Tanisha Chaudhary vs Ward 5(2)(4), Noida

PER VIKAS AWASTHY, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of Additional/Joint Commissioner of Income Tax (Appeals)-1, Gurugram [in short ‘the CIT(A)’] dated 25.08.2025, for Assessment Year 2024-25.

The appeal is time barred by 89 days. The assessee has filed an application citing reasons causing delay in filing of appeal. After perusal of the same, I am satisfied that delay in filing of appeal is not intentional, the delay has been caused for the reasons stated in application which appears to be bonafide. Thus, delay of 89 days in filing of appeal is condoned and appeal is admitted for decision on merits.

The short issue in the instant appeal is denial of set off of capital gains of impugned assessment year against carry forward short term capital losses of A.Y. 2020-21. Facts of the case in brief as emanating from records are; the assessee had filed return of income for AY 2020-21 declaring Short Term Capital Loss (STCL) of Rs.62,74,635/-. Undisputedly, the return of income for A.Y. 2020-21 was filed beyond the due date as specified u/s 139(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The due date for filing return of income was 10.01.2021, whereas, the assessee filed return of income for AY 2020-21 on 23.03.2021. Thus, there was a delay of 72 days in filing the return of income.

Ms. Megha Garg, appearing on behalf of the assessee submits that the delay in filing return was on account of the COVID-19 pandemic. Thus, there was a valid reason for filing the return beyond the due date. The assessee, while filing the return of income for the impugned assessment year, claimed set off of capital gains against STCL of A.Y. 2020-21. The same was denied while processing the return of income u/s 143(1) of the Act. The assessee carried the issue in appeal before the CIT(A). The CIT(A), vide impugned order, dismissed appeal of the assessee without considering the fact that delay in filing return for A.Y. 2020-21 was on account of reasonable cause, beyond the control of the assessee. The ld. Counsel submits that the Hon’ble Supreme Court of India in the case of CIT vs. Kullu Valley Transport Co. Pvt. Ltd. reported as 77 ITR 518 has held that a return filed u/s 139(4) of the Act can also be treated as a valid return for the purpose of carry forward of losses. Thus, the ld. Counsel for the assessee prayed for allowing the benefit of set off of capital gains against carry forward short term capital losses of A.Y. 2020-21.

Per contra, Shri Manoj Kumar, representing the Department vehemently defending the impugned order, submitted that the provisions of section 80 of the Act are unambiguous. For the assessee to claim benefit of carry forward of losses, it is mandatory to file return of income within the time prescribed u/s 139(1) of the Act. He thus prayed for dismissing appeal of the assessee.

Both sides heard, orders of the lower authorities examined. Admittedly, the assessee’s return of income for A.Y. 2020-21 was filed beyond the due date prescribed for filing return u/s 139(1) of the Act. The assessee in return of income had reported STCL in A.Y. 2020-21, which the assessee intended to carry forward. The claim of the assessee was denied by the CPC vide intimation u/s 143(1) of the Act dated 25/11/2021. In the impugned assessment year, the assessee claimed set off of profits against the losses of A.Y. 2020-21. The assessee’s claim was denied for the reason that the return of income for A.Y. 2020-21 was not in accordance with the provisions of section 139(3) of the Act. Since the return of income was not filed within the prescribed time, the benefit of carry forward of losses was denied.

Here it would be relevant to refer to the provisions of section 80 of the Act, the same reads as under:

A bare reading of section 80 of the Act makes it abundantly clear that a loss shall not be allowed to be carried forward and set off unless such loss is determined in pursuance of a return filed in compliance with the provisions of section 139(3) of the Act. Thus, for claiming the benefit of carry forward of losses, it is mandatory to file the return in terms of section 139(3) of the Act. It is not emerging from the record that the assessee had, at any point of time, filed an application before the appropriate authority seeking extension of time for filing the return of income or had filed any application for condonation of delay in filing the return of income for A.Y. 2020-21. Now, in A.Y. 2024-25, the assessee cannot be allowed the benefit of set off of profits against losses pertaining to A.Y. 2020-21. The remedy against denial of carry forward of losses of AY 2020-21 does not lie in appeal for AY 2024-25.

The assessee has placed reliance on the decision rendered in the case of CIT vs. Kullu Valley Transport Co. Pvt. Ltd. (supra). The decision rendered in the said case is distinguishable on facts. In the case of Kullu Valley Transport Co. Pvt. Ltd. (supra), the assessee had filed a belated return of income and was denied the benefit of carry forward of losses on the ground that the return was not filed within the prescribed time. The Hon’ble Supreme Court, in facts of the said case held, that where a return of income has been filed, the claim of carry forward of losses must be considered as having been made within the prescribed time if the return is filed within the time specified under section 22(3) of the Indian Income-tax Act, 1922 (corresponds to Section 139(4) of the Income Tax Act, 1961). In other words, if the provisions of section 22(3) are complied with, section 22(1) must also be held to have been complied with. In the instant case, the assessee in assessment proceedings for AY 2024-25 is seeking benefit of carry forward of losses pertaining to A.Y. 2020-21. The cause of action against denial of carry forward losses arose when the return of income for A.Y. 2020-21 was processed u/s 143(1) of the Act and the benefit of carry forward of losses was denied. In proceedings relating to A.Y. 2024-25, the assessee cannot be permitted to seek a remedy for the disallowance made in A.Y. 2020-21. Ergo, in peculiar facts of the case, the benefit of set off of profits of AY 2024-25 against losses of A.Y. 2020-21 cannot be permitted to the assessee.

In the result, appeal of the assessee is dismissed.