Return of Loss [Section 139(3) read with Section 80]

Under Section 139(3) of the Income Tax Act, 1961, taxpayers can file a Return of Loss to carry forward certain losses to future years, subject to conditions under Section 80. Here’s a detailed breakdown:

1. Applicability & Key Conditions

• Who Can File?
  • Individuals, HUFs, firms, companies, etc., who incur losses under:
    • Business/Profession(including speculative business).
    • Capital Gains(short-term or long-term).
    • Owning racehorses(Section 74A).
  • Exception: Loss under House Property(Section 71B) can be carried forward even if filed late.
• Mandatory Filing for Firms/Companies:
  • Firms/companies mustfile a loss return to carry forward losses.

2. Due Date for Filing

• Section 139(1) Deadline:
  • Loss returns must be filed by the original due date(e.g., 31 July 2025 for FY 2024-25 for non-audit cases).
  • Late filing (under Section 139(4)) disqualifiescarry-forward of losses (except house property).

3. Carry-Forward Rules (Section 80)

• Losses Eligible for Carry-Forward:

• Unabsorbed Depreciation:
  • Can be carried forward even if filed late(governed by Section 32(2), not Section 80).

4. Key Exceptions & Clarifications

• Revised Returns (Section 139(5)):
  • Losses can be revised only if the original return was filed on time.
  • Belated returns cannotbe revised to claim fresh losses.
• Set-Off in the Same Year:
  • Current-year losses can be set off against other incomeeven if filed late (but cannot be carried forward).

5. Penalties for Non-Compliance

• Late Filing:
  • Losses (except house property) cannot be carried forward.
  • Penalty of ₹5,000 under Section 271F(if income > ₹5 lakh)

1.  Power to Condon Delay in Filing a Return of Loss [Circular No. 9/2015, dated 9.6.2015]

Under Circular No. 9/2015, the CBDT has outlined the framework for condoning delays in filing returns of loss under Section 119(2)(b) of the Income Tax Act, 1961. This allows taxpayers to carry forward losses even if filed late, provided certain conditions are met.

1. Key Provisions of Circular No. 9/2015

(A) Who Can Apply?

• Taxpayers who missed filing loss returns(e.g., business loss, capital loss) by the due date under Section 139(1) or 139(3).
• Applies to individuals, firms, companies, etc., but notfor house property losses (which can be carried forward even if filed late).

(B) Time Limit for Application

• 6 yearsfrom the end of the relevant Assessment Year (AY).
  • Example: For AY 2025-26 (FY 2024-25), the last date is 31 March 2032.
• Exception: If the loss claim arises from a court order, the pendency period in court is excluded, but the application must be filed within 6 monthsof the court order.

(C) Monetary Limits & Approving Authorities

(Revised limits effective from 1 June 2023).

2. Conditions for Condonation

• Genuine Hardship: The delay must be due to unavoidable circumstances(e.g., illness, natural calamities, legal disputes).
• Correctness of Claim: The loss must be genuineand verifiable (AO may scrutinize books of accounts).
• No Interest/Refund Benefit:
  • No interestis payable on belated refunds arising from condonation.
  • Applies only to loss carry-forward, not refunds.

3. Procedure for Filing a Condonation Request

1. Submit Application:
   • Online: Via Income Tax e-filing portal under “Condonation Request”.
   • Offline: Manual application to the jurisdictional CIT/CCIT.
2. Supporting Documents:
   • Proof of hardship (medical certificates, court orders, etc.).
   • Audited financials (if applicable).
3. Disposal Timeline:
   • Authorities must decide within 6 monthsof receiving the application.