1993 (3) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Whether the business loss claimed in the return filed in response to notice u/s 148 can be allowed to be carried forward.
2. Interpretation of section 148 in relation to section 139(2) and section 80 of the Income-tax Act, 1961.

Summary:

Issue 1: Business Loss Claimed in Return Filed in Response to Notice u/s 148
The Tribunal held that the business loss of Rs. 5,41,220 claimed in the return filed in response to notice u/s 148 could not be allowed to be carried forward. The return filed on September 25, 1981, in response to the notice u/s 148 was not considered as a return filed u/s 139(2) and within the time specified in section 80 of the Income-tax Act, 1961. The Tribunal confirmed the view of the Commissioner of Income-tax (Appeals) and rejected the appeal of the assessee.

Issue 2: Interpretation of Section 148 in Relation to Section 139(2) and Section 80
The Tribunal and the High Court examined whether the return filed in response to notice u/s 148 could be treated as a return filed u/s 139(2). The Tribunal concluded that the purpose of notice u/s 148 was distinct from that of section 139(2). The High Court supported this view, stating that section 148 is a machinery provision for assessing escaped income and does not equate to section 139(2) for the purpose of assessing losses for the first time. The High Court emphasized that section 147 and section 148 are designed to address income escaping assessment and not for the initial determination of losses. The court also noted that section 80 mandates that only losses determined in pursuance of a return filed u/s 139 are eligible for carry forward and set off.

The High Court referred to the decision in Burdwan Wholesale Consumers' Co-operative Society Ltd. v. CIT [1991] 191 ITR 570 (Cal), which supported the assessee's claim. However, it distinguished the facts of the present case and followed the principle laid down in older decisions, including Satyendra Mohan Roy Chowdhury, AIR 1930 Cal 627 [FB], which held that section 147 is meant exclusively for the benefit of the Revenue and not for the benefit of the assessee in terms of carrying forward losses.

The High Court concluded that the fiction under section 148 does not extend to entitling an assessee to file a return of loss for carry forward and set off purposes. The court highlighted that the amended provision of section 80, effective from April 1, 1985, prohibits the determination of loss and its carry forward except where the return is filed u/s 139(1) or u/s 139(2).

Conclusion:
The High Court answered the question in the affirmative and in favor of the Revenue, holding that the business loss claimed in the return filed in response to notice u/s 148 cannot be allowed to be carried forward. There was no order as to costs.