G.R. Raghavan, Accountant Member - (1.)THIS appeal by the assessee is against the order of the Commissioner under Section 263 of the Income-tax Act, 1961 ('the Act') withdrawing the loss of Rs. 47,160 relating to the assessment year 1979-80 set off by the ITO in the assessment for the year 1980-81 under consideration and thereby enhancing the total income to the same extent.
(2.)The question at issue in this appeal is whether the ITO was not justified in setting off the loss of Rs. 47,160 relating to the assessment year 1979-80 in the assessment for the year 1980-81 and the Commissioner was, therefore, justified in revising the assessment under Section 263 and thereby withdrawing the set off allowed by the ITO. The facts relating to this issue are in a brief compass and they are as under.
The assessment for the year 1980-81 was completed under Section 143(1) of the Act on 23-3-1982 and while computing the income, the ITO had set off the loss of Rs. 47,160 relating to the assessment year 1979-86 against the income for the assessment year 1980-81. While scrutinising the assessment records, the Commissioner noticed that the return for the assessment year 1979-80 declaring a loss was filed on 19-7-1980 as against the due date of 30-6-1979 and there was also no application from the assessee requesting for extension of time for filing the return of income. He was of the opinion that the loss returned for the assessment year 1979-80 did not conform to the statutory requirements of Sub-section (3) of Section 139 of the Act especially after the addition of the words therein by the Taxation Laws (Amendment) Act, 1970, with effect from 1-4-1971, namely, 'or within such further time which, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, allow'. In view of the specific addition of the abovementioned words to the section, he was of the opinion that the decision of the Supreme Court in CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 did not apply and since the return declaring a loss was not filed within the time allowed under Sub-section (1) of Section 139 and there was also no application from the assessee requesting for extension of time for filing the return, the loss computed for that year was not a loss determined in pursuance of a return filed under Section 139 and, therefore, by virtue of Section 80 of the Act, the same was not to be carried forward and set off. Accordingly, he initiated proceedings under Section 263 and called for the assessee's objections for the proposed revision of the assessment and withdrawal of the loss erroneously set off by the ITO.

(3.)THE assessee's submissions to the show-cause notice, briefly summarised are as under :
Even though the return of loss for 1979-80 was not filed within the time allowed under Sub-section (1) of Section 139 and there was also no application for extension of time made in this behalf, the return filed, being under Section 139(4), the requirements of Sub-section (3) should be considered to have been satisfied in view of the decision of the Supreme Court in Kulu Valley Transport Co. (P.) Ltd.'s case (supra). A number of other decisions were also cited before him. It was also contended that any loss determined in pursuance of a return filed under Section 139 was automatically eligible for set off in the subsequent year under the provisions of Section 80 and the ITO had no other option except to carry forward the same and allow the set off in the assessment for 1980-81. It was further submitted that the Board's Instruction No. 210 [F. No. 288/9/78-IT(A-II)] dated 28-8-1970 to the effect that the decision of the Supreme Court in Kulu Valley Transport Co. (P.) Ltd.'s case (supra) under the Indian Income-tax Act, 1922 ('the 1922 Act') was equally applicable to the provisions of the 1961 Act, still holds good and since in this case the assessment was completed on 23-3-1982, this instruction was still in force as the latter instruction in this regard, namely, Instruction No. 1528 [F. No. 223/248/78-IT(A-II)] dated 20-9-1983, was issued subsequent to the completion of the assessment. In fine, it was submitted that the action of the ITO, in allowing set off of loss of the assessment year 1979-80 against the income of the assessment year 1980-81 was in order and the assessment did not call for revision under Section 263.