Section 139(3)

Section 139(3) — the law in short

What the courts have decided on section 139(3), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• PCIT v Wipro Ltd Supreme CourtHelps department
  A declaration was required by the due date and you filed it late. Is that fatal?
  Yes. Both limbs — furnishing the declaration, and doing so before the due date for the original return — are mandatory, not directory. A claim made only in a belated revised return does not qualify.
• CIT v Kulu Valley Transport Co (P) Ltd Supreme CourtHelps taxpayer
  I filed a return showing a loss after the due date but before any assessment was made. Can the officer refuse to determine the loss and refuse to let me carry it forward?
  No, on the 1922 Act. By a majority the Supreme Court held that a voluntary loss return filed at any time before the assessment is a good return which the Income-tax Officer cannot ignore, and the loss must be determined and carried forward. Section 22(1) is to be read with section 22(3), which is in effect a proviso to it, so a return filed within the time in section 22(3) is filed within the time prescribed and the condition in section 22(2A) is satisfied. Shah, J dissented, holding that reading it that way makes section 22(2A) otiose.
• Balaji Landmarks LLP v CBDT High CourtHelps taxpayerNo later treatment found
  I filed my loss return late on my CA's advice and lost the carry-forward. Will the delay be condoned?
  The Board could not refuse to condone the delay. A delay caused by acting on a professional's opinion is bona fide and not negligence, especially where the issue is fairly complex and unsettled, and refusing condonation would have permanently extinguished the carry forward of losses under s.139(3) read with s.80. The department loses nothing, because s.153(1B) gives the Assessing Officer twelve months from the end of the financial year of the return to assess. The delay was condoned and the assessment directed - but all contentions were kept open, so the losses themselves remain open to examination.
• Technovaa Plastic Industries Private Limited v Central Board of Direct Taxes High CourtHelps taxpayerNo later treatment found
  The resolution professional never filed the company's returns during the insolvency process. The new management filed them late and the carry forward of losses has gone. Will the Board condone the delay?
  It must, on these facts. The Gujarat High Court quashed the Board's order refusing condonation under s.119(2)(b) for Assessment Years 2018-19 and 2019-20 and condoned the delay itself, holding that where the suspended management had lost all powers from the date of admission under the Insolvency and Bankruptcy Code and the resolution professional had neither had the accounts audited nor filed the returns, and the new management filed them promptly after the resolution plan was approved, refusing condonation would frustrate the very purpose of the approved resolution plan and would amount to genuine hardship.
• Kunal Structure (India) Pvt Ltd v Dy CIT High CourtHelps taxpayer
  My return was defective and I cured the defect ten months later. Does the s.143(2) clock run from the original filing or from the day I removed the defect?
  From the original filing. Where the defect is removed within the time the Assessing Officer allowed, the return relates back to the date on which it was originally furnished, and the six-month limitation for a s.143(2) notice is counted from the end of the financial year in which that original return was filed. On the facts the scrutiny notice was issued nearly a year after that period had run out and was held barred. The Revenue's special leave petition was dismissed.
• Gluhend India Private Limited v DCIT ITATHelps taxpayerNo later treatment found
  I filed this year's return late under section 139(4). The Assessing Officer has now refused to carry forward a capital loss and unabsorbed depreciation that both came from the earlier year, whose return was on time. Can he do that?
  No, on the Tribunal's reasoning. Section 80 read with s.139(3) attaches to the year in which the loss arises: if the return for the loss year was filed within the s.139(1) time, the loss has already become eligible for carry forward, and a belated return for a later year does not extinguish it. Unabsorbed depreciation stands on a stronger footing still — it is governed by s.32(2), and the s.80 restriction does not apply to it at all.
• Tanisha Chaudhary v Income-tax Officer, Ward 5(2)(4), Noida ITATHelps departmentNo later treatment found
  My AY 2020-21 return was 72 days late because of Covid and the short-term capital loss was refused. Four years on I want to set that loss off against this year's gains. Can I argue the delay in the current year's appeal?
  No. The Delhi Tribunal dismissed the appeal, holding that s.80 makes it mandatory to file the return of loss in terms of s.139(3), and that where the carry forward was denied when the loss year's return was processed under s.143(1), the remedy against that denial does not lie in an appeal for the later set-off year. Kulu Valley Transport was distinguished on its facts.
• Paramsukh Infradevelopers LLP v Income-tax Officer, Ward 1(1)(1), Agra ITATHelps taxpayerNo later treatment found
  My LLP was not required to be audited, but the partners had the accounts audited anyway. The CPC treated the return as belated and refused the carry forward of the business loss. Was the return late?
  No. The Agra Tribunal held that where the partners of an LLP that is exempt from audit under the first proviso to Rule 24(8) of the LLP Rules 2009 decide to have the accounts audited, the second proviso requires the audit to be carried out in accordance with those Rules, and the LLP then becomes a person whose accounts are 'required to be audited ... under any other law for the time being in force' within Explanation 2(a)(ii) to s.139(1). The due date accordingly moved to 30 September, the return filed on 17 September was in time, and the business loss was allowed to be carried forward.
• Luxury Goods Retail Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  You filed a loss return on paper within the due date because the portal would not let you in. Has the carry-forward gone?
  No. The Tribunal held that a return filed manually within the due date under s.139(1) is a valid return, and that filing it on paper rather than electronically makes it at best a defective return and not an invalid one. Section 292B protects a return that substantially complies with the intent of the statute, and the carry-forward of the loss could not be refused on that ground.
• JCIT v Tata Cummins Ltd ITATHelps taxpayerNo later treatment found
  The officer's order under s.139(9) says your return is invalid and that you are not entitled to carry forward the loss. Can he decide that in a s.139(9) order?
  No. The Tribunal held that an order under s.139(9) can be made only to determine whether there was a defect in the return and whether it was rectified. An officer who goes on to rule on entitlement to carry forward the loss has made an assessment order, with the consequence that it is appealable. On the facts the Tribunal also held that the acknowledgement sheet is not part of the return prescribed under Rule 12, and that a signature defect, once removed, relates back to the date the return was originally filed.
• Statutory position — s.73A: a specified business loss can only be set off against another specified business, and it carries forward indefinitely CBDT Circulars & InstructionsCuts both ways
  My client's section 35AD hotel has thrown up a large loss because the whole capital cost was written off. Can that loss be set against the profits of its other, ordinary business, and for how many years can it be carried forward?
  No, it cannot. Section 73A(1) provides that any loss computed in respect of any specified business referred to in section 35AD "shall not be set off except against profits and gains, if any, of any other specified business". Section 73A(2) then allows the unabsorbed part — or the whole loss where there is no other specified business — to be carried forward to the following assessment year, subject to the other provisions of Chapter VI, to be set off against the profits of any specified business carried on by the assessee assessable for that year, and if it still cannot be wholly set off, to be carried forward to the following assessment year "and so on". There is no limit on the number of years, which is the one respect in which section 73A is more generous than the ordinary eight-year rule for business losses in section 72. The section was inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010 — the same Act and the same date as section 35AD itself — so it governs AY 2010-11 onwards.
• Statutory position — the capital-loss asymmetry: sections 70(2), 70(3) and 74(1) from AY 2003-04 CBDT Circulars & InstructionsCuts both ways
  I have a long-term capital loss and short-term capital gains this year, and also a brought-forward long-term loss. Which loss can go against which gain, and for how long can I carry it?
  A short-term capital loss can be set off against any capital gain, short-term or long-term; a long-term capital loss can only be set off against a long-term capital gain. That asymmetry holds both within the year, under s.70(2) and s.70(3), and on carry forward, under s.74(1)(a) and s.74(1)(b); the carry forward is limited to eight assessment years by s.74(2). The present form of both sections was put in place by the Finance Act 2002 with effect from 1 April 2003, that is Assessment Year 2003-04.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.