COMMISSIONER OF INCOME-TAX VS JOSEPH RAJAPPAN
2001 PT D 278
[238 I T R 721]
[Kerala High Court (India)]
Before Om Prakash, C. J. and J. B. Koshy, J
COMMISSIONER OF INCOME‑TAX
versus
JOSEPH RAJAPPAN and others
Income-tax Reference No. 18 of 1996, decided on 12/01/1999.
Income-tax---
‑‑‑‑Loss‑‑‑Carry forward and set off‑‑‑Return of loss tiled pursuant to notice under S. 148 within time limit prescribed under S. 139(4)‑‑‑Will be deemed to have been filed under S.139‑‑‑Assessee entitled to carry forward loss‑‑ Indian Income Tax Act, 1961, Ss. 139 & 148.
The legal position is well‑settled that when. a return is tiled pursuant to the notice issued under section 148 of the Income Tax Act, 1961, within the time limit prescribed under section 139(4), it will be taken to have been tiled 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 under section 148(1) as it stood in the relevant year that a return filed pursuant to the notice under section 148(1) will be deemed to have been filed under section 139.
CIT v. R. Chandran (1991) 191 ITR 328 (Ker.): Kareemsons, (Pvt.) Ltd. v. CIT (1992) 198 ITR 543 (Kar.); Cooperative Marketing Society Ltd. v. CIT (1983) 143 ITR 99 (MP); Burdwan Wholesale Consumers Cooperative Society Ltd. v. CIT (1991) 191 ITR 570 (Cal.) and CIT v Kulu Valley Transport Co. (P.) Ltd. (1970) 77 ITR 518 (SC) fol.
P.K.R. Menon and N.R.K. Nair for the Commissioner
C. Kochunni Nair and S. Vinod Kumar for the Assessee.
JUDGMENT
OM PRAKASH, C.J.‑‑‑In obedience to the direction of this (Court under section 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 under section. 148 of the Income Tax Act, 1961'?"
The facts, as found by the Appellate Tribunal, are that the assessee did, not file a return under section 139(1) of the Act. Notice under section 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.3,13,820 on January 8, 1985. The assessment was completed under section 143(3) on May 13, 1985, determining the loss at Rs.3,11,166. As according to the Assessing Officer no return was tiled under section 139 aid as no loss was determined pursuant to any return under section 139, the loss determined was riot allowed to be carried forward for set off.
Aggrieved, the assessee preferred an appeal against the order of tile 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 under section 147 but in terms of section 148(1) of the Act, the return furnished can only be taken as under section 139(2) and hence once again the appellant will be entitled to the benefits extended to the taxpayer by the circular referred to supra.
(4) 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 tile (he return under section 139(1). A notice under section 148 was issued and served on him on May 8, 1984. In response to the said notice under section 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 under section. 139(4) Under section 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-op. Society (1991) 191 ITR 570, held that where the return filed in response to a notice under section. 148 is within the time allowed under section 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 Cooperative Marketing Society Ltd.. (1983) 143 ITR 99. 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 'under section 148 but within the time stipulated under section 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 under section‑ 139(2) and that there was no deeming provision thereunder that a return filed pursuant to the notice issued under section 148(1) will be deemed to have been filed under section 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 under section 148, the assessee filed the return' showing loss on January 8, 1985, and that return falls under section 139(4), inasmuch as that was tiled 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 hat any return filed pursuant to the notice issued under section 148 would be treated to have been filed under section 139 and that deeming provision as contained in section 148, will be restricted only to the notice as if it were a notice under section 139(2). He, therefore, submits that the return filed by the assessee pursuant to the notice issued under section 148 could not be taken to have been filed under section 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. 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 under section 148 should be treated as a return under section 139(4) as the same was filed prior to the making of the assessment order and as that was filed within the period prescribed under section 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 under section 139(4) despite the fact that the same was filed pursuant to the notice issued under section 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 under section 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 Cooperative Marketing Society Ltd. v. CIT (1983) 143 ITR 99 and by the Calcutta High Court in Burdwan Wholesale Consumers' Cooperative. Society Ltd. v. CI T (1991) 191 ITR 570. All these High Courts in turn relied on CIT v. Kulu Valley Transport Co. (P'.) Ltd. (1970) 77 ITR 518 (SC). 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 under section 148 within the time limit prescribed under section 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 under section 148(1) as it stood in the relevant year that a return filed pursuant to the notice under section 148(1) will be deemed to have been filed under section 139. The submission of senior standing counsel that a return filed pursuant, to the notice under section 148 can be taken to have been filed under section 139 only after the amendment made under section 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 under section 139(4) pursuant to the notice issued under section 148, then that will be deemed to have been filed under section 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 tiled under section 139 the same could not be allowed to be carried forward. In this case, the Appellate Tribunal clearly held that the return tiled pursuant to the notice under section 148 would be taken to have been filed under section 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 under section 139. The return filed under section 139(4) is nothing but a return under section 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.
M.B.A./146/FC
Reference answered.