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Judgment
Om Prakash, C.J.—In obedience to the direction of this court u/s 256(2) of the Income Tax Act, 1961 (briefly, "the Act"), the Income Tax Appellate Tribunal referred the following question, relating to the assessment year 1983-84, for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the assessee is entitled to carry forward the business loss although the return was filed pursuant to the notice u/s 148 of the Income Tax Act, 1961 ?"
The facts, as found by the Appellate Tribunal, are that the assessee did not file a return u/s 139(1) of the Act. Notice u/s 148 was issued and served on the assessee on May 8, 1984. Pursuant to the notice he filed a return declaring a loss of Rs. 5,13,820 on January 8, 1985. The assessment was completed u/s 143(3) on May 13, 1985, determining the loss at Rs. 3,11,166. As according to the Assessing Officer no return was filed u/s 139 and as no loss was determined pursuant to any return u/s 139, the loss determined was not allowed to be carried forward for set off.
Aggrieved, the assessee preferred an appeal against the order of the Assessing Officer before the Commissioner of Income Tax (Appeals), who passed a brief order as follows :
"3. As for 1983-84, the assessment was reopened u/s 147 but in terms of Section 148(1) of the Act, the return furnished can only be taken as u/s 139(2) and hence once again, the appellant will be entitled to the benefits extended to the taxpayer by the circular referred to supra.
In the circumstances, I hold in favour of the appellant for both the years and hold that he will be entitled to have the business losses computed carried forward."
The Revenue feeling aggrieved, carried the dispute in appeal to the Appellate Tribunal. The latter dismissed the departmental appeal observing as follows :
"6. We have considered the matter. In this case the assessee failed to file the return u/s 139(1). A notice u/s 148 was issued and served on him on May 8, 1984. In response to the said notice u/s 148, the assessee filed a return declaring a loss of Rs. 3,13,820 on January 8, 1985. The filing of the said return was well within two years relevant to the assessment year 1983-84 and falls u/s 139(4). u/s 139(4) the assessee has got time to file the return up to March 31, 1986. The Calcutta High Court in the case of Burdwan Wholesale Consumers'' Co-operative Society Ltd. Vs. Commissioner of Income Tax, , held that where the return filed in response to a notice u/s 148 is within the time allowed u/s 139, the assessee is entitled to carry forward and set off of loss. While coming to the said conclusion their Lordships have followed the judgment of the Madhya Pradesh High Court in the case of Co-operative Marketing Society Ltd. Vs. Commissioner of Income Tax, . Respectfully following these decisions, we hold that the Commissioner of Income Tax (Appeals) is fully justified in holding that the assessee is entitled to carry forward of business loss computed. We uphold his order. The departmental appeal is dismissed." (underlining by court)
The question for consideration is whether loss determined pursuant to the return filed after service of the notice issued u/s 148 but within the time stipulated u/s 139(4) will be allowed to be carried forward for the purpose of set off. The Tribunal, relying on the decisions of the Madhya Pradesh and the Calcutta High Courts, held that the assessee was entitled to carry forward the business loss. The submission of learned senior standing counsel before us is that Section 148(1), as it stood in the relevant assessment year, simply deemed that the notice issued thereunder will be deemed as if it were a notice issued u/s 139(2) and that there was no deeming provision thereunder that a return filed pursuant to the notice issued u/s 148(1) will be deemed to have been filed u/s 139, which deeming provision was enacted by a subsequent amendment not relevant for the purpose of the assessment year relevant herein. The Appellate Tribunal clearly found that pursuant to the notice issued u/s 148, the assessee filed the return showing loss on January 8, 1985, and that return falls u/s 139(4), inasmuch as that was filed within the period of two years, which would have expired on March 31, 1986. The only submission of learned senior standing counsel is that Section 148(1) does not deem that any return filed pursuant to the notice issued u/s 148 would be treated to have been filed u/s 139 and that the deeming provision, as contained in Section 148, will be restricted only to the notice as if it were a notice u/s 139(2). He, therefore, submits that the return filed by the assessee pursuant to the notice issued u/s 148 could not be taken to have been filed u/s 139 at all. We are not at all impressed by the submission of learned senior standing counsel. This question came up for consideration before a Full Bench of the Karnataka High Court in Kareemsons Pvt. Ltd. v. CIT, (1992) 198 ITR 543 (KAR) . In this case, the Full Bench was concerned with the assessment year 1978-79. Before the Full Bench, the assessee contended that the return filed pursuant to the notice u/s 148 should be treated as a return u/s 139(4) as the same was filed prior to the making of the assessment order and as that was filed within the period prescribed u/s 139(4), The Full Bench held that the return filed by the assessee within limitation as prescribed for the purpose of Section 139(4) would be deemed to be a return u/s 139(4) despite the fact that the same was filed pursuant to the notice issued u/s 148. Similar view was taken by this court in CIT v. R. Chandran [1991] 191 ITR 328. This court held that under the law, as it stood in the assessment year 1976-77, a return filed or deemed to have been filed u/s 139(4) of the Act before the assessment is made should be considered and the assessee is entitled to carry forward the loss determined by the Assessing Officer. Similar view was taken by the Madhya Pradesh High Court in Co-operative Marketing Society Ltd. Vs. Commissioner of Income Tax, and by the Calcutta High Court in Burdwan Wholesale Consumers'' Co-operative Society Ltd. Vs. Commissioner of Income Tax, . All these High Courts in turn relied on Commissioner of Income Tax, Punjab Vs. Kulu Valley Transport Co. P. Ltd., . There are some other High Courts as well which have taken the same view. Therefore, the legal position seems to be well settled that when a return is filed pursuant to the notice issued u/s 148 within the time limit prescribed u/s 139(4), it will be taken to have been filed under that provision and if any loss is determined by the Assessing Officer pursuant to such return, that will be allowed to be carried forward for the purpose of set off. The position will not change simply because there was no deeming provision u/s 148(1) as it stood in the relevant year that a return filed pursuant to the notice u/s 148(1) will be deemed to have been filed u/s 139. The submission of senior standing counsel that a return filed pursuant to the notice u/s 148 can be taken to have been filed u/s 139 only after the amendment made u/s 148 and not prior to that, does not seem to be persuasive at all. Simply because the amendment was made after the assessment year 1983-84, it does not mean that the position which stood after the amendment, could not exist at all prior to that. The catena of authorities clearly indicate that if a return is filed within the time limit prescribed u/s 139(4) pursuant to the notice issued u/s 148, then that will be deemed to have been filed u/s 139(4) and the loss determined pursuant to such return will be allowed to be carried forward and we fully share that view.
The submission made by learned senior standing counsel is that unless loss is determined pursuant to a return filed u/s 139 the same could not be allowed to be carried forward. In this case, the Appellate Tribunal clearly held that the return filed pursuant to the notice u/s 148 would be taken to have been filed u/s 139(4) and rightly so. The view of the Appellate Tribunal is fully supported by many High Courts. On the facts of the case, it cannot be said that there was no return u/s 139. The return filed u/s 139(4) is nothing but a return u/s 139 and, therefore, the loss determined pursuant to such return will be carried forward on the reasoning of senior standing counsel himself.
Following the abovementioned authorities, we accept the contention of the assessee and answer the aforestated question in the affirmative, that is, in favour of the assessee and against the Revenue.