Brought forward losses can be setoff – Returns of subsequent years not to be considered

Filling of return within due date u/s 139 (1) is very important especially if any loss has been incurred in the year for which return is to be filed and any delay in non filling of same will invite innumerable problems which may range from interest / penalty leviable to appeals / assessments.


Filing of Return of Loss

But it has been found that taxpayers are not clear with the provisions relating to return of loss u/s 139(3) and its implication in subsequent years. It is a well established fact that if an assessee incurs loss in business in any year, then in order to claim the benefit of carry forward and set – off of such losses, I.T. return should be filed within the time limit prescribed under Sec 139(1).


It should be clear that the requirement to file return within the time prescribed u/s.139 (1) is only for carrying forward the loss. Regarding the set – off part, Sec 139(3) (Return of Loss) should be read with Sec 139(1) which makes it clear that if loss is determined in the return file u/s.139 (3), the assessee becomes eligible for set off against the income of the subsequent years irrespective of the fact whether the returns of such later years are filed within the due date or not.


It is now well understood that in case the return of income for any is year is not filed within the due date, the entire brought forward loss shall be allowed to be carried forward and set – off, if the return of income for the year in which the loss was actually incurred was filed within the due date.


In addition to this, it is very important to note that if a case has been subject to assessment in case of search and the assessee has been asked to furnish his return for six years immediately proceeding the relevant year, even in that case, any loss incurred in previous years can be claimed to be set – off if the above mentioned conditions are satisfied.


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