TMI Blog1991 (1) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the year under consideration allowed at Rs. 96,930. The Assessing Officer ordered that since the return has not been filed under section 139, the loss would not be allowed to be carried forward. In the assessment proceedings the assessee had contended that he had earlier filed a return under section 139, but this contention was not accepted by the Assessing Officer as there was no evidence to support it. 5. The assessee appealed to the CIT(Appeals) who has upheld the ITO's finding that there was no evidence of any earlier return having been filed by the assessee and also that the return having been filed in pursuance of a notice under section 148 the assessee had no right to carry forward the loss. The assessee is now in appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly suffered the loss the assessment made by the Assessing Officer under section 147 is invalid. 8. The learned Departmental Representative has filed before us a copy of the reasons recorded by the Assessing Officer as below :--- " He is existing assessee. He has not filed the return so far. Take action under section 147/139/17/14 of Income/Wealth-tax Act. " 9. According to the learned Departmental Representative the aforesaid reasons did not say that the ITO had reason to believe that any income chargeable to tax had escaped assessment and, therefore, the initiation of action under section 147/148 was invalid. In our view, this argument is not available to the revenue. The reason is that this is an appeal by the assessee and the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire proceedings to the disadvantage of an assessee and that too on a plea by the revenue that the ITO acted illegally. 10. As regards the argument that when the Assessing Officer came to the conclusion that no income chargeable to tax had escaped assessment and the assessee had actually suffered a loss, the ITO should have dropped the proceedings and not computed the loss. For this proposition reliance was placed on Essex Farms (P.) Ltd. v. CIT [1986] 157 ITR 241/27 Taxman 438 (Delhi). In that case it was held at the instance of the assessee that initiation of proceedings under section 147(a) was invalid when there was no escapement of tax. In that case certain portions of income were assessed to tax in the hands of other persons, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessment of loss so made is invalid. We, therefore, reject these contentions of the revenue. 11. Now we come to the question whether the loss in question can be carried forward. The question depends on the interpretation of section 80 of the Act which at the relevant time was as under :---- " 80. Submission of return for losses.---- Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed under section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) of section 74 or sub-section (3) of section 74A. " The aforesaid provision would show that a loss can be allowed to be carried forwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 'Profits and gains of business or profession' or under the head 'Capital gains' and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, or sub-section (1) of section 74, or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1) or within such further time which, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, allow a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1). " From the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereunder would be a notice under section 139(2), the return of income filed in pursuance thereto should be deemed to be a return filed under section 139, as required by section 80 and the loss should be allowed to be carried forward. In our view, it is not permissible to do so and enlarge the scope of the fiction so as to subvert the provisions of section 139(3). We have to construe the provisions of section 139(3) and section 80 in a harmonious manner and, therefore, only that loss, which has been determined on the basis of a return satisfying the provisions of section 139(3), can be allowed to be carried forward. Patently, in this case the return filed by the assessee being beyond the time allowed under section 139(1) was not a return f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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