TMI Blog1992 (2) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... recording reasons for the issue of such notices under section 147(a). Assessee furnished returns in response to the notices under section 148. These returns, however, did not disclose positive income. The figures of loss disclosed in the returns filed on 31st of March, 1983 were indicated in these returns as under :---- 1978-79 Rs. 2,53,678 1979-80 Rs. 3,48,400 It was explained before the assessing officer that the returns filed on 11th of October, 1985 disclosing income of Rs. 6,087 and Rs. 8,080 for the respective assessment years were on the basis of unaudited accounts. However, after the accounts had been audited the final position had emerged that the assessee has in fact suffered losses. The ITO was requested to complete the assessment and allow to carry forward depreciation and investment allowance to subsequent years. It was also claimed that assessee was entitled to deduction under section 80J. The ITO filed the proceedings by recording his reasons in the order-sheet for the assessment year 1978-79 as under :---- "23-10-1986 In view of the reply of the 'a' dated17-10-1986proceedings under section 147/148 are hereby filed. As stated by the 'a' return in compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.) Ltd. v. Second ITO [1969] 71 ITR 260. It was further contended that for the carry forward of unabsorbed depreciation, investment allowance and deduction under section 80J, the filing of return within the time allowed is not a condition precedent. In this connection, reliance was placed on the decision of the Tribunal in the case of Western Leasing General Finance Co. Ltd. v. CIT 104 Taxman 52 (sic) (Trib.) where it has been held that unabsorbed depreciation is allowable to be carried forward despite loss return having been filed late. 4. Our attention was drawn to section 32(2) of the Income-tax Act, 1961 and section 80 in support of the contention that unabsorbed depreciation cannot be equated with business losses and that section 32(2) permits carry forward of unabsorbed depreciation without the strings attached to carry forward of business losses. 5. The DR, on the other hand, contended that the issue being covered by the decision of the Hon'ble Supreme Court in the case of Anglo-French Textile Co. Ltd. relied upon by the CIT (A) there is no merit in the appeals of the assessee. 6. We have given our careful consideration to the rival contentions. It is not disputed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return or his income or the income of any other person in respect of which he is assessable under the Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed ; and the provisions of this Act, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." On perusal of section 147 read with section 148 it is evident that the assessing officer is to make an assessment of escaped income. In this case, there is no material on record, except the returns filed by the assessee on11-10-1985disclosing some income, to suggest that there was escapement of income. Thus, it was open to the Assessing Officer to drop the proceedings by filing the same. The contention that once notice under section 148 is issued Assessing Officer is bound to complete the assessment seems attractive b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of section 139. The plea of the assessee that the returns had been filed under section 139(4)(a) was also rejected by the Tribunal. 7. On a reference, the Madhya Pradesh High Court held that since the returns had been filed within the time allowed under sub-section (4) of section 139, the losses determined by the assessing officer for the relevant assessment years could be said to be losses determined in pursuance of the returns filed under section 139. Assessee was, thus, held to be entitled to the benefit of carry forward and set off of losses computed by the assessing officer. Reliance was placed on the decision of the Supreme Court in the case of CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518. 8. This decision of the Madhya Pradesh High Court is inapplicable to the facts of this case. Firstly, no return had been filed by the assessee within the time allowed under section 139(4) either voluntarily or in response to notice under section 148. Secondly, no assessment has been made by the assessing officer and we have already held that the assessing officer could not be compelled to frame the assessment in a case where the assessing officer is sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed. 12. Assessee is aggrieved and it is claimed that the conditions as per section 80 of the Income-tax Act, 1961 for carry forward and set off of business losses are not applicable to the unabsorbed depreciation. Our attention was drawn to the provisions of section 32(2) of the Income-tax Act, 1961 in support of the contention that carry forward and set off of unabsorbed depreciation was regulated under a specific provision of law and accordingly, the general provision under section 80 would be inapplicable. According to the Id. counsel unabsorbed depreciation for assessment years 1978-79 and 1979-80 was to be treated as part of depreciation for assessment year 1984-85 as it was the first year when such unabsorbed depreciation could be absorbed --- profits of the year being sufficient to absorb the depreciation. It was accordingly urged that the orders of the revenue authorities be set aside and suitable deduction allowed to the assessee. 13. We have given careful consideration to the rival contentions. The issue before us is as to whether on the facts and in the circumstances of this case, assessee will be entitled to carry forward and set off of unabsorbed depreciation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits or gains chargeable being less than the allowance then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous year. " 15. In order to appreciate the circumstances under which section 32 comes into play, we shall have to revert back to section 29 of the Act. Section 29 of the Income-tax Act provides that income from profits and gains of business or profession shall be computed in accordance with the provisions contained in sections 32 to 43(c). Section 32 of the Act will come into picture only when as assessment is to be made of the profits and gains of business or profession. For assessment years 1978-79 and 1979-80 there has been no computation of income under the head income from business. Thus, there was no occasion for applying the provisions of section 32 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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