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TMI Blog1984 (9) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... of business or profession '. It may be mentioned at this stage that under the provisions of section 139(4) of the Act, the period of limitation, which permitted the assessee to voluntarily furnish a return where a return had not been filed within the time allowed under sub-section (1) or (2) of section 139, was two years from the end of the assessment year. Therefore, if this was to be treated as a voluntary return under section 139(4), the return should have been filed before 31-3-1981. But, that was not the case. Therefore, the return filed was construed and considered as one filed under section 148 alone. The ITO issued a notice under section 143(2) of the Act to the assessee on 29-1-1982, fixing the hearing for 10-2-1982. The case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner went on to observe that the Mysore High Court had held in the case of S. Natarajan v. CIT [1964] 52 ITR 882 that the scope of an equiry under section 147 of the Act was very limited and the assessee was not entitled to carry forward the loss if the return of income was not filed within the time allowed under section 139(4). Following the decision of the Mysore High Court, the Commissioner dismissed the appeal. 2. Before us, the learned counsel for the assessee submitted that losses are nothing but negative profits and where notice under section 148 was issued and a return was filed, the ITO was bound to process the return even if only a loss was shown. In support of his contention, he relied on the decision of the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, he contended that the provisions of section 139(2) applied to notices issued under section 148. Finally, be submitted that after the case was examined, the ITO could not just drop the proceedings. 3. The learned departmental representative submitted that the present case was fully covered by the ratio of the decision of the Tribunal in ITO v. A.Y. Apte [1983] 3 ITD 553 (Pune). He further submitted that it was open to the ITO to drop proceedings under section 147, where he found that there was no liability to tax. 4. We have considered the rival submissions in the present case, the proceedings were initiated under section 147(a). The provisions of section 147 read as under : " If --- (a) the Income-tax Officer has reason to belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section." [Emphasis supplied] The criterion for assuming jurisdiction under section 147(a) is that the ITO should have reason to believe that income chargeable to tax had escaped assessment. The Explanation also provides certain instances, where it would be deemed that income chargeable to tax had escaped assessment. At the stage of initiation of proceedings, formation of believe, which has a reasonable nexus with the facts as ascertained, is sufficient. The adequacy of the reasons cannot be gone into by any appellate body or Court. After initiating proceedings, notice is issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings on his own. The question that arises is whether he was competent to drop the proceedings or the only course open to him was to frame an assessment determining a loss. The provisions of section 147(a), which we have set out clearly show that action is taken for bringing within the tax net ' income chargeable to tax which has escaped assessment '. The whole exercise is for bringing to tax not income in its general sense (which may in certain cases include also negative income, i.e., a loss), but income chargeable to tax, which construes only positive income because negative income can never be chargeable to tax. A loss per se does not also fall within deemed ' income chargeable to tax ' as defined in Explanation 1 to section 147. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt's case dealt expressly with the scope of enquiry under section 34 of the Indian Income-tax Act, 1922, which was not the issue before the Supreme Court. 6. The learned counsel had also placed before us a copy of an order of the Bench of this Tribunal in IT Appeal Nos. 523 and 524 (Hyd.) of 1982, dated 31-1-1983. We do not find any observations in the aforesaid order, which would go, to support the stand of the assessee. On the other hand, the Tribunal itself had observed that it was open to the ITO to have dropped proceedings, once he found that there was no taxable income. We would also state that our conclusion that the assessee is not entitled to the determination of the loss on the facts of the present case and that the dropping of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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