2007 (11) TMI 248 - HC - Income Tax

Return filed pursuant to notice u/s 148 even where the assessee is called upon to file a return by a notice u/s148 of the Act by a fiction created by law, it would be deemed that the notice was issued u/s 139(2) loss determined in reassessment proceedings assessee would be entitled to carry forward the loss to the subsequent assessment year in terms of section 80 - question is, therefore, answered in favour of the assessee and against the Revenue

Summary

Issues:
1. Eligibility for carry forward of losses based on the return filed in response to notice under section 148 of the Income-tax Act, 1961.

Analysis:
The case involved a question referred by the Income-tax Appellate Tribunal regarding the eligibility of the assessee to carry forward losses determined for the year based on a return filed in response to a notice under section 148 of the Income-tax Act. The assessee, an individual, did not file a return for the assessment year 1984-85 initially. However, upon receiving a notice under section 148, the assessee filed a return on November 25, 1987, declaring a loss. The Assessing Officer processed the return but disallowed the carry forward of the loss as it was not filed within the time allowed under section 139(3) of the Act.

The Commissioner of Income-tax (Appeals) ruled in favor of the assessee, citing decisions from the Calcutta High Court and Madhya Pradesh High Court, directing the Assessing Officer to allow the benefit of carrying forward the loss. However, the Revenue appealed to the Tribunal, which disagreed with the Commissioner's decision. The Tribunal held that the return filed under section 148 was not a voluntary return under section 139(4) and was filed after the prescribed time, thus ineligible for carry forward.

Nevertheless, the Tribunal ruled in favor of the assessee based on the provisions of section 148, which include the requirements of section 139(2) by law. The Tribunal held that the return filed in response to a notice under section 148 should be treated as a return under section 139(2) of the Act, making the assessee eligible to carry forward the loss under section 80 of the Act.

The judgment analyzed various sections of the Income-tax Act, including sections 80, 139, and 148, to determine the eligibility of the assessee for carrying forward losses. The court emphasized that the return filed under section 148 should be deemed as filed under section 139(2) by legal fiction, entitling the assessee to the benefit of carrying forward losses. The judgment referenced precedents from the Calcutta High Court and the Madhya Pradesh High Court to support the interpretation of the law in favor of the assessee.

In conclusion, the court held that even if the return was not filed within the time specified under section 139(3) or 139(4), filing it in accordance with section 139(2) based on a notice under section 148 would entitle the assessee to carry forward losses under section 80 of the Income-tax Act. The judgment was delivered in favor of the assessee, and a copy was directed to be forwarded to the Tribunal for compliance.