1991 (11) TMI 85 - AT - Income Tax

Amnesty Scheme, Carry Forward, Orders Prejudicial To Interests, Speculation Business, Speculation Loss

Issues Involved:
1. Validity of returns filed under the Amnesty Scheme.
2. Eligibility for carry forward of speculation losses.
3. Applicability of section 263 of the Income-tax Act.
4. Compliance with statutory provisions under sections 73, 80, 139(3), and 157.
5. Immunity from penalties and interest under the Amnesty Scheme.

Detailed Analysis:

1. Validity of Returns Filed Under the Amnesty Scheme:
The assessee submitted returns for the assessment years 1981-82 to 1984-85 under the Amnesty Scheme. The returns showed positive income and claimed speculation losses. The Income Tax Officer (ITO) completed the assessments under section 143(1) without specific findings on speculation losses. The Commissioner of Income-tax (CIT) issued a show-cause notice under section 263, arguing that these assessments were erroneous and prejudicial to the interest of revenue. The CIT contended that the returns were filed beyond the time allowed under section 139(1), making the claimed losses ineligible for carry forward.

2. Eligibility for Carry Forward of Speculation Losses:
The assessee argued that the returns were covered by the Amnesty Scheme and that the income disclosed was true and real. The CIT, however, noted that the returns were filed beyond the period prescribed under section 139(4). The CIT held that the ITO did not consider the provisions of sections 73, 80, 139(3), and 157, which govern the carry forward and set off of speculation losses. The CIT concluded that the assessments were completed without necessary and relevant enquiries, making them erroneous and prejudicial to the interest of revenue.

3. Applicability of Section 263 of the Income-tax Act:
The CIT invoked section 263, arguing that the ITO's assessments were erroneous and prejudicial to the interest of revenue. The CIT directed the ITO to make fresh assessments after due enquiries. The assessee contended that the assessments were in line with the Amnesty Scheme circulars and should not be revised under section 263. The CIT, however, maintained that the ITO failed to verify the correctness of the speculation losses and did not consider the relevant legal provisions.

4. Compliance with Statutory Provisions Under Sections 73, 80, 139(3), and 157:
The Tribunal noted that section 73 governs the carry forward and set off of speculation losses, which can only be set off against speculation profits. Section 80 requires that a loss must be determined in pursuance of a return filed within the time allowed under section 139(3). The Supreme Court in CIT v. Kulu Valley Transport Co. (P.) Ltd. held that returns filed beyond the period prescribed under section 139(4) are not eligible for carry forward of losses. The Tribunal observed that the ITO did not consider these provisions, making the original assessments erroneous.

5. Immunity from Penalties and Interest Under the Amnesty Scheme:
The Tribunal noted that the Amnesty Scheme circulars did not relax statutory restrictions on the carry forward of losses. The Tribunal held that if the figures of speculation losses were found to be correct, the assessee would be entitled to immunity from penalties and interest, as assured in the circulars. The Tribunal referred to the Gujarat High Court judgment in Taiyabji Lukmanji, which emphasized the credibility of the department and the importance of honoring assurances given under the Amnesty Scheme.

Conclusion:
The Tribunal upheld the CIT's order under section 263, directing the ITO to make fresh assessments after necessary enquiries. The Tribunal observed that if the speculation losses were found to be true and complete, the assessee would be entitled to immunity from penalties and interest as per the Amnesty Scheme circulars. The appeals were dismissed.

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