Vildirect: IncomeTax-caselaws-1983-VIL-449-MP-DT

1983-VIL-449-MP-DT

Equivalent Citation: [1983] 143 ITR 99, 34 CTR 290, 14 TAXMANN 257

MADHYA PRADESH HIGH COURT

Date: 07.04.1983

CO-OPERATIVE MARKETING SOCIETY LIMITED

COMMISSIONER OF INCOME-TAX, MP -I, BHOPAL

BENCH

Judge(s) : G. G. SOHANI., R. K. VIJAYVARGIYA

JUDGMENT

The judgment of the court was delivered by

SOHANI J.-By this reference under s. 256(1) of the I.T. Act, 1961 (hereinafter referred to as " the Act "), the Income-tax Appellate Tribunal, Indore Bench, has referred the following questions of law to this court for its opinion:

(1) On the facts and in the circumstances of the case, whether the Tribunal is right in law in holding that the AAC was justified in declining to allow the benefit of carry forward and set off of the losses computed by the ITO in respect of the assessment years 1972-73 and 1973-74.

(2) On the facts and in the circumstances of the case, whether the assessee is entitled to carry forward and set off the losses under the provisions of the Income-tax Act, 1961 ?

(3) Whether the substantial provisions of section 139 are inherently attracted in proceedings u/s. 148 read with section 147 in view of the specific reference of section 139 in section 148, viz., 'and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were notice issued under that sub-section, and in view of this legal position whether the assessee is entitled to carry forward and set off the loss in terms of section 80 of the I.T. Act since the returns filed as a consequence of the proceedings u/s. 148 amply attract and invoke the provisions of section 139(2) of the Income-tax Act, 1961 ?

The material facts giving rise to this reference briefly are as follows:

For the assessment years 1972-73 and 1973-74, notices under s. 148 of the Act were served on the assessee on 29th August, 1974. The assessee filed returns of its income for the said years on 20th February, 1975, declaring losses. The ITO computed the losses of the assessee for the assessment year 1972-73, at Rs. 1,35,000 and for the assessment year 1973-74 at Rs. 1,32,000 but he declined to carry forward these losses for the purpose of set-off during the subsequent years on the ground that the returns were not filed within the time allowed by the provisions of s. 139 of the Act. On appeal, the AAC upheld the decision of the ITO. On further appeal, the Tribunal held that the returns of income for the assessment years in question were filed by the assessee after service of notice under s. 148 of the Act and in these circumstances, the returns could not be said to have been filed by the assessee in pursuance of the provisions of s. 139 of the Act. The Tribunal also rejected the contention advanced on behalf of the assessee that the returns were filed by the assessee under s. 139(4)(a) of the Act. In this view of the matter the Tribunal dismissed the appeal. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid questions of law have been referred to this court for its opinion.

Now, though three questions have been referred by the Tribunal, the answer to question No. 1 will be decisive. That answer will turn on the construction of s. 80 of the Act, which reads as under:

" 80. Submission of return for losses.-Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed under section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or subsection (1) of section 74 or subsection (3) of section 74A

From the aforesaid provision it is clear that in order that loss can be carried forward and set off under s. 72(1) or 73(2) or 74(1) of the Act such loss should have been determined in pursuance of a return filed under s. 139 of the Act. The question for consideration, therefore, is whether in the instant case the loss can be said to have been determined in pursuance of a return filed under s. 139 of the Act ?

Now in the instant case, the assessee filed returns in response to notice issued to the assessee under s. 148 of the Act. It is not disputed that the assessee had not filed any relevant returns of its income nor was it assessed for the relevant assessment years before notices were issued under s. 148 of the Act. Section 148 of the Act reads as under:

" 148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation tinder section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.

(2) The Income-tax Officer shall, before issuing any notice tinder this section, record his reasons for doing so.

The aforesaid provisions make it clear that the provisions of the Act shall, so far as may be, apply as if the notices were issued under s. 139(2) of the Act. It was urged on behalf of the assessee that there was nothing in the language of s. 80 of the Act which rendered the provisions of s. 139(2) of the Act inapplicable in the case of a return filed by an assessee to whom notice had been issued under s. 148 of the Act to file a return to enable the ITO to assess the income of the assessee as he had not been assessed till then and had failed to file a return under s. 139(1) of the Act. It is, however, not necessary to deal with this aspect of the matter any further, because, in the instant case, there is another aspect of the matter which, in our opinion, is decisive. It is admitted by the Department that returns had been filed by the assessee before the end of the period specified in cl. (b) of sub-s. (4) of s. 139 of the Act. It is true that the provisions of s. 139(3) of the Act cannot be said to have been complied with by the assessee but as held by the Supreme Court in CIT v. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518, sub-ss. (1) and (4) of s. 139 of the Act are to be read together and an assessee would be entitled to carry forward the loss if he has filed a return after the period prescribed by subs.(1) of s. 139 of the Act but within the time allowed under sub-s. (4) of s. 139 of the Act. In the instant case returns have been filed within the time allowed under sub-s. (4) of s. 139 of the Act. Hence, the loss determined by the ITO for the relevant assessment years can be said to be loss determined in pursuance of returns filed under s. 139 of the Act. In this view of the matter it must be held that the Tribunal was not right in law in holding that the AAC was justified in law in declining to allow the benefit of carry forward and set off of the losses computed by the ITO in respect of the assessment years 1972-73 and 1973-74.

For all these reasons our answer to question No. 1 referred to this court by the Tribunal is in the negative and against the Revenue. In view of our answer to question No. 1 it is not necessary to answer questions Nos. 2 & 3.

Reference answered accordingly.

Parties shall bear their own costs of this reference.

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