1992 (2) TMI 147 - AT - Income Tax

Summary

Issues Involved:
1. Validity of returns filed beyond the time allowed under section 139(1) and 139(4).
2. Justification for initiating action under section 147(a) and issuance of notices under section 148.
3. Obligation of the Assessing Officer to complete the assessment once notice under section 148 is issued.
4. Entitlement to carry forward and set off of unabsorbed depreciation, investment allowance, and deduction under section 80J.
5. Applicability of section 32(2) regarding unabsorbed depreciation.

Detailed Analysis:

1. Validity of Returns Filed Beyond the Time Allowed Under Section 139(1) and 139(4):
The assessee did not file returns within the time allowed under section 139(1) or section 139(4) for the assessment years 1978-79 and 1979-80. Returns were filed on 31st March 1983 disclosing losses, and fresh returns were filed on 11th October 1985 disclosing positive income. Both sets of returns were considered non est (invalid) as they were filed beyond the permissible time limits.

2. Justification for Initiating Action Under Section 147(a) and Issuance of Notices Under Section 148:
The Assessing Officer issued notices under section 148 on 16th May 1986 after recording reasons under section 147(a), prompted by the returns filed on 11th October 1985 disclosing income. The action was justified to adjust the tax paid based on the invalid returns. The returns filed in response to these notices disclosed losses, and the Assessing Officer, upon satisfaction that no income had escaped assessment, filed the proceedings.

3. Obligation of the Assessing Officer to Complete the Assessment Once Notice Under Section 148 is Issued:
The core issue was whether the Assessing Officer was bound to complete the assessment when no income had escaped assessment. Section 147 empowers the Assessing Officer to reassess escaped income, but if no income has escaped, the proceedings can be dropped. The Supreme Court's decision in Anglo French Textile Co. Ltd. established that if no return was filed within the allowed time, the assessee has no right to demand loss determination. The Assessing Officer, therefore, was not compelled to complete the assessment once satisfied that no income had escaped.

4. Entitlement to Carry Forward and Set Off of Unabsorbed Depreciation, Investment Allowance, and Deduction Under Section 80J:
The assessee claimed entitlement to carry forward unabsorbed depreciation, investment allowance, and deduction under section 80J despite filing returns late. The CIT(A) upheld the Assessing Officer's decision, relying on the Supreme Court's ruling in Anglo-French Textile Co. Ltd., which stated that the assessee could not claim loss determination if no return was filed within the allowed time. The Tribunal agreed, noting that no assessments were made for the years in question, and therefore, the claims could not be allowed.

5. Applicability of Section 32(2) Regarding Unabsorbed Depreciation:
For the assessment year 1984-85, the issue was whether the assessee could carry forward and set off unabsorbed depreciation from 1978-79 and 1979-80. The Tribunal held that section 32(2) allows carry forward of unabsorbed depreciation without the conditions applied to business losses under section 80. However, since no valid returns were filed and no assessments were made for 1978-79 and 1979-80, the unabsorbed depreciation could not be carried forward. The Tribunal emphasized that section 32(2) presupposes an assessment where full effect cannot be given to the depreciation allowance, which was not the case here.

Conclusion:
The appeals for the assessment years 1978-79 and 1979-80 were dismissed, affirming that the Assessing Officer was not obligated to complete the assessment once satisfied that no income had escaped. For the assessment year 1984-85, the Tribunal ruled that unabsorbed depreciation could not be carried forward due to the lack of valid returns and assessments for the earlier years. The Tribunal's decisions were based on established legal precedents and statutory provisions.