1984 (5) TMI 64 - AT - Income Tax

Summary

Issues:
- Entitlement of the assessee company to determine and carry forward its loss despite filing returns in response to notice under s. 148 r/w s. 147(a) of the IT Act, 1961.

Detailed Analysis:

1. The main issue in this case revolves around whether the assessee company is entitled to have its loss determined and carried forward despite filing returns in response to a notice under s. 148 r/w s. 147(a) of the IT Act, 1961. The company, engaged in the production of cinematographic feature films, declared a loss for the assessment years 1974-75 and 1975-76 after being issued notices by the Income Tax Officer (ITO). The ITO, however, found discrepancies in the company's accounts, including excessive expenses claimed against royalty receipts and unreported income from a film release. Consequently, the ITO determined the total income of the assessee as 'Nil' for both assessment years due to the late filing of returns.

2. Upon appeal, the Commissioner of Income Tax (Appeals) (CIT (A)) rejected the assessee's argument that the ITO should have computed the losses for each year. The CIT (A) held that since the assessee did not file returns voluntarily within the stipulated time but in response to a notice under s. 148, the company could not claim benefits it would have had if the assessments were not reopened. The CIT (A) further stated that the ITO could have chosen not to proceed with the assessments, which would be deemed as dropped assessments. Consequently, the appeals by the assessee were dismissed, leading to further appeals to the Tribunal.

3. During the Tribunal proceedings, the assessee's counsel argued that the company was unable to file returns timely due to the IT Department seizing its books of account. The counsel contended that the returns filed in response to the notice under s. 148 r/w s. 147(a) should be treated as returns under s. 139(2), allowing for the determination of business losses and their carry forward. Citing legal precedents from the Madras and Calcutta High Courts, the counsel supported the argument for the assessee's entitlement to the losses.

4. The Departmental representative, on the other hand, argued that the returns filed by the assessee did not fall under any specific section of the IT Act, as they were not filed within the statutory periods outlined in s. 139(1), 139(2), or 139(4). The representative also contested the relevance of the legal precedents cited by the assessee's counsel.

5. The Tribunal carefully reviewed the submissions and relevant case law. It noted that the assessee did not file returns within the prescribed time limits under s. 139(1) and 139(4) for the assessment years in question. As per the provisions of s. 139(3) of the IT Act, a person who has not been served with a notice under s. 139(2) and has sustained a loss must file returns within the specified time to carry forward such losses. Since the assessee failed to meet these requirements and only declared losses in response to a notice under s. 148 r/w s. 147(a), the Tribunal held that the company was not entitled to determine and carry forward the losses.

6. The Tribunal emphasized that the reassessment proceedings under s. 147(a) are intended to address under-assessed income or excessive relief, not to grant relief for loss determination and carry forward. Referring to the legal precedents cited by the assessee, the Tribunal clarified that those cases were distinguishable as they involved different circumstances where returns were filed within the statutory time limits. Ultimately, the Tribunal upheld the decision of the CIT (A) for both assessment years, resulting in the dismissal of the assessee's appeals.

7. In conclusion, the Tribunal ruled that the assessee company was not entitled to have its losses determined and carried forward as claimed, given the failure to file returns within the specified time limits under the IT Act. The decision was based on the clear provisions of the law and the purpose of reassessment proceedings under s. 147(a) to address specific income-related issues, not loss determination and carry forward.