Balachandra Joshi Vs ACIT (ITAT Bangalore)
The appeal arose from the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi, which had partly allowed the assessee’s appeal against the CPC’s order passed under Section 143(1) of the Income Tax Act, 1961 for AY 2021–22. The principal issue before the ITAT was the denial of carry forward of capital loss amounting to ₹2,99,750 despite the original return having been filed within the due date prescribed under Section 139(1).
The assessee filed the original return of income on 5 October 2021 declaring taxable income of ₹1,31,76,320 and carrying forward capital loss of ₹5,26,428. A revised return was filed on 31 March 2022 under Section 139(5), reporting additional short-term capital gain of ₹4,63,989, long-term capital gain of ₹2,26,678, payment of additional self-assessment tax, and long-term capital loss of ₹2,99,750. While processing the revised return under Section 143(1)(a), the CPC denied the carry forward of the current year’s capital loss of ₹2,99,750. The CPC also denied foreign tax credit of ₹39,044. The CIT(A) directed the Assessing Officer to verify Form No. 66 and grant foreign tax credit in accordance with law but upheld the denial of carry forward of loss on the ground that a loss return must be furnished within the time allowed under Section 139(1).
Before the Tribunal, the assessee contended that the original return had been filed within the prescribed due date under Section 139(1) and that filing a revised return under Section 139(5) did not disentitle the claim for carry forward of loss. The assessee also submitted that the revised return substituted the original return and relied upon a CBDT Circular stating that a return filed within the extended due date should be treated as filed within the due date for allowing carry forward of losses. The Departmental Representative supported the order of the CIT(A), contending that returns not filed within the due date under Section 139(1) were not eligible for carry forward of losses.
The ITAT observed that the due date for filing the original return was 31 December 2021 and that the assessee had filed the original return on 5 October 2021, within the prescribed due date. It held that merely because the revised return was filed on 31 March 2022, the assessee could not be denied the benefit of carry forward and set-off of losses, as the original return had been filed within the time prescribed under Section 139(1). Accordingly, the Tribunal directed the Assessing Officer to allow the carry forward of ₹2,99,750 and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 19/Bang/2026 is filed for assessment year 2021 – 22 by Sri Balachandra Joshi (the assessee/appellant) against the appellate order passed by the Commissioner of Income Tax (Appeals), NFAC, Delhi dated 10 November 2025 wherein the appeal filed by the assessee against the order passed by the Central Processing Centre [CPC] under section 143 (1) of the Income Tax Act, 1961 [the Act]dated 27.5.2022 was partly allowed.
2. The assessee is aggrieved with the same and has preferred this appeal raising several grounds of appeal, however the main ground raised by the assessee is with respect to the disallowance of the carry forward of capital loss amounting to ₹ 299,750, despite the original return of income having been filed within the due date prescribed under section 139 (1) of the Act.
3. Briefly stated the facts of the case show that assessee an individual, filed his original return of income on 5 October 2021 at a total taxable income of Rs.1,31,76,320. This return of income was revised on 31st of March 2022. In the original return of income the assessee had carried forward loss under the head capital gain of ₹ 526,428 later on the assessee filed revised return reporting additional income of short-term capital gain of ₹ 4,63,989 and long-term capital gain of Rs.2,26,678. Assessee also paid an additional assessment tax. In the revised return of income the assessee had reported the long term capital loss of Rs.2,99,750. The revised return was processed under section 143 (1) (a) of the Act. The CPC while processing the return of income, did not grant credit of the loss of current year to be carried forward of Rs.2,99,750 as claimed by the assessee. Further in the original return of income the assessee has claimed the foreign tax credit of ₹ 39,044 despite assessee filing form No. 67 and reporting of foreign dividend income of Rs.1,14,558. Thus the main grievance of the assessee is denial of foreign tax credit of ₹ 39,044. The learned CIT – A directed the ld. AO to verify the form No. 66 and provide the foreign tax credit for the assessment year 2021 – 22 in accordance with the law. Further with respect to the carry forward of loss, it was held by the learned CIT – A that the return is required to be furnished within the time allowed under section 139 (1) of the Act if the return of income is loss and then only the assessee can carry forward the losses to the future years. Therefore he dismissed the claim of the assessee. Accordingly the appeal of the assessee was partly allowed.
4. Before us the assessee is aggrieved with the denial of the carry forward of the capital loss amounting to Rs.2,99,750 and submitted that the original return of income has been filed by the assessee within the due date prescribed under section 139 (1) of the Act. However the revised return was filed u/s. 139(5), that does not disallow the loss claimed by the assessee in the original return of income. It was submitted that the learned CIT – A has incorrectly held that the revised return filed by the assessee is an independent return of income for the purpose of section 139 and instead of appreciating that revised return relates back to substitute the original return which was filed within the prescribed due date. He further relied upon the Circular issued by the Central Board of Direct Taxes wherein it has been stated that if the return of income filed within such an extended due date should be considered as a return filed within due date and the carry forward of the loss should have been allowed to the assessee.
5. The ld. DR vehemently supported the order of the learned CIT – A and submitted that when the return of income is held not to be filed within the due date specified under section 139 (1) of the Act, the assessee is not entitled to carry forward of the losses.
6. We have carefully considered the rival contention and perused the orders of the learned lower authorities. We find that the CPC has stated that the due date of filing of the original return of income was 31 December 2021 which was extended up to 31 December 2021 and the assessee has filed its return of income on 5 October 2021 which was subsequently revised on 31st of March 2022. Thus the assessee has filed the return of income within the prescribed due date under section 139 (1) of the Act. Merely because the assessee has filed a revised return on 31st of March 2022 but filed the original return of income within the due date prescribed under section 139 (1) of the Act, we are of the view that the assessee is entitled to the carry forward and set off of the losses to subsequent years. Accordingly we direct the ld. AO to allow the set off of Rs.2,99,750 to be carried forward. This was also the claim of the assessee in the return of income.
7. Accordingly we allow the appeal of the assessee.
Order pronounced in the open court on 11th June, 2026.
