Judgment:
"On the facts and in the circumstances of the case the learned Dy.
CIT(A) has erred in holding that the AO was not justified while acting under s. 154 in giving a finding that benefit of carry forward of loss would not be made available to the assessee.
ignoring the fact that the return was not filed within the time stipulated under s. 139(1) of the Act." 2. The learned Departmental Representative submitted that the Dy.
CIT(A) has erred in holding that the AO was not justified, while acting under s. 154(1) in giving a finding that benefit of carry forward of loss would not be made available to the assessee. He relied upon the judgment of the Hon'ble Calcutta High Court in Koppind (P) Ltd. vs. CIT (1994) 207 ITR 228 (Cal).
3. The learned counsel supported the order of the Dy. CIT(A). He pointed out that the original assessment was passed under s. 143(3) determining total income of the assessee at Rs. 1,384 vide order dt.
28th March, 1990. This income included share of profit from M/s Jay Key Woollen Industries to the tune of Rs. 26,270. This share income from the aforesaid firm was reduced to Nil through an order under s. 154 passed in the case of the said firm. The assessee, thereafter, moved an application under s. 154 on 13th July, 1990, requesting amendment of the order passed in the case of the assessee at an income of Rs. 1,384.
The AO noted in his order that the original return filed by the assessee was not within the time allowed under s. 139(1) and, therefore, the assessee was not entitled to carry forward of the losses to be determined in consequence of the reduction of assessee's share income from the aforesaid firm's income at Nil instead of Rs. 26,270.
The Dy. CIT(A) held that the question whether share of loss from the said firm was to be allowed or not did not survive at the time of making the assessment under s. 154/155 of the Act. The AO was required to pass an order under s. 153 simply to amend the figure of share of profit from M/s Jay Key Woollen Industries. Unit-I. It is not open to the AO while acting under s. 154/155 to go into the question whether original return filed by the assessee was to be treated as valid return or not and whether the loss return by the assessee thereon was to be carried forward or not. This was not an issue with the AO who would decide against the assessee while passing an order under s. 154/155.
The Dy. CIT, therefore, held that the order passed by the AO under s.
154 is not valid and the AO was not justified in giving a finding that benefit of carry forward of loss would not be made available to the assessee. The learned counsel also relied upon judgment C. P. Sarathy Mudaliar vs. CIT (1978) 114 ITR 687 (AP). He further pointed out that no notice as required under s. 154(3) was given to the assessee before passing the impugned order under s. 154.
4. I have carefully examined the rival submissions and have gone through the relevant provisions of law and various judgments cited by the learned representatives of both sides. The provisions of s. 80 was amended by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989. The effect of this amendment is that prior to the said amendment, the provisions of s. 80 provided that no loss which has not been determined in pursuance of a return filed within the time allowed under s. 139(1) or within such further time as may be allowed by the ITO, shall be carried forward and set off under ss. 72, 73, 74, etc. The discretion to extend the time for filing the return under s. 139(1) has been taken away from asst. yr. 1989-90 by the aforesaid amendment. In my view, the Dy. CIT(A) has rightly held that the point in issue is a debatable issue and, therefore, the same falls outside the purview of s. 154. The learned Dy. CIT(A) has given adequate and convincing reasons to show as to how the issue relating to carry forward/set off of share from loss in a firm is a debatable one. There cannot be two opinions on this point that the issue involved in the present appeal was a debatable one and, therefore, the same was outside the ambit of s. 154/155 of the Act. I, therefore, do not find any justification to interfere with the view taken by the Dy. CIT(A). In my view the Revenue's appeal has no merit.