1984 (4) TMI 78 - AT - Income Tax

Assessment Proceedings Assessment Year Carry Forward Failure To File Return In Time Reassessment Proceedings Valid Notice

Issues Involved:
1. Proper service of notice under section 148.
2. Validity of the reopening of assessment under section 148.
3. Classification of the return filed under section 139(4) or section 148.
4. Entitlement to carry forward the loss under section 80.

Issue-wise Detailed Analysis:

1. Proper Service of Notice under Section 148:
The assessee contended that the notice under section 148 was not properly served, as it was received by an individual not authorized to do so. However, the Commissioner (Appeals) found that Abdul Wahab, who received the notice, had regularly accepted other notices on behalf of the assessee, including assessment orders and demand notices for earlier years. Given this consistent pattern, the Commissioner (Appeals) held that Wahab was authorized to receive notices on behalf of the assessee. The Tribunal upheld this finding, noting that the assessee had not raised this issue before the ITO or the IAC under section 144B, thus rejecting the contention of improper service.

2. Validity of the Reopening of Assessment under Section 148:
The assessee argued that the reopening of the assessment under section 148 was invalid. The Tribunal noted that the ITO had completed the assessment ex parte on 16-2-1979 with a total income of Rs. 10, and the reopening was initiated on 27-11-1979. The Tribunal emphasized that the ITO had a reasonable belief that income had escaped assessment due to the assessee's failure to file a return. The Tribunal clarified that while the adequacy of the reasons for reopening cannot be questioned, the existence of such reasons is crucial. Upon reviewing the recorded reasons, the Tribunal was satisfied that the reopening was justified and valid.

3. Classification of the Return Filed under Section 139(4) or Section 148:
The assessee claimed that the return filed on 13-5-1980 should be considered under section 139(4) and not section 148. The Tribunal examined the sequence of events and found that the return was filed after the service of notice under section 148. It emphasized that section 139(4) presumes no notice has been issued to the assessee. Since the return was filed in response to the notice under section 148, it could not be classified as a voluntary return under section 139(4). The Tribunal also noted that the assessment was completed on 20-4-1982, well beyond the normal time limit for assessments under section 143(3), further indicating that the return was under section 148.

4. Entitlement to Carry Forward the Loss under Section 80:
The core issue was whether the loss declared in a return filed under section 148 could be carried forward. The Tribunal referred to section 80, which states that no loss not determined in pursuance of a return filed under section 139 shall be carried forward. Although the wording of section 80 is ambiguous, the Tribunal highlighted that it does not specifically refer to section 139(3). The Tribunal considered the Madhya Pradesh High Court decision in Co-operative Marketing Society Ltd. v. CIT, which supported the assessee's claim. However, it ultimately relied on the Mysore High Court decision in S. Natarajan v. CIT, which held that the scope of an enquiry under section 34 (equivalent to section 148) is limited to escaped income and does not extend to carrying forward losses. Bound by this precedent, the Tribunal concluded that the loss could not be carried forward and dismissed the appeal.

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