ORDER
SATISH CHANDRA, A.M. :
The assessee’s appeal arises out of the order dt. 10th August, 1990, of the CIT(A) and pertains to the asst. yr. 1985-86.
2. The assessee has taken six grounds of appeals. During the course of bearing before us, grounds Nos. 2 to 6 have not been pressed. These grounds are, therefore, dismissed as not pressed. The remaining ground No. 1 is taken up for adjudication.
3. Ground No. 1 relates to denial of claim of carry forward and set off of business loss.
4. The assessee is a limited company and owns and runs a cotton textile mill. For the asst. yr. 1985-86, the relevant previous year ended on 31st December, 1984. The return for the asst. yr. 1985-86 was due on 30th June, 1985. It was, however, filed on 26th December, 1985 declaring loss of Rs. 2,96,36,730. The Assessing Officer computed the loss at Rs. 1,25,35,993, vide his order dt. 27th October, 1987. The Assessing Officer, however, recorded a finding that the loss so computed will not be allowed to be carried forward for the reason that the assessee did not file the return before 30th September, 1985, the date upto which time to file the return was allowed by him. It may be stated that the assessee had applied in Form No. 6 on 28th June, 1985, seeking time to file the return upto 31st August, 1985. On 31st August, 1985, another application in Form No. 6 seeking time to file the return upto 30th September, 1985 was filed and the Assessing Officer had allowed time to file the return upto 30th September, 1985. The assessee again applied in Form No. 6 on 30th October, 1985 seeking further extension upto 30th November, 1985. Vide his letter dt. 22nd November, 1985, the Assessing Officer informed the assessee that the extension requested by it cannot be granted. Again on 26th December, 1985, the assessee filed Form No. 6 requesting extension of time upto 31st December, 1985 and filed the return on 26th December, 1985, i.e., within the time sought for, vide application dt. 26th December, 1985.
5. The assessee filed an appeal against the Assessing Officer’s decision to allow carry forward of the determined loss before the CIT(A). The assessee did not succeed before the CIT(A), who upheld the Assessing Officer’s action with the following observations :
“I have considered the facts of the case and the submissions of the assessee. There is no denying the fact that assessee has not filed the return within the time available under s. 139(1) and as extended further by the Assessing Officer. Thus, as per the provisions of s. 80 , the assessee is not entitled to carry forward of loss. In this respect it is noted that assessee’s reason for asking further extension of time beyond 30th September, 1985, are not valid, because after the finalisation of accounts, even the annual general meeting had been held on 22nd August, 1985, sufficient time was available to the assessee to file the return by 30th September, 1985. The assessee is represented by M/s M. H. Joshi & Co., CAs, since many years and after the accounts had been finalised and general body meeting had been held on 29th August, 1985, there is apparently no valid reason as to why the assessee/assessee’s representative could not file the return within the time allowed.
No appeal lies against Assessing Officer’s action in refusing the extension of time asked for. Therefore, whether there was reasonable cause or not for asking extension of time is not material while deciding the application of provisions of s. 80 even though the assessee-company further committed the default by not asking extension of time before the expiry of time earlier allowed upto 30th September, 1985, and thus there was no application for extension of time for the month of October, 1985. Even as per its application the time had been asked upto 30th November, but the assessee did not file the return within the said period.”
Aggrieved thereby, the assessee is in further appeal before the Tribunal.
6. Shri T. N. Unni, the learned counsel for the assessee, argued that under s. 80 of the IT Act, 1961 (for short ‘the Act’), the Assessing Officer has no authority to declare that loss determined by him will not be allowed to be carried forward. In support of this proposition, he placed reliance on the decision of the Supreme Court in the case of CIT vs. Manmohandas (1966) 59 ITR 699 (SC), wherein their Lordships held that :
“It is for the ITO dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the ITO, who computes the loss in the previous year under s. 24(3) that the loss cannot be set off against the income of the subsequent year is not binding on the assessee.”
The learned counsel for the assessee also placed reliance on the Tribunal, Cochin Bench decision in the case of Ajith Kumar vs. Dy. CIT (1993) 44 ITD 687 (Coch).
7. The learned counsel for the assessee further submitted that the assessee was prevented by reasonable cause in late submission of the return. He submitted that the company was in acute financial distress during the years 1984 and 1985. The workers had also started agitation. Many of the officers and staff had also left the service of the company, as their salary fell into arrears and there was atmosphere of uncertainty. The Chief Accountant and Company Secretary, who were head of accounts Department and some senior accountants had also left the service and the accounts Department was in a state of paralysis. Under these circumstances, it was not possible for the company to file the return by the due date. The learned counsel submitted that though the accounts were finalised in July, 1985, the chartered accountant made numerous queries and asked for several details from the company for the purpose of preparing the return, but such details could not be furnished to the chartered accountant due to paucity of staff. The assessee had, therefore, sought extension from time to time and filed the return within the time upto which the extension was sought, vide application dt. 26th December, 1985. The learned counsel argued that the assessee is entitled to file application seeking extension of the date for furnishing the return even after the expiry of time allowed by the Assessing Officer and in support of this proposition, he relied on Calcutta High Court’s decision in the case of Sunderdas Thacker Say & Bros. vs. CIT (1982) 26 CTR (Cal) 290 : (1982) 137 ITR 646 (Cal) and the decision of Gujarat High Court in the case of CIT vs. Gordhan Bhai Jethabhai (1982) 31 CTR (Guj) 244 : (1983) 142 ITR 84 (Guj). Learned Counsel further submitted that the tax audit report was also delayed and in response to the query made by the Assessing Officer, the assessee had made a written submission, vide letter dt. 12th October, 1987, explaining the reason for delay a copy of which appears at pages 4-7 of the paper book. According to the learned counsel, it was on consideration of the reasonable cause for delay in filing the return that the Assessing Officer did not initiate penalty proceedings under s. 271(1)(a) of the Act. The learned Counsel concluded his arguments by urging that there was reasonable cause for the delay in filing the return and the Assessing Officer ought to have considered the assessee’s application dt. 30th October, 1985, and 26th December, 1985, seeking extension upto 30th November, 1985 and 31st December, 1985 judiciously which has not been done. He pleaded that in the facts and circumstances of the case, the benefit of carry forward of the determined business loss could not be denied. Opposing the contention of the learned counsel for the assessee, the learned Departmental Representative supported the orders of the Revenue authorities and submitted that the application for extension of time which is filed beyond time cannot be considered by the Assessing Officer. In support of this proposition, reliance was placed on the decision of Patna High Court in the case of CIT vs. Jugsalai Electric Supply Co. (1987) 63 CTR (Pat) 368 : (1987) 165 ITR 740 (Pat). The learned Departmental Representative further argued that the penalty proceedings under s. 271(1)(a) were not initiated, as it was a case of loss and as such there was no assessed tax which form the basis of levy of penalty for late submission of return.
8. We have considered the rival submissions. It is not in dispute that the Assessing Officer had quantified the loss of the year of account in the order of assessment. He has, however, recorded a finding that the loss computed will not be allowed to be carried forward. This finding is based on the reason that the return of loss was not filed within the extended time allowed to the assessee for filing the return. The Assessing Officer had allowed time upto 30th September, 1985. The return was, however, not filed by that time.
9. It is an admitted position that the accounts had been finalised in July, 1985, the audit had been completed on 20th July, 1985 and annual general meeting had taken place on 29th August, 1985. Even then the return was not filed within the extended time upto 30th September, 1985 and the argument of the learned counsel for the assessee is that on receipt of final accounts the chartered accountants raised numerous queries and called for more information and details from the company for the purpose of preparing statements to enable them to file the return. However, at no stage of the proceedings, material has been brought on record in support thereof. Moreover, before the expiry of the extended period on 30th September, 1985, the assessee-company did not approach the Assessing Officer and no application seeking extension for the month of October, 1985 was filed. There is no dispute on facts in this regard. The assessee sought further extension of time upto 30th November, 1985 vide application in Form No. 6, dt. 30th October, 1985, on grounds of taking out the details and preparing the statements for compiling the return. Admittedly no return was filed even within the time upto which further extension was sought. The assessee’s stand is that the refusal for extension upto 30th November, 1985, was communicated to it on 7th December, 1985, and it was thereafter that all out efforts were made and the return was filed on 26th December, 1985 along with application for further extension upto 31st December, 1985. The Assessing Officer considered this application and rejected the same as he had already refused extension of time and had communicated refusal to the assessee. As stated earlier, the accounts had been finalised by July, 1985. The audit had taken place in July, 1985 itself and the annual general meeting had also been held on 29th August, 1985. There was, thus, enough time available with the assessee to have compiled the statements and submitted the return within the extension allowed upto 30th September, 1985. However, this was not done. In the given situation, we hold that the Assessing Officer was justified in rejecting the application for further extension of time beyond 30th September, 1985. He has used the discretion to refuse further extension rightly. The discretion exercised by him is not arbitrary.
10. We also do not find any substance in the argument of learned counsel for the assessee that non-initiation of penalty proceedings under s. 271(1)(a) of the Act goes to indicate that the Assessing Officer was satisfied about the existence of reasonable cause for the delay in filing the return. As pointed out by the learned Departmental Representative, non-initiation of penalty proceedings under s. 271(1)(a) was for the reason that there was no assessed tax and the assessment had resulted in computation of negative income.
11. The next contention raised on behalf of the assessee is whether after recording the finding that the return was not filed within the extended time allowed, the Assessing Officer was legally competent to record a further finding that loss as computed by him will not be allowed to be carried forward. The argument of learned counsel for the assessee is that under s. 80 of the Act, the Assessing Officer had no authority to declare that loss determined by him will not be allowed to be carried forward. He has referred to the decision of Hon’ble Supreme Court in the case of CIT vs. Manmohandas (supra), as also the decision of Cochin Bench of the Tribunal in the case of Shri Ajith Kumar vs. Dy. CIT (supra). The learned Departmental Representative, on the other hand, opposed the contention of the learned counsel for the assessee. According to him, the decision of the apex Court was rendered under s. 24(2) of the old Act and was inapplicable to s. 80 of the IT Act, 1961, as amended w.e.f. 1st April, 1985.
12. We have given a careful thought to the rival submissions. Since a return declaring loss was filed, it was the duty of Assessing Officer to compute the loss/income. In the instant case, the loss was determined at Rs. 1,25,35,993. Since the return was not filed in time, the Assessing Officer has observed that the loss computed will not be allowed to be carried forward. The observations made by him are in tune with the provisions contained in s. 80 of the Act. However, the Supreme Court in the case of Manmohandas (supra) had held that it is for the ITO dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. The Hon’ble Court also observed that a decision recorded by the ITO who computes the loss in the previous year under s. 24(3) of the 1922 Act that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. In view of this principle it has to be held that the observations of the Assessing Officer that the loss will not be allowed to be carried forward would not be binding on the assessee and it would be open to the Assessing Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year.
13. Subject to the above observations, the appeal filed by the assessee is dismissed.