COVID-19-Related Delay in Filing ITR Does Not Permit Set-Off of Capital Gains Against Carry-Forward Losses in Subsequent Assessment Year: ITAT

The Income Tax Appellate Tribunal, (ITAT) Delhi Bench, has dismissed the appeal of Noida resident Tanisha Chaudhary for Assessment year 2024-25. The case was related to her claim for setting off capital gains earned in 2024-25 against a short-term capital loss (STCL) of Rs 62.74 lakh incurred in Assessment Year 2020-21.

The tribunal condoned a delay of 89 days in filing the appeal holding that the delay was not intentional and was caused by bona fide reasons. The bench after admitting the appeal examined the issue on merits.

As per records, the taxpayer had filed her income tax return for AY 2020-21 on March 23, 2021, declaring short-term capital loss of Rs. 62,74,635. The return was filed 72 days after the due date of January 10, 2021. Later she tried to carry forward this loss and set off against capital gains earned in AY 2024-25.

The taxpayer claimed that the Covid-19 pandemic caused a delay in filing the return for the year 2020-21 and therefore it was a reasonable cause. Her counsel also relied upon the decision of the Supreme Court in CIT vs. Kullu Valley Transport Co. Pvt. Ltd. and submitted that even a belated return under the relevant provisions should be considered as valid for the purpose of loss carry forward.

The Income Tax Department objected to the claim and said that Section 80 of the Income Tax Act clearly states that a taxpayer needs to file the return within the time prescribed under Section 139(1) if he wants to carry forward losses. The department said the benefit could not be granted because the return was filed after the deadline.

After reviewing the matter, ITAT observed that the claim of the taxpayer for carry forward of the loss has already been rejected when the return for AY 2020-21 was processed under section 143(1).

The tribunal stated that “it is not emerging from the record that the assessee had, at any point of time, filed an application before the appropriate authority seeking extension of time for filing the return of income or had filed any application for condonation of delay in filing the return of income for A.Y. 2020-21″.

The bench further held that any challenge to the denial of loss carry-forward should have been made when the AY 2020-21 return was processed. The tribunal stated that proceedings for AY 2024-25 could not be used to seek relief against a disallowance that arose in AY 2020-21.

Distinguishing the Supreme Court ruling in Kullu Valley Transport Co., the tribunal said that the facts of the present case were different. It held that the taxpayer was effectively attempting to reopen an issue that had already been decided in an earlier assessment year.

As a result, ITAT dismissed the appeal and upheld the denial of the claim.