Shivashankar Bhat, J.:—
A Division Bench of this Court, referred this case to the Special Bench, after doubting the correctness of the Decision of an earlier Division Bench; the said earlier Decision is reported in S. Natarajan v. Commissioner of Income Tax, Mysore . 52 ITR 882..
Two questions were referred by the Appellate Tribunal to this Court under Section 256(1) of the Income Tax Act, 1961, which read as follows:—
“1. Whether on the facts and in the circumstances of the case, the return filed by the assessee on 13.5.1980 before the normal date of limitation for assessment for the year 1978-1979 could be deemed to be a return under section 139(4) despite the fact that a notice under section 148 had been issued by the Income-tax Officer on 27.11.1979?
2. If the answer to the above question is in the negative, whether the assessee is entitled to carry forward of loss declared in a return filed in response to notice under section 148?
2. All the relevant facts are found in the order of the Division Bench to which one of us was a party. In response to the notice issued on 27.11.1979, under Section 148, the assessee had to file the return by 29.12.1979 But no such return was filed. The return was filed only on 13.5.1980 and the assessee's contention has been, that this return should be treated as a return under Section 139(4), as it was filed prior to the making of the assessment order for the relevant year, and that it was filed within the period prescribed by Section 139(4). There is no dispute that in case the return was a return under Section 139(4), it satisfied all the statutory requirements stated therein.
3. According to the assessee, since, the return was a return filed under Section 139(4), it falls within the description of “return filed under Section 139” and if so, the loss claimed by the assessee which has been accepted, was eligible to be carried forward, without the bar under Section 80 against any such ‘carry forward’
4. The revenue, contends that when a notice is issued under Section 148 and a return is not filed within the period stipulated in the said notice, any return filed thereafter cannot claim the status of a return under Section 139(4), even if the return filed was within the period prescribed by Section 139(4). Mr. Chander Kumar, the learned Counsel for the Revenue, contended before us that a proceeding initiated by a notice under Section 148 is a proceeding for the benefit of the revenue and the notice issued to the assessee under Section 148 cannot be treated for all purposes under the Act as a notice issued under Section 139(2); since the assessee failed to file a return under Section 139(1), the assessee cannot take advantage of a proceeding initiated under Section 148 to claim a loss to be determined thereunder, so that it can be carried forward under Section 72, read with Section 80; the learned Counsel urged, that, the assessee cannot take advantage of his own default in failing to file the return at an appropriate time earlier to have the loss determined; the object of Section 147, it was contended, was to assess the escaped income and the proceedings thereunder is solely for the benefit of the revenue.
5. The question referred are to be answered with reference to the provisions of the Act governing the relevant assessment year, such as Sections 80 and 139(4) of the present Act (which are different from the earlier Indian Income-tax Act 1922) read with Section 148 thereof.
6. Under the Indian Income-tax Act, 1922, the subject of assessing the escaped income was found in Section 34. Section 22 of the said Act provided for filing of the return (a subject, now dealt with by Section 139 of the Act); however, Section 22 by itself did not prescribe any period to file the return. The subject of the “loss” was dealt in Section 22(2A) of the earlier Act, which may be compared with the present Section 139(3). Under the old Act, a provision similar to the present Section 80 was not found. Section 22(2A) of the earlier Act, which is comparable to Section 139(3) of the present Act enabled the filing of a “loss return” under circumstances stated therein; but failure to file a return under it by itself was not a ground to reject the claim of “loss”, in case of a return filed under Section 22(3), i.e, a return filed before any order of assessment was made. In Commissioner of Income Tax v. Kulu Valley Transport Co. (P) Ltd. . AIR 1970 SC 1734 this proposition was accepted by the Supreme Court. The relevant passage has been quoted in the order of the Division Bench while referring this matter to this Special Bench. The principle stated by the Supreme Court when applied to the present Section 139, results in the inference that Section 139(4) should be read as a proviso to Section 139(1) and that a return filed within the time allowed under sub-section (4) of Section 139 would also be considered as a return filed within the time allowed under sub-section (1). A “loss return” being the return of the “minus income” (a phrase used by the Supreme Court in another Decision) - Commissioner of Income Tax v. Hariprasad Deo . AIR 1975 SC 1282, such a return also would be a return to be considered by the Income-tax-Officer. The Supreme Court had, at page 1286 of the A.I.R stated thus:
“From the charging provisions of the Act, it is discernible that the words ‘income’ or profits and gains’ should be understood as including losses also, so that, in one sense ‘profits and gains’ represent ‘plus income’ whereas losses represent ‘minus income’: Commr. of Income Tax, Ahmedabad v. Karan Chand Prem Chand, 40 ITR 106 : (AIR 1960 SC 1175) Commissioner of I.T v. Elphispone SP Weaving Mill company Ltd. 40 ITR 142 : (AIR 1960 SC 1016). In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material in the same mode of the taxable income of the assessee. Although Section 6 classifies income under six heads, the main charging provision is Section 3 which levies income-tax, as only one tax, on the ‘total income’ of the assessee as defined in Section 2(15). An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the “total amount of income, profits and gains referred to in Section 4(1)”. Secondly, it must be “computed in the manner laid down in the Act”. If either of these conditions fails, the income will not be a part of the total income that can be brought to charge.”
Thus, what is taxable is the real income properly deduced as provided by the Act.
7. The Decision of the Supreme Court in the aforesaid Kulu Valley Transport case meets the argument of Mr. Chanderkumar that any return filed by an assessee after the receipt of a notice under Section 148 but beyond the date stipulated in the notice cannot be treated as a return under Section 139. The correct approach, is to examine whether the ‘return’ satisfied the requirements of Section 139(4); and if it satisfies the said statutory requirements, no further argument would arise. The right given to the assessee under Section 139(4) by the Act cannot be lost, merely because, the Revenue instituted proceedings under Section 147, in the meanwhile. Right to file a return, falling within Section 139(4), is as much a statutory right vested in the assessee, as, if the power vested in the Assessing Officer to net in the escaped income for taxation under Section 147. There is no reason to read the two provisions as in conflict with one another, or, to read one provision as overriding the other; both can stand harmoniously to arrive at the true taxable income as demonstrated by the Decision of the Supreme Court in the aforesaid Kulu Valley Transport's case.
8. Section 80 of the Act, during the relevant year read as follows:—
“Section 80: Submission of returns 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.”
(underlining is ours)
9. The bar against the carrying forward of the loss is attracted here, only, if the loss is not determined in pursuance of a return filed under Section 139. Under Section 139, filing of a return may come under any one of the three sub-sections - Section 139(1); 139(2) or 139(4). Any return, falling within any of these sub-sections, is a return filed under Section 139.
10. The provision of Section 80 as it then stood, in no way barred the ‘carry forward’ of the loss determined in pursuance of a return filed by the assessee and the Assessing Officer had to consider such a return filed by the assessee in the instant case.
11. Therefore, the first question has to be answered in the affirmative, and in favour of the assessee; the return filed by the assessee has to be treated as a return under Section 139(4) of the Act.
12. In view of the answer to the first question, which results in enabling the assessee to carry forward the loss determined by virtue of the return filed under Section 139(4), need to answer the second question does not arise.
13. Reference answered accordingly without any order as to costs.