Last updated: March 30th, 2020 1:42 PM

Loss Return Filing - Income Tax

A loss return is a communication forwarded by a taxpayer to the Income Tax department, informing that there is a loss incurred for a financial year. Typically, the purpose of filing a loss return is to enable the taxpayer to carry forward the loss to future periods. Losses are inevitable while pursuing a business. Loss return filing provides the option to carry forward losses, as well as the option of setting-off against income arising in the future years. Setting off losses means the setting of losses in one head, against gains in another. Loss return can be filed by an assessee who 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 those losses to be carried forward. Filing of income tax returns is mandatory for a company or firm, but not compulsory in the case of individuals or other taxable entities. However, loss return filing must be submitted before the due date in order to carry forward the losses.

Condonation of Delay - Loss Return

As mentioned above, loss return must be filed before the due date to carry forward the losses. However, in rare cases, delay in filing of loss return can be condoned. In this article, we examine the responsibilities of different personnel with regards to the same, as well as the conditions which determine the rights of the personnel.

• The Principal Commissioner of Income-tax/Commissioners of Income-tax has the power to accept/reject a delayed application of claim of loss, provided that the amount of such claims do not exceed rupees 10 lakhs for any assessment year.
•  The Principal Chief Commissioners of Income Tax/Chief Commissioners of Income-tax has the power to accept/reject a delayed application of claim of loss, provided that the amount of such claim exceeds 10 lakhs but isn't more than 50 lakhs for any assessment year.
• If the claim of exemption exceeds 50 lakhs, the decision to accept/reject delayed application of claim of loss would be vested with the Board.
• The delay can be condoned for not more than six years from the end of the assessment year.
• A condonation application must be attempted to be disposed off within six months from the end of the month in which the application is received by the competent authority.

Conditions for Acceptance/Rejection

The power of accepting/rejecting the delay will be subject to the following conditions:

• While taking the decision, the concerned officer must ensure the authenticity of the loss declared, and that the case is of genuine hardship on merits.
• The concerned officer must empower the jurisdictional assessing officer to make the necessary inquiries or scrutinize the case in accordance with the provisions of the Act, in order to ascertain the correctness of the claim.

Loss Carry Forward - Irrespective of Late Filing

The due date for submission of on-time income tax return is mandatory only in case of business loss, speculation loss, capital loss or loss on account of owing and maintaining the horses for the purpose of racing. Loss on account of house property can be carried forward even if the return is submitted late. Further, depreciation not absorbed can be carried forward even if loss return is submitted after the due date. It must also be noted that the set-off of losses of the current year is not prohibited in the late filing of loss return.