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TMI Blog1993 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... turn under section 139(1) of the Act by June 30, 1978. The assessee did not submit any voluntary return even within the time prescribed under section 139(4)of the Act. Subsequently, in response to notice under section 148 of the Act which was served on the assessee on September 16, 1981, the assessee-company filed a return on September 25, 1981, claiming business loss of Rs. 5,99,310. The Income-tax Officer, as per his order dated December 26, 1984, computed the business loss including depreciation at Rs. 5,94,370.He allowed carry forward of depreciation of Rs. 53,150 to be set off against profit of subsequent years but refused to allow carry forward of business loss as the income-tax return for the said year was not filed within the time allowed under section 139(1) of the Act. Being aggrieved, the assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals). It was claimed that the return filed in response to notice under section 148 should be treated as a return filed under section 139(2) of the Act. Before the Commissioner of Income-tax (Appeals), the assessee relied upon certain decisions of the Calcutta, Madras, Andhra Pradesh and Madhya Pradesh Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Commissioner of Income-tax (Appeals) and rejected the appeal of the assessee. It was submitted on behalf of the assessee that the assessee is entitled to the carry forward of loss even when it is determined in pursuance of the return which was filed under section 148 and filed beyond the time A under section 139. Support was drawn from the decisions of this court in Burdwan Wholesale Consumers' Co-operative Society Ltd. v. CIT [1991] 191 ITR 570 as well as Himmatsingha Motor Works Ltd. v. CIT [1993] 200 ITR 749. We have gone through the said decisions of this court. But, it is only the decision in Burdwan Wholesale Consumers' Co-operative Society Ltd. [1991] 191 ITR 570 (Cal), which avails the assessee and not the other one, viz., Himmatsingha Motor Worhs Ltd. [1993] 200 ITR 749 (Cal), because in that case, the notice under section 148 was served and the return of loss filed before the time for filing the voluntary return under section 139(4) c expired. In the former case which is in favour of the assessee, this court has principally relied on the language of section 148 which is in the following terms "Section 148. (1) Before making the assessment, reassessment or recompu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , another assessee not served with such notice shall be entitled to determination of loss under section 139 coupled with the right to carry it forward for future set off simply because, fortuitously in his case, no notice under section 148 is served. The basic question before us is as it was before the Division Bench deciding the issue in Burdwan Wholesale Consumers' Co-operative Society Ltd. [1991] 191 ITR 570 (Cal), whether the language of section 148 creates a fiction. Even if it creates a fiction, what is the effect and purpose of such fiction and whether any extension of the fiction considered logical is really consistent with the object either of the fiction itself or the object of the provisions which the fiction is created to implement. We consider that, if there be any fiction under section 148, that fiction has limited use as machinery for carrying out the process of assessment or reassessment of the escaped income, as the case may be, under section 147. Assessment in pursuance of a notice under section 139(2) and assessment in pursuance of a return under section 148 read with section 147 have distinct and separate character and purpose. The purpose of section 139 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss for the first time or at a higher loss than assessed or to claim that the reassessment is necessary to secure to him any benefit which had F escaped for not having filed his return or not disclosing fully and truly all material facts. The provision is meant to be a safeguard against the loss of revenue for escapement of assessment. This is also clear from the way in which "escaped assessment" has been defined in Explanation 1 to section 147. The cases of escapement are exhaustively enumerated in the said Explanation : (a) where income chargeable to tax has been underassessed; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed. The Explanation can also be said to have introduced a fiction. Even loss can be the subject-matter of section 147 as escapement of income if the loss determined in original assessment is excessive. This precludes the first determination of loss in a proceeding under section 147. From reading of clause (d) of the Explanation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an assessee in filing any return of loss to be assessed at a loss for carry forward and set off against future profit. The fiction is intercepted by the fiction in clause (d) of Explanation 1 which allows loss to be a subject-matter of the proceedings under section 147 only in the contingency of an earlier assessment of loss being excessive and needing to be cut back. The fiction stands in the way of a loss being determined for the first time under section 147 read with section 148. In our view, the true import of the expression "escaped assessment" precludes determination of the first return of loss not filed under section 139 but filed under section 148 after the time for filing voluntary return under sub-section (4) of section 139 has expired. Section 148 only seeks to assess what has not been assessed and not brought to tax ; and as the machinery to effectuate that function, it can avail itself of the same machinery available in a proceeding under section 139(2). This does not mean a total and complete equation between sections 139(2) and 148. Nor does it allow the provisions of section 148 to surpass its purpose. Beaumont C. J. said in Madhavjee Thackersay v. CIT [1935] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this section, section 34 of 1922 Act (corresponding to section 147 read with section 148), it appears to me that, if the Legislature had meant to say that, if, in any case, it appears to the Income-tax Officer that an assessee has been assessed upon too low a figure or at too low a rate, the Income-tax Officer may issue a fresh notice under section 22(2) (corresponding to section 139(2)) and may proceed to reassess such assessee afresh, the language employed would have been noticeably different from that which we find in the present section. It is clear that the initial duty of the Income-tax Officer is merely to assess the income which has escaped". This leaves no room for the question that this court in that old decision had already ruled out section 139(2), in the context in which it occurs in section 148, having a scope and ambit larger than the assessment of escaped income demands. This precludes the assessee from claiming his loss to be determined in a proceeding under section 148. There are quite a few decisions which are directly on the question of allowance of carry forward of loss under the old Act. And the courts had as early as in the thirties concluded the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 but beyond the time available for filing voluntary return under section 139(4) the assessee cannot be entitled to determination of the loss for the purpose of carry forward and set off, because section 80 has a clear mandate that it is only the loss determine in pursuance of a return filed under section 139 that is eligible for carry forward and set off. Above all, the construction placed on the words of section 148 equating section 148 with section 139(2) leads to an absurd position, particularly in the context of the amended provision of section 80 which, with effect from April 1, 1985, completely prohibits determination of loss and its carry forward and set off except where the return is filed either under section 139(1) or under section 139(2). So, under the amended law contained in section 80, even a loss returned belatedly under section 139(4) is not eligible for carry forward. But, the equation accepted in the decision relied upon shall entitle an assessee to have his loss carried forward simply by virtue of not having filed the return under section 139 and having been served with a notice under section 148, while a more diligent or less negligent assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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