IN THE ITAT BANGALORE BENCH ‘A’
Karnataka Forest Development Corp. Ltd.
V/s.
Commissioner of Income-tax
I T APPEAL NO. 81(BANG.) OF 2011
[ASSESSMENT YEAR 2004-05]
MARCH 30, 2012
ORDER
Smt. P. Madhavi Devi, Judicial Member
This appeal is filed by the assessee. The appeal is directed against the order of the Commissioner of Income-tax – I at Bangalore dated 2.11.2010. The appeal arises out of the order passed u/s 143(3) of the Income-tax Act, 1961.
2. In this appeal, the assessee is aggrieved by the order of the CIT(A) in confirming the order of the AO that the revised return filed by the assessee u/s 139(5) of the Act was nonest.
3. The brief facts of the case are that the assessee is a domestic company which is engaged in the business of forest products. The assessee filed its return of income on 30.10.2004 declaring an income of Rs.16,61,006/-. A revised return was filed on 24.10.2005 declaring a loss of Rs.32,92,809/-. During the assessment proceedings u/s 143(3) of the Income-tax Act, the Assessing Officer observed that in the original return of income, the assessee has shown positive income while in the revised return the assessee as shown positive income from business but a huge loss under income from other sources which has resulted in negative income. He observed that the interest payment on project loans was relatable to the business activities of the assessee and, therefore, the interest paid on business loan cannot be set off against ‘income from other sources’. He also observed that the assessee has claimed loss from hiring bulldozers and this is not allowable as these bulldozers were specifically sanctioned for its plantation work/business activities. In view of the same, he held that the income returned in the original return is to be adopted as the losses accounted under the head ‘income from other sources’ are relatable to its business activities and not other sources. He accordingly computed the taxable income of the assessee.
4. Aggrieved, the assessee preferred an appeal before the CIT(A) challenging the non consideration of the revised return filed u/s 139(5) of the Income-tax Act by the assessing authority. This ground was raised as additional ground before the CIT(A). In the additional ground, the assessee also challenged the disallowances and additions made by the assessing authority. The assessee also submitted written submissions before the CIT(A) and the CIT(A) called for the remand report from the AO on these written submissions. The Assessing Officer submitted the remand report and the assessee also submitted his rejoinder to the remand report. After considering the rival submissions, the CIT(A) observed that in the original return of income, the assessee has shown income from ‘business’ and income from ‘other sources’ as such interest income from F.Ds. etc. In the revised return, a new item has been introduced under the source ‘sale of rubber tree’ under the head ‘business income’. After applying Rule 7A of the Income-tax Rules 1962 and under the head ‘other sources’, drastic changes have been made. He observed that for the first time, it has been shown that the assessee owns bulldozers, which it given on hire and earns hiring charges and also claimed huge depreciation and expenses incurred in maintenance of these bulldozers besides netting of the interest income received from FDs with the interest paid to the banks for loan received from bank for rubber plantation. He observed that after claiming the loss, it is pleaded that the loss return should have been considered and loss should have been determined by the AO for carry forward. The assessee in the rejoinder to the remand report has submitted that the assessee has filed revised return within the time prescribed u/s 139(5) of the Act and before the conclusion of the assessment and, therefore, the AO should have considered the revised return while framing the assessment order. After considering this submission of the assessee, the CIT(A) held that the revised return is a loss return which should have been filed within the time specified u/s 139(3) of the Act and, therefore, the loss return filed beyond the time limit prescribed u/s 139(3) of the Act was null and void. He also held that the claim of the assessee for the loss return is also not acceptable and even if it is found to be genuine, then such loss in this year cannot be allowed to be carried forward to subsequent year for set off as the loss return was not filed within the time specified u/s 139(3) of the Income-tax Act.
5. Aggrieved, the assessee is in second appeal before us.
6. The learned counsel for the assessee while reiterating the submissions made by the assessee before the authorities below placed reliance upon the decision of the Tribunal in the case of Sujani Textiles (P.) Ltd. v. Asstt. CIT [2004] 88 ITD 317 (Mad.), wherein it was held that if the assessee has filed a loss return under sub-sec. (3) of sec. 139 within the period provided under the Act and if the assessee has filed a revised loss return under sub sec. (5) thereof, again within the prescribed time limit, the Assessing Officer is bound to take cognizance of the revised return, because the original return is replaced by the revised return. He also placed reliance upon the decision of ‘A’ Bench of this Tribunal in the assessee’s own case for the assessment year 2003-04, wherein the Tribunal has directed the AO to reconsider the claim of the assessee under Rule 7A of the Income-tax Rules. He submitted that even if the assessee has not claimed the loss and if from the facts investigated at the time of assessment it emerges that the assessee is entitled to a particular relief provided in law, it is obligatory on the part of the Assessing Officer to draw the attention of the assessee to the lawful relief or deduction, although the assessee did not claim it. For this purpose, he placed reliance upon the Commentary on Income-tax law by Chaturvedi & Pithisaia at pages 1434.
7. The learned DR on the other hand supported the orders of the authorities below and submitted that the claim of the assessee cannot be entertained and that the decisions relied upon by the learned counsel for the assessee are distinguishable on facts.
8. The assessee was asked to produce the copies of original return of income and also the revised return of income filed before the AO and assessee has accordingly filed the same before us on 14.3.2012.
9. Having heard both the parties and having considered the rival contentions, we find that the assessee has filed its original return of income showing positive taxable income, while in the revised return of income the assessee claimed loss to be carried forward. The main reason for holding that the revised return was nonest is that a loss return has to be filed within the time specified in sub-sec. (3) of sec. 139 of the Income-tax Act. For proper appreciation of law, the provision of sec. 139(3) is reproduced here under :
