Kolar & Chickballapur District Co-op. Bank Ltd. V. The Asst. Commissioner of Income Tax, Circle 10(1), Bangalore

ITA/280/2015

AI Insights

The case revolves around the denial of carry forward of business losses by the Kolar & Chickballapur District Co-op. Bank Ltd. for the assessment year 2006-07, due to a belated filing of the income tax return for the previous year. The Income Tax Department had rectified the assessment order under Section 154 of the Income Tax Act, claiming the losses were not allowable as the return for the year 2004-05 was filed late. The Tribunal and lower authorities upheld this decision, leading the bank to appeal in the High Court. The High Court found that the delay of one day in filing the return, which was due to it falling on a Sunday and the next day being a holiday, should be condoned and did not warrant the rectification of the assessment order under Section 154.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 813001 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 01-09-2021
• Assessment Year: misc
• Other Referred Cases: Dr. Sudha Krishnaswamy vs. Chief Commissioner of Income Tax (International Taxation), T.S. Balaram, ITO vs. Volkart Brothers, Satishchandra and Co. vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: JINITA CHATTERJEE
• Keywords: Assessment Year 2006-2007; Carry forward of loss; Income tax appeal; Rectification of mistake
• Section: 143(3); 154; 139(1); 139(3); 80; 260-A

Judgement Text

" IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF SEPTEMBER, 2021 PRESENT THE HON’BLE MRS.JUSTICE S.SUJATHA AND THE HON’BLE MR. JUSTICE RAVI V. HOSMANI I.T.A.No.280/2015 BETWEEN : M/s THE KOLAR & CHICKBALLAPUR DISTRICT CO-OP. BANK LTD., POST BOXS NO.11, D.C.C. BANK, KOLAR-563101 REP BY ITS CHIEF EXECUTIVE OFFICER, SRI UMAKANTH S/O SRI SHESH RAO AGED ABOUT 51 YEARS ...APPELLANT (BY SMT.JINITA CHATTERJEE, ADV. FOR SRI S.PARTHASARATHI, ADV.) AND : THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 10(1), UNITY BUILDING ANNEXE, MISSION ROAD, BANGALORE-560027 …RESPONDENT (BY SRI K.V.ARAVIND, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 27.02.2015 PASSED IN ITA NO.351/BANG/2014, FOR THE ASSESSMENT YEAR 2006-2007 PRAYING TO 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDER OF - 2 - THE INCOME TAX APPELLATE TRIBUNAL DATED 27.02.2015 BEARING ITA NO.351/BANG/2014 FOR THE ASSESSMENT YEAR 2006-2007. THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING: J U D G M E N T This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 (‘Act’ for short) against the order dated 27.02.2015 passed by the Income Tax Appellate Tribunal, “A” Bench, Bangalore (‘Tribunal’ for short) relating to the assessment year 2006-07. 2. The appeal was admitted to consider the following substantial questions of law:- (i) Whether in law, the authorities below were justified in approving the action of the assessing officer who chose to rectify the alleged mistake, under Section 154 of an issue which is debatable in nature? (ii) Whether in law, the authorities below were justified in rejecting the claim of set- off of loss to the appellant when the - 3 - return for the year under dispute was in time? (iii) When the loss of immediately preceding year was undisturbed, whether the authorities were justified in disturbing the same, for the year under challenge? (iv) Whether in law, the authorities below were justified in denying the set-off of loss for the year under challenge on the ground that there was a delay in filing the return for the assessment year 2004- 05? (v) Without prejudice to the above, when a delay of one day in filing the return of income for the assessment year 2004-05 having been explained and the same having not been denied or negative by the revenue, whether in law the loss for that year be said to have been determined for the purpose of carry forward? 3. The appellant/assessee is a co-operative bank. Relating to the assessment year in question, the assessee filed its return of income declaring ‘Nil’ income - 4 - which was processed and thereafter the case was selected for scrutiny. Assessment order dated 28.11.2008 was passed under Section 143(3) of the Act. The Assessing Officer issued a notice dated 05.01.2010 under Section 154 of the Act alleging that incorrect carry forward of loss to be rectified relating to the assessment years 2003-04 and 2004-05, as return of income for the assessment years were not filed in time. An order under Section 154 of the Act was passed by the Assessing Officer after issuing notice to the assessee and considering the reply filed thereon, rectifying the assessment order. It was opined that as per the records, the actual carry forward for the assessment years 2003- 04 to 2005-06 was Rs.13,28,42,417/- as against Rs.39,12,24,944/-, the loss claimed for the year 2004- 05 of Rs.5,23,18,280/- was not allowable as the return filed for the said year was belated. Being aggrieved by the said order, the appellant/assessee preferred an appeal before the CIT (Appeals) – V, Bangalore, inter alia - 5 - contending that there was a delay of one day in filing the return for the assessment year 2004-05, as the due date for filing of the return which happened to be a Sunday and the next day being Kannada Rajyosthsava Day, the assessee was under bonafide belief that it was a Government Holiday. CIT (Appeals) called for report of the Assessing Officer. Further, the CIT (Appeals) observed that it was CBDT which has powers under Section 119(2)(b) of the Act to authorize any income tax authority to admit an application or claim of any exemption, deduction, after the expiry of the period prescribed by or under the Act, in any case or class of cases. Accordingly, the CIT (Appeals) rejected the claim of carry forward of the loss, further observing that the assessee had not moved any application to CBDT for condonation of delay in filing the loss return. 4. Being aggrieved by the said order, an appeal was filed by the assessee before the Tribunal which - 6 - came to be dismissed. Hence, the assessee has preferred this appeal. 5. Learned counsel appearing for the appellant/assessee submitted that the denial of set-off of carry forward of loss relying on Section 80 of the Act by all the authorities is untenable. Admittedly, in the case on hand, the loss for previous year i.e., assessment year 2005-06 has been quantified by the Assessing Officer which pre-supposes the determination of loss by the assessee in its return. Learned counsel placing reliance on the judgment of this Court in the case of Dr. Sudha Krishnaswamy vs. Chief Commissioner of Income Tax (International Taxation) reported in (2019) 414 ITR 0144 (Karn) submitted that delay of one day in filing the return ought to have been condoned and no powers under Section 154 of the Act would have been invoked. Referring to the judgment of the Hon’ble Apex Court in the case of T.S. Balaram, - 7 - ITO vs. Volkart Brothers reported in (1971) 82 ITR 50 (SC) which has been quoted in the Co-ordinate bench decision of this Court in the case of Satishchandra and Co. vs. Commissioner of Income Tax reported in (1998) 234 ITR 0070, submitted that Section 154 could be invoked only when a mistake apparent on the record is obvious and patent mistake which can be established sans adjudicating on the points. At most, it was a case for reassessment under Section 147, not a case for rectification wherein the tax liability has been enhanced. 6. Learned counsel for the revenue justifying the orders of the authorities submitted that Section 80 of the Act provides for submission of return for losses. In terms of the said Section, it is mandatory that the return for losses has to be filed in accordance with provision of sub-section (3) of section 139. Sub-section (3) of Section 139 of the Act contemplates that loss of - 8 - return has to be filed within the time allowed under sub-Section (1), accordingly the said return ought to have been filed on or before 31st day of October, 2004, but admittedly the return was filed belatedly on 02.11.2004, the same being not a debatable issue and an error apparent on the face of the record, the Assessing Officer was justified in passing the order under Section 154 and the same has been rightly confirmed by the First Appellate Court as well as the Tribunal. 7. Heard the learned counsel appearing for the parties and perused the material on record. 8. Section 80 of the Act reads thus: “80. Submission of return for losses.—Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed [in accordance with the provisions of sub-section (3) of section 139, shall be carried - 9 - forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 [or sub-section (2) of section 73A or sub-section (1) or sub-section (3) of section 74 or sub- section (3) of section 74A.” 9. Section 139(3) of the Act reads thus: “(3) If any person who 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 (2) of section 73A or sub-section (1) or sub-section (3) of section 74, or sub- section (3) of section 74A, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub- section (1).” - 10 - 10. Section 139(1) of the Act reads thus: “139. Return of income.—(1) Every person,— (a) being a company or a firm; or (b) being a person other than a company or a firm], if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed78 form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Explanation 2.—In this sub-section, “due date” means,— (a) where the assessee other than an assessee referred to in clause (aa) is— (i) a company; or (ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or (iii) a partner of a firm whose accounts are required to be audited under this Act or - 11 - under any other law for the time being in force or the spouse of such partner if the provisions of section 5A applies to such spouse, the 31st day of October of the assessment year; 11. Section 154 of the Act reads thus: “154. Rectification of mistake.— (1) xxxxx (2) Subject to the other provisions of this section, the authority concerned— (a) may make an amendment under sub- section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee or by the deductor, or by the collector, and where the authority concerned is the Commissioner (Appeals), by the Assessing Officer also. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee or the deductor or the collector, shall not be made under this section unless the authority concerned has given notice - 12 - to the assessee or the deductor or the collector of its intention so to do and has allowed the assessee or the deductor or the collector a reasonable opportunity of being heard.” 12. In terms of the order of the Hon’ble Apex Court in the case of T.S. Balaram, supra, a mistake apparent on the face on the record when it is taken as obvious or self-evident, power under section 154 of the Act could be invoked. If the alleged mistakes require investigation into facts or determination of law or two opinions are possible on the issue, then it could not be construed as the mistake apparent on record which could be rectified under Section 154. 13. Admittedly, the return for the relevant assessment year herein was filed on 02.11.2004 instead of 31.10.2004. As per Section 139(1) and the explanation to thereto, ‘due date’ means, 31st day of October of the assessment year. As aforesaid, 139(3) makes it clear that the return has to be filed as per sub- - 13 - Section (1) of Section 139 for carrying forward and set- off of losses. If any order was passed inadvertently under Section 143 sans considering the date of filing of the return for losses, the same certainly is an error apparent on the record, which do not require any further adjudication. Hence, the finding of the authorities on this issue cannot be faulted with. Accordingly, the questions of law raised are answered in favour of the assessee and against the revenue. 14. However, we reserve liberty to the assessee to file an application under Section 119(2)(b) of the Act before the competent authority seeking for condonation of delay in filing returns and thereafter to seek for carry forward of loss to the subsequent assessment year which were incurred during the assessment year 2004- 05. If such an application is filed by the assessee within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered by the - 14 - competent authority in accordance with law, in an expedite manner and the consequential reliefs shall be extended accordingly. The appeal stands disposed of as indicated above. Sd/- JUDGE Sd/- JUDGE PMR "