When Return Of Loss Should Be Filed [Section 139(3)]

If a person has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital Gains" and claims that such loss or any part thereof should be carried forward under section 72(1) or section 73(2) or 73A(2) or section 74(1) and (3) or section 74A(3) then he may furnish a return of loss within the time prescribed under section 139(1) and all the provisions of this Act shall apply as if it were a return under section 139(1).

The following Losses cannot be carried forward if the Return Of Loss is not submitted in time—

1. business loss (speculative or otherwise);

2. capital loss; and

3. loss from the activity of owning and maintaining race horses.

It is not mandatory to file a return of loss (except in case of a company or a firm) as there is no taxable income. However, as already discussed under section 80 in the chapter on 'Set off and carry forward of losses', losses under the head business or profession and capital gain cannot be carried forward unless the return of loss is submitted on or before the due date mentioned under section 139(1) and it is duly assessed. If the return of loss is not submitted or is submitted after the due date, such losses cannot be carried forward.

Some Points in respect of Return of Loss [Section 139(3)]

1. As already discussed, all losses are not allowed to be carried forward. Therefore return of loss should be submitted on or before due date only in case of business loss, speculation loss, capital loss or loss on account of owning and maintaining the horses for running in horse races.

2. It may be noted that filing a return of loss within the due date is necessary for carry forward of losses under sections 72(1), 73(2), 73A(2), 74(1), 74(3) and 74A(3). It does not cover section 71B i.e. carry forward and set off loss of house property. Therefore, loss on account of house property can be carried forward even if the return is submitted late.

3. Unabsorbed depreciation can also be carried forward even if the return of loss is submitted after the due date, as it is not covered under Chapter VI of set off or carry forward of losses but covered under section 32(2).

4. Section 139(3) read with section 80, does not prohibit the set off of losses of the current year while computing the Total Income even if the return is filed after the due date. It only prohibits the carry forward of such losses.

5. If an assessee has submitted a return of loss in response to a notice under section 142(1), such loss cannot be carried forward unless it is a loss under the head income from house property. However, unabsorbed depreciation can be carried forward in this case.

6. Although the loss of the current year cannot be carried forward unless the return of loss is submitted before the due date but the loss of earlier years can be carried forward if the return of loss of that year(s) was submitted within the due date and such loss has been assessed.

Can Return Be Filied Beyond Time [Section 139(4)]

Any person who has not furnished a return within the time allowed to him under section 139(1), or within the time allowed under notice issued under section 142(1), may furnish the return for any previous year at anytime —

1. before the end of the relevant assessment year; or

2. before the completion of the assessment,

   whichever is earlier.

Consequences of Late Submission or Filing of IT Return -

If return is submitted after the due date of submission of return of income, the following consequences will be applicable. These rules are applicable even if a belated return is submitted within the time-limit given above—

1. The assessee will be liable for penal interest under section 234A.

2. The assessee shall be liable for late filing fee under section 234F.

   • Late filing fee under section 234F is Rs. 5,000 (if the return is furnished after the due date but on or before December 31 of the assessment year) or

   • Rs. 10,000 (if return is furnished after December 31 of the assessment year).

   • However, in a case where the total income does not exceed Rs. 5 lakh, the late filing fee amount shall not exceed Rs. 1,000.

3. If return of loss is submitted after the due date, a few losses cannot be carried forward . However, CBDT has power under section 119(2) to condone delay in case of a return which is filed late and where a claim for carry forward of losses is made.

4. If return is submitted after the due date, deduction under sections 10A, 10B, 80-IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, 80-IC, 80-ID, 80-IE, 80JJA, 80JJAA, 80LA, 80P, 80PA, 80QQB and 80RRB will not be available.

Can Revised Return Be Filed [ Section 139(5)]

1. Conditions to Furnish a Revised Return of Income under Section 139(5)

If certain conditions are satisfied, a person may furnish a revised return of income under section 139(5).

The following conditions one has to satisfy—

1. Which Return can be Revised -

If any person, having furnished a return under section 139(1)/(4), discovers any omission or any wrong statement therein, he may furnish a revised return. From the assessment year 2017-18, even a belated return submitted under section 139(4) can be revised.

2. Omission or Wrong Statement -

Revised return can be filed only if the assessee discovers any omission or wrong statement in return originally filed.

3. Time-Limit -

   Revised return can be filed at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

For the assessment year 2019-20, a revised return can be filed up to March 31, 2020. If, however, the assessment is completed before March 31, 2020 (say on December 15, 2019), then revised return can be filed before December 15, 2019.

2. 'Completion of Assessment' in reference to Section 139(5):

The word assessment used in section 139(5) will refer to assessment made under section 143(3) and section 144. Assessment made under section 143(1) will not be treated as assessment for this purpose as such return can be revised even after the intimation under section 143(1) has been served.

Further, the return can be revised before the date of passing the order under section 143(3) or section 144 and not till the date of service of such order.

3. Can a Return Filed under section 139(3) or 139(4A) or 139(4B) or 139(4C) or 139(4D) be Revised:

As already stated that a return of loss submitted under section 139(3) or a return submitted under section 139(4A) or 139(4B) or 139(4C) or 139(4D) is deemed as if it were a return under section 139(1).

Therefore, a return submitted under section 139(3) or 139(4A), etc. can be revised under section 139(5).

4. Can a Return Filed within the time extended by CBDT be Revised:

Return filed within the period extended under section 119 i.e. extended by the CBDT beyond the due date mentioned under section 139(1) is a return filed under section 139(1).

It can therefore be revised under section 139(5).

5. Can a Return Furnished in response to Notice under Section 142(1) be Revised:

The notice under section 142(1) to file a return of income can be issued by the Assessing Officer to the assessee only after the due date mentioned under section 139(1). Thus return filed in response to a notice under section 142(1) is though filed after the due date prescribed under section 139(1) but as per section 139(5), such return can be revised. However, if the return in response to notice given under section 142(1) is furnished after the time allowed in the notice, it will be a return submitted under section 139(4) and such return cannot be revised as per the decision of the Supreme Court mentioned above.

Hence return submitted in response to notice under section 142(1) can be revised but any loss declared in either the original return filed in response to a notice under section 142(1) or in the revised return cannot be carried forward in view of section 80 read with section 139(3) as the original return has been filed after due date.

6. Can Revised Return be further Revised:

If the assessee discovers any omission or any wrong statement in a revised return, it is possible to revise such a revised return provided it is revised within the same prescribed time.

For example, if the return of income for assessment year 2016-17 is filed on 15.7.2016 and is revised on 15.4.2017 (before the assessment is completed), such revised return can still be revised at any time upto 31.3.2018, or before the completion of the assessment, whichever is earlier.

7. Revised Return substitutes the Original Return:

Once a revised return is filed, the originally filed return must be taken to have been withdrawn and substituted by the revised return. Thus where a return was filed under section 139(1) declaring income and later it is revised declaring a loss, the loss shall be allowed to be carried forward as the revised return shall substitute the original return which was filed with in time.

Similarly, where a return is filed declaring a loss within the time allowed under section 139(1) and such loss is increased in the revised return, such higher loss will be eligible for being carried forward.

8. Can a Return be Revised after receipt of Notice under Section 143(2) / Show cause notice under section 144:

As per the law (prior to the amendment made by the Finance Act, 2017, w.e.f. A.Y. 2018-19,) a return can be revised at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier.

Issue of notice under section 143(2) or show cause notice under section 144 means that the assessment is not yet completed. Therefore, original return, if submitted within the due date, can be revised even after issue of such notice. But the penalty under section 271(1)(c) for concealment of income may be levied on the additional income disclosed in the revised return.

What Is A Defective Or Incomplete Return [Section 139(9)]

1. What is a Defective or Incomplete Return

Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of 15 days from the date of such intimation. Such time may be extended by the Assessing Officer on an application made by the assessee.

If the defect is not rectified within 15 days, or the extended time so allowed, as the case may be, the return filed by the assessee shall be treated as invalid return and the consequences of the same will be as if no return has been filed by the assessee. However, if the assessee rectifies the defect even after 15 days, or the extended time, but before the completion of assessment, the Assessing Officer may condone the delay and treat the return as a valid return.

2. When a Return of Income is Defective ?

A return of income is regarded as defective in the following cases—

(1) Return Form has not been duly Filled -

All items in income-tax return form (i.e., ITR-1 to ITR-7) must be filled in the manner indicated in the return form. If any schedule of the relevant form is not applicable in the case of an assessee, it should be scored across as “.... NA....” If any item is inapplicable, one should write “NA” against it. One should write “NIL” to denote nil figure. No column or row should be left blank. Otherwise the return may be liable to be held defective or even invalid.

(2) Return of Income without Self-Assessment Tax -

Section 139(9) provides that the return of income shall be regarded as defective unless the tax together with interest, if any, payable in accordance with the provisions of section 140A has been paid on or before the date of furnishing of the return.  This provision has been amended by the Finance Act, 2016 from the assessment year 2017-18. After this modification, a return (which is otherwise valid) would not be treated as defective merely because selfassessment tax and interest payable in accordance with the provisions of section 140A, have not been paid on or before the date of furnishing of the return.

3. Defective or Incomplete Return of Income due to Annextures , Statements , Accounts etc. -

Under section 139(9), a few statements, reports, proof of pre-paid taxes, accounts, etc. should accompany the return of income, otherwise the return will become defective. However, it is not possible to attach any certificate or report or computation or final accounts with new incometax return forms. Likewise, it is not possible to attach proof of pre-paid taxes (like tax deducted/collected at source, advance payment of tax, self-assessment tax). The assessee should, therefore, retain these certificates, report, computation, final accounts, proof of pre-paid taxes with him. These may be furnished whenever the Assessing Officer wants to examine them in assessment proceedings or otherwise. Return of income will not become defective because of non-fulfilment of this requirement.