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TMI Blog1983 (11) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1961. 4. For that the learned Commissioner (Appeals) erred in law and fact in sustaining the order of the learned ITO and not allowing the determined loss to be carried forward. 5. For that the order of the learned Commissioner (Appeals) is otherwise bad in fact and law." In column 14 of Form No. 36, the assessee has claimed the following relief : " That the notice under section 148 be quashed, the return of income be treated as a return under section 139(4)(a) and the carried forward of business loss be allowed." 2. In fact, this appeal had come up for hearing before us earlier and by an order dated 28-12-1981, we determined the issues relating only to some of the grounds concerning validity of reassessment under section 147 of the Income-tax Act, 1961 ('the Act'). However, the assessee moved a miscellaneous petition on the basis that the Tribunal in the said order had not adjudicated upon all the grounds of appeal, as no specific finding had been given in respect of all the grounds of appeal taken by the assessee. The Tribunal, after hearing the parties on the miscellaneous petition, came to the conclusion that all the parties concerned, during the course of hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obliged to file either the estimate of total income pertaining to the previous year relevant to the assessment year 1976-77. In this estimate, which appear at page 4 of the paper book, income shown was loss. 5. Return of income for the assessment year 1976-77 was due from the assessee under section 139(1) of the Act on or before 31-7-1976. The assessee, however, did not file the return under this sub-section, as required under law. It is pertinent to note that the ITO did not issue any notice under section 139(2) to the assessee for the assessment year 1976-77 before 31-3-1977 or any time thereafter. On 22-2-1977, the assessee-corporation wrote to the ITO a letter asking for extension of time for filing the return under section 139 up to 30-6-1977. 6. On 11-7-1977, the ITO made the following noting on his order sheet : "A/W, Simla, H.P. State Forest Corpn. Ltd. 1976-77, 11-7-1977. As per latest assessment year for 1975-76, the assessee has income above Rs. 1 lakh. No return for the assessment year 1976-77 has been filed by the assessee. In my opinion, the assessee has taxable income for this year also. Therefore, I have reason to believe that the income to the tune of Rs. 2 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. Thus, whereas the assessee-corporation laboured under the impression that the return filed by it on 12-3-1979 was in response to notice under section 148, dated 20-3-1978 and the ITO did not say which of the two notices issued by him under section 148, he was availing of for raising the assessment, the Commissioner (Appeals) upheld the assessment on the strength of the notice under section 148 issued by the ITO on 11-7-1977. 10. Before us, in nutshell, the arguments raised on behalf of the assessee-corporation by its learned counsel, Mr. D.K. Gupta, Advocate, were to the effect that the return filed on 12-3-1979 declaring loss, as described supra, was a return under section 139(4). It was not a return in response to any of the notices issued by the ITO under section 148. Since the ITO had not issued notice under section 139(2) at all, return filed by the assessee under section 139(4) was before him for disposal because it had been filed within the time prescribed under section 139(4)(b)(iii), under which return could be filed at any time before assessment is made, which also clearly means at any time before assessment is or can be made, as the time for filing such a return wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn showing loss and filed within the period allowed under section 139(4)(b), it was valid return under section 139(4) in view of the ratio of the judgment of the Andhra Pradesh High Court in the case of C.P. Sarathy Mudaliar v. CIT [1978] 114 ITR 687. In any case, the issue stands squarely decided in favour of the assessee in view of the judgment of the Supreme Court in the case of CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518, Since under the Act, there is no power with the ITO to curtail the right and privilege of the assessee of filing the return under section 139(4) and the ITO in fact did not issue any notice under section 139(2), return under section 139(4) was the only return on which assessment could be and had been framed and, therefore, assessment is only under section 143(3) and the assessee has right and privilege including that of determination and carry forward of the business loss determined. 12. The learned counsel for the assessee further argued that where the ITO has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year, or to disclose fully and truly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lcutta High Court in the case of ITO v. Sudhir Kumar Bhose [1972] 84 ITR 60, contended that since the ITO had started the proceedings under section 147(a) with the issuance of notice under section 148 which he could be lawfully in view of the ratio decidendi of the Calcutta High Court judgment in the case of Amarnath Mehra v. ITO [1977] 110 ITR 376, the assessee could not claim carry forward of loss in such proceedings. It was contended that the reasons given by the ITO for reopening assessment that the assessee was assessed on a total income of Rs. 1 lakh in the immediately preceding assessment year and, therefore, he had reason to believe that the income for the current year had escaped assessment, were valid. Relying upon the judgment of the Punjab and Haryana High Court in the case of Auto & Metal Engineers v. Union of India [1978] 111 ITR 161 and the Calcutta High Court decision in the case of Sun Engg. Works (P.) Ltd. v. CIT [1978] 111 ITR 166 and that of the Andhra Pradesh High Court judgment in the case of Nagasuri Raghaveswara Rao v. CIT [1967] 66 ITR 496, it was contended by the revenue that notice under section 148 was validly issued by the ITO and the return in fact was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is income is assessable under the Act, the ITO may, before the end of the relevant assessment year, issue a notice to him and serve the same upon him requiring him to furnish, within thirty days from the date of service of the notices, a return of his income, etc., in the prescribed form and verified in the prescribed manner. There is a proviso to this sub-section which entitles an assessee to make an application in the prescribed manner asking for extension of time and there is a power given to the ITO who in his judicial discretion may extend the date of furnishing the return. 17. Sub-section (3) of this section makes a provision for furnishing a return by any person who has not been served with a notice under sub-section (2), if such a person has sustained a loss in any previous year under the head '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 of the Act. This return is to be, furnished within the time allowed under sub-section (1) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfers the benefit of losses being set off and carried forward and there is no provision in section 22 of the 1922 Act under which losses have to be determined for the purpose of section 24(2). Section 22(2A) simply says that in order to get the benefit of section 24(2), the assessee must submit his loss return within the time specified by section 22(1). That provision must be read with section 22(3) for the purpose of determining the time within which a return has to be submitted. It can be said that section 22(3) is merely a proviso, to section 22(1). Thus, a return submitted at any time before assessment is made is a valid return. In considering whether a return made is within time, sub-section (1) of section 22 must be read along with sub-section (2) of that section. A return whether it is a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it is made within the time specified in section 22(3). In other words, if section 22(3) is complied with, section 22(1) must also be held to have been complied with. In this judgment, the hon'ble Supreme Court made the celebrated observation that even if two views in the interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole and not any specific sub-section of it. Mention of section 139 as a whole becomes important in the context that in sections 139(8), 144, etc., the Legislature has specifically mentioned sub-sections of section 139. 23. In the context of interpretation of this section 139, we have to keep in view the famous words of Rowlatt, J. in the case of Cape Brandy Syndicate v. IRC [1921] 1 KB 64 approvingly quoted by the Supreme Court in the case of CIT v. Ajax Products Ltd. [1965] 55 ITR 741 that "in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used". It is thus clear that where the ITO has not exercised his powers vested in him under section 139(2) within time allowed to him, the Legislature has bestowed upon the assessee something of a locus poenitentiae to file a loss return and the time within which such a return can be filed as specified in section 139(4)(b), which has been discussed supra. 24. In the case of Anglo-French Textile Co. Ltd., relied upon by the revenue, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to it in the judgment. 26. In the case of Nagasuri Raghaveswara Rao, the Andhra Pradesh High Court held that the letter of the assessee giving particulars of the lease amount did not amount to a statutory return and the ITO was right in reopening the assessment. This case turns on its own facts and is not an authority for deciding the issue before us. Further, the Bombay High Court in the case of Kevaldas Ranchhodas has held that in the reassessment proceedings initiated under section 34(1)(a) on the ground that loss had been over-estimated in original assessment, the ITO had no jurisdiction to reopen the entire assessment originally made and determine afresh the assessable profits or to correct errors and omissions made by the assessee in the return in the matter of computation of total income. 27. Before we proceed further, we have also to keep in focus the doctrine of approbate and reprobate. It is only a species of estoppel and cannot operate against the provisions of statute as held by the Supreme Court in the case of CIT v. V. MR. P. Firm [1965] 56 ITR 67. This doctrine will be applicable to find out whether when there was no provision of a statute, either party could bin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the assessment, did not act in a bonafide manner because before him there was ample evidence to show that the assessee had suffered loss during the accounting period relevant to the assessment year under appeal. Therefore, if the ITO had to have a resort to section 147(a) he had to show that he had reason to believe that for failure of the assessee to file a return under section 139(1) income chargeable to tax had escaped assessment. This belief has to be that of a person well instructed in law acting in a bona fide manner and a mere pretence to reopen the assessment cannot be justified. In this case, the ITO has merely stated that he is of the opinion that income of the assessee for the year under consideration amounting to Rs. 2 lakhs has escaped assessment. For this observation, be did not have even an iota of evidence. On the other hand, he had evidence tendered by the assessee showing loss for the assessment year 1976-77 and he was, thus, duly bound in law to indicate to the evidence that would convert loss of lakhs of rupees into positive taxable income of Rs. 2 lakhs which he stated he had reason to believe to have escaped assessment. Therefore, we are convinced that he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the assessment or reassessment ; section 148 being merely of procedure for issuance of a notice. Therefore, our reference in this judgment to section 148 wherever made has to be taken as reference to section 147 when relevant. 31. The position of law considered above may give the impression that there is a conflict of judicial opinion that when there is a failure or omission on the part of the assessee to file a return within time provided under section 139(1) this not only gives a right to the ITO to issue notice under section 148 for assessment or reassessment under section 147 but also a power to reject, as non est in law, a return filed after lapse of time provided under section 139(1) but before notice under section 148 is issued and served. To us, however, there appears to be no such conflict in view of very clear position of law available from the judgment of the Supreme Court in S. Raman Chettiar's case. Even if for the sake of argument this position were to be considered, there can be said to be two reasonable views possible. In such a case, again the Supreme Court says that the view that favours the subject must prevail. However, in the case before us, this issue ..... 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