Income-tax (Appeals) also has held that as the return for the assessment year 1978-79 filed by the assessee was beyond the statutory period of assessment, the Income-tax Officer was precluded from proceeding with the assessment under section 143 of the Income-tax Act, 1961 (in short “the Act”). According to him, since no loss was determined in pursuance of the return filed under section 139 of the Act, the loss could not be carried forward.
5. The assessee took up the matter on appeal to the Appellate Tribunal. The Appellate Tribunal concurred with the views of the Commissioner of Income-tax (Appeals) and dismissed the appeal preferred by the assessee. It is the order of the Appellate Tribunal that is the subject-matter of reference before us and the two questions of law set out earlier have been referred to us for our consideration.
6. We hold that the view of the Tribunal that the loss for the assessment year 1978-79 could not be carried forward is correct in law. Admittedly, the return for the assessment year 1978-79 was filed by the assessee only on March 31, 1982. Under section 153 of the Act, inter alia, an order of’assess-ment could be made within two years from the end of the assessment year in which the income becomes assessable and the assessee filed its return for the assessment year 1978-79 beyond the time limit prescribed under section 153(1) of the Act and the same cannot be regarded as a valid return. Since the return filed by the* assessee was not a valid return, it is not incumbent on the part of the Income-tax Officer to determine the loss of the assessee under section 143(3) of the Act. It follows that when there was no determination of loss as contemplated under the Act, it is not open to the assessee to claim that the loss should be carried forward and adjusted against the income of the next year. We hold that the Income-tax Officer has merely recorded that the return for the assessee for the assessment year 1978-79 was lodged and he has not chosen to determine the loss as provided under section 143 of the Act. Therefore, it is neither permissible nor possible for the assessee to claim that the loss should be carried forward to be set off against the income of the subsequent assessment year.
7. The apex court in Commissioner Of Income-Tax v. Dalmia Cement (Bharat) Ltd., [1995] 216 ITR 79, has considered the question arising under the provisions of the Indian Income-tax Act, 1922 and after noticing the relevant provisions of law that were prevalent, the Supreme Court held that the controversy, which arose under the 1922 Act, would not arise under the Income-tax Act, 1961, and that the Income-tax Officer under section 143 of the Act has to determine not only the profits/income taxable, but also to determine the loss if there is one. Under the Income-tax Act, 1961, the assessee is entitled to, and ought to, question the amount of loss determined in an appeal preferred against the assessment order itself. The Supreme Court has further observed that the assessee need not wait till he receives the intimation under section 157 of the Act and the assessee could have very well preferred an appeal against the assessment. It is pertinent to note that the decision of this court in Commissioner Of Income-Tax v. Dalmia Cement (Bharat) Ltd., [1976] 104 ITR 337, was reversed by the Supreme Court in Commissioner Of Income-Tax v. Dalmia Cement (Bharat) Ltd., [1995] 216 ITR 79.
8. In the instant case, admittedly, the assessee had not preferred an appeal against the order lodging the return for the assessment year 1978-79 and that order has become final. The assessee, therefore, cannot claim that it is entitled to claim that loss should be carried and adjusted against the income of the assessment year 1979-80 in the assessment proceedings for 1979-80. We, therefore, hold that the order of the Appellate Tribunal does not suffer from any infirmity, and we answer both the questions of law referred to us in the affirmative and against the assessee. However, there will be no order as to costs.
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