Asstt. Cit vs Mahesh J. Patel
2003 Latest Caselaw 717 Bom

ORDER

G.C. Gupta, J.M.

These appeals by the revenue for the assessment years 1994-95 and 1995-96 are directed against the order of the Commissioner (Appeals). Since identical issues are involved in both the appeals, these are being disposed of with this common order.

2. The only issue in these appeals is regarding the allowability of set off of carry forward losses to the extent of speculation profit during the relevant year. The learned counsel for the assessee submitted before us that the assessee has filed the return of income for the earlier assessment year 1993-94 on 19-8-1994, declaring a taxable positive income therein at Rs. 59,55,970. This return was late, i.e., after the time-limit specified under section 139(l) of the Act. He argued that the assessing officer in the assessment order for the assessment year 1993-94 treated a sum of Rs. 7,03,400 as speculation losses and added the same to the total income of the assessee. During the assessment years under appeal the assessing officer has rejected the claim of the assessee for set off of carry forward losses to the extent of speculation profit during the relevant period on the plea that as per provisions of section 80 read with section 139(3) of the Act, the loss is not allowed to be set off since the return for the assessment year 1993-94 was filed late by the assessee. The learned counsel argued that the assessee has returned a positive income in the assessment year 1993-94 and, therefore, the assessee could not be expected to do impossible under the law by foreseeing the action of the assessing officer in holding a sum of Rs. 7,03,400 as speculation loss as-against business loss returned by the assessee in the assessment year 1993-94. The learned departmental Representative has argued that in accordance with the provisions of section 80 read with section 139(3), the prerequisite for carry forward of losses is that the return shall be filed in time and this condition was not fulfilled by the assessee. He argued that the observation of the assessing officer in the assessment order for the assessment year 1993-94 that the assessee is entitled to the carry forward of this loss is not decisive of the issue.

2. The only issue in these appeals is regarding the allowability of set off of carry forward losses to the extent of speculation profit during the relevant year. The learned counsel for the assessee submitted before us that the assessee has filed the return of income for the earlier assessment year 1993-94 on 19-8-1994, declaring a taxable positive income therein at Rs. 59,55,970. This return was late, i.e., after the time-limit specified under section 139(l) of the Act. He argued that the assessing officer in the assessment order for the assessment year 1993-94 treated a sum of Rs. 7,03,400 as speculation losses and added the same to the total income of the assessee. During the assessment years under appeal the assessing officer has rejected the claim of the assessee for set off of carry forward losses to the extent of speculation profit during the relevant period on the plea that as per provisions of section 80 read with section 139(3) of the Act, the loss is not allowed to be set off since the return for the assessment year 1993-94 was filed late by the assessee. The learned counsel argued that the assessee has returned a positive income in the assessment year 1993-94 and, therefore, the assessee could not be expected to do impossible under the law by foreseeing the action of the assessing officer in holding a sum of Rs. 7,03,400 as speculation loss as-against business loss returned by the assessee in the assessment year 1993-94. The learned departmental Representative has argued that in accordance with the provisions of section 80 read with section 139(3), the prerequisite for carry forward of losses is that the return shall be filed in time and this condition was not fulfilled by the assessee. He argued that the observation of the assessing officer in the assessment order for the assessment year 1993-94 that the assessee is entitled to the carry forward of this loss is not decisive of the issue.

3. We have considered the rival submissions carefully. We find that the prerequisite for the application of section 139(3) read with section 80 is that the return which is filed late by the assessee shall be return of loss. The provision of section 139(3) refers to return of loss and has no reference to assessment as "loss" of some amount by the assessing officer. In this case the assessee has filed return declaring a positive income of Rs. 59,55,970 and no amount of loss was declared in the return filed by the assessee for the assessment year 1993-94. In view of the fact that the assessee has not filed a return of loss, the provision of section 139(3) cannot be applied to the facts of the case. The prerequisite for application of provision of section 139(3) is a "return of loss". Since in this case, no return declaring loss was filed by the assessee for the assessment year 1993-94, the provisions of section 80 read with section 139(3) shall not be applicable to the facts of the case. Merely because the assessing officer while framing assessment for the assessment year 1993-94, has treated some item of loss as speculation loss, does not make the return of income filed by the assessee showing a positive income as a "return of loss". In this view of the matter we hold that there is no mistake in the order of the Commissioner (Appeals) in holding that there is no justification for refusing to allow benefit of carry forward loss which is to be set off against the speculation profit for the assessment years under reference and accordingly the ground of appeal of the revenue being without any merit is dismissed.

3. We have considered the rival submissions carefully. We find that the prerequisite for the application of section 139(3) read with section 80 is that the return which is filed late by the assessee shall be return of loss. The provision of section 139(3) refers to return of loss and has no reference to assessment as "loss" of some amount by the assessing officer. In this case the assessee has filed return declaring a positive income of Rs. 59,55,970 and no amount of loss was declared in the return filed by the assessee for the assessment year 1993-94. In view of the fact that the assessee has not filed a return of loss, the provision of section 139(3) cannot be applied to the facts of the case. The prerequisite for application of provision of section 139(3) is a "return of loss". Since in this case, no return declaring loss was filed by the assessee for the assessment year 1993-94, the provisions of section 80 read with section 139(3) shall not be applicable to the facts of the case. Merely because the assessing officer while framing assessment for the assessment year 1993-94, has treated some item of loss as speculation loss, does not make the return of income filed by the assessee showing a positive income as a "return of loss". In this view of the matter we hold that there is no mistake in the order of the Commissioner (Appeals) in holding that there is no justification for refusing to allow benefit of carry forward loss which is to be set off against the speculation profit for the assessment years under reference and accordingly the ground of appeal of the revenue being without any merit is dismissed.

4. In the result, the appeals of the revenue are dismissed.

4. In the result, the appeals of the revenue are dismissed.