1986 (5) TMI 58 - AT - Income Tax

Summary

Issues:
1. Jurisdiction under section 147(a) before issuing notice under section 148.
2. Entitlement to deduction of current year's depreciation allowance and set off of past years' losses, depreciation, and deductions under section 80J.

Jurisdiction under section 147(a) before issuing notice under section 148:
The case involved the assessment year 1979-80, with the main issue being the jurisdiction of the Income Tax Officer (ITO) under section 147(a) before issuing a notice under section 148. The ITO issued a notice under section 148 without the assessee filing a return of income, claiming that income had escaped assessment. However, the Tribunal found that the ITO did not have sufficient material to form a reasonable belief that income had escaped assessment. The ITO's reasons for invoking jurisdiction did not specify the income that had escaped assessment, merely stating the turnover of the assessee was high. The Tribunal noted the past history of losses incurred by the assessee and concluded that the ITO wrongly assumed jurisdiction under section 147(a), rendering the notice under section 148 invalid.

Entitlement to deduction of current year's depreciation allowance and set off of past years' losses, depreciation, and deductions under section 80J:
The second issue revolved around the assessee's entitlement to deduction of the current year's depreciation allowance and the set off of past years' losses, depreciation, and deductions under section 80J. The assessee filed a return of loss after the time allowed under the Income Tax Act, which the ITO did not consider. The Tribunal, following a precedent set by the Supreme Court, held that a loss return filed after the allowed period should be treated as a return under section 139(4) if filed before the assessment is completed. Consequently, the Tribunal reversed the order of the Commissioner of Income Tax (Appeals) and directed the ITO to determine the claims made by the assessee and pass a fresh assessment order, allowing the appeal.

In conclusion, the Tribunal found that the ITO wrongly assumed jurisdiction under section 147(a) and that the assessee was entitled to the deduction of the current year's depreciation allowance and the set off of past years' losses, depreciation, and deductions under section 80J. The appeal was allowed in favor of the assessee.