V. V. KAMAT, J. :

The Revenue, under s. 256(2) of the IT Act, 1961, desires reference of the following questions :

"1. Whether, on the facts and in the circumstances of the case, and also in the light of the relevant provisions, the assessee is entitled to carry forward any loss

2. Whether, on the facts and in the circumstances of the case and also considering the relevant provisions and the provision contained in sub-s. (10) of s. 139 which retrospectively came into force from 1st April, 1986, the Tribunal is right in law in holding that the assessee is entitled to have the loss carried forward

3. Whether, on the facts and in the circumstances of the case and since the AO had extended time only upto 30th Sept., 1986, and return filed on 10th Oct., 1986, being one within the further extension of time applied for by the assessee (and on which no order was passed by the officer) the Tribunal is right in law in holding that "therefore, in view of the proviso to s. 139(1) as it stood then, the assessee is entitled to have the loss carried forward "

The factual matrix takes us to the situation as to whether the ITO has discretion in the matter and whether the discretion has been properly ordered by the Tribunal to have applied to the facts and circumstances of the case.

2. The question relates to the asst. yr. 1986-87 in regard to which in the first instance a return was filed on 10th Oct., 1986. Obviously the AO acting under s. 143(1) accepted the loss shown in the return amounting to Rs. 34,54,499 to be carried forward. However, it was held that the assessee would not be entitled for the benefit of carry forward of the loss because the return of income was not furnished within the time allowed under s. 139(3) of the Act. This was with regard to the asst. yr. 1986-87.

3. For the asst. yr. 1987-88 also the AO refused to allow carry forward of loss on the same ground that the return was filed beyond the due date.

4. The matter was taken up before the first appellate authority - the CIT(A). The authority has found that for the asst. yr. 1986-87 the assessee had been granted extension of time upto 30th Sept., 1986. As the return was filed beyond the time allowed under s. 139(3) of the Act, it was held that the assessee was not entitled to carry forward the loss determined in the assessment. For the asst. yr. 1987-88 also the first appellate authority confirmed the order of the AO on the ground that in terms of s. 139(3) r/w s. 139(10), the loss could not be carried forward and set off.

5. The matter came up before the Tribunal. Factually, the Tribunal has recorded that initially extension of time till 30th Sept., 1986, was granted and the assessee had again applied for extension of time upto 15th Oct., 1986, and it was within this time, in regard to which extension was applied for, the return in question came to be filed on 10th Oct., 1986, it was within the further extension of time applied for by the assessee. The Tribunal took the view that on the facts and circumstances stated above, the assessee would be entitled to have the loss carried forward. The Tribunal has observed that it is the AO who is in the seisin of the assessment proceedings having positive income to decide whether the loss of the previous year is to be carried forward for set off and pass appropriate orders bearing in mind the facts and circumstances of the case.

6. With regard to the asst. yr. 1987-88 the Tribunal also has recorded that although the assessee had to file the return on or before 31st July, 1987, an application for extension of time for filing the return upto 30th Sept., 1987, was also made and actually the return showing the loss was also filed on 30th Sept., 1987. This was also not allowed to be carried forward by the AO in regard to assessment proceedings under s. 143(1) of the Act, holding that the loss returned was filed beyond the time allowed under s. 139(3) of the Act.

7. In the process of reasoning reliance is placed by the Tribunal on the decision of the Supreme Court in CIT vs. Manmohan Das : [1966]59ITR699(SC) and other two decisions of the Bombay High Court for the proposition that the AO is to be considered to be in the seisin of the situation.

8. The learned senior tax counsel brought to our notice the later decision of the Supreme Court in CIT vs. Dalmia Cement Bharat Ltd. : [1995]216ITR79(SC) wherein, according to the learned counsel, the earlier decision (supra) of the apex Court has been taken up for consideration. In Dalmia Cements case, the apex Court was concerned with regard to the question of quantification of the losses for the purpose of set off and the provisions of s. 24 of the Indian IT Act, 1922, in regard thereto. The assessees therein had applied for extension of time and had, in fact, obtained extension from the ITO himself and the question was not at all res integra. In the process of reasoning in relation to Manmohan Das case (supra), it is tersely observed in the context of the question under consideration of the apex Court that the principle of the said decision is of no relevance to the facts and circumstances of the cases before the Supreme Court. Even then, it is observed that the question whether the loss determined for the previous year is to be carried forward or set off against the income of the succeeding year would be a matter to be decided by the ITO dealing with the assessment relating to the subsequent year in which year the loss is sought to be set off by carrying it forward from the previous year (see pp. 90 and 91 in the paragraph at the bottom of p. 90).

9. In our judgment, these observations are in perfect consonance with the statutory provision of s. 139(3) of the IT Act, 1961. The language speaks of the ITO acting "in his discretion" and dealing with a situation where an application is presented by the assessee within the time allowed under s. 139 sub-s. (1) of the Act specifying a return of loss. In our judgment, the assessee had applied for extension of time. It was to be considered and could not be stated to have been rejected. If the Tribunal has considered the position as a proper case for use of discretion in the matter, and accordingly what has been done is carrying forward of the loss of the previous year, no question of law can be said to have flown from the factual matrix and the situation dealt with by the Tribunal.

For the above reasons the petition stands dismissed.