Ajit K. Sengupta, J. -
(1.)In this reference under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred to this court the following questions relating to the assessment year 1977-78 :
"1. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Sections 80, 139, 148 and other applicable provisions of the Income-tax Act, 1961, the Income-tax Appellate Tribunal was justified in law in upholding the order passed by the Commissioner of Income-tax under Section 263 of the Act in respect of the assessment year 1977-78 ?
(2.)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the assessment order passed by the Income-tax Officer setting off the speculation loss of Rs. 1,53,199 out of the total speculation loss of Rs. 7,25,607 determined in respect of the assessment year 1974-75 against the speculation profits for the assessment year 1977-78 was erroneous and prejudicial to the interests of the Revenue within the meaning of Section 263 of the Act ?"
2. Shortly stated, the facts as found by the Tribunal are that the assessee is an individual. The Income-tax Officer, while making the assessment under Section 143(3)/147(a) of the Income-tax Act, 1961, allowed the benefit of carry forward of loss amounting to Rs. 1,53,199 which pertained to the assessment year 1974-75.
(3.)On scrutiny of the assessment record, the Commissioner of Income-tax found that, for the assessment year 1974-75, the assessee' had filed a return in pursuance of the notice issued by the Income-tax Officer under Section 148 and no return was filed under Section. 139(1). The Commissioner of Income-tax was of the opinion that, since the assessee had not filed any return for the assessment year 1974-75 in terms of Section 139, he was not entitled to the benefit of carry forward of loss incurred for the year. He, therefore, came to hold that the Income-tax Officer committed an error in allowing the benefit of carry forward of the aforesaid loss for the assessment year 1974-75. Accordingly, the Commissioner of Income-tax initiated proceedings under Section 263 and issued a show-cause notice, in reply to which the assessee contended that, since his books of account were seized and possessed by the Income-tax Department, he could not file his return of income within the time allowed under Section 139(1), that no notice under Section 139(2) was served on him and that the return filed under Section 148 was to be treated as a return under Section 139(2) as per the clear language of Section 148 itself. It was, therefore, claimed that the order of assessment was not erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax held that, in view of the provisions of Section 80, the loss which was not determined in pursuance of a return filed under Section 139 could not be carried forward and set off against the profit for the subsequent year. He, therefore, rejected the assessee's contention, revised the assessment and directed the Income-tax Officer to withdraw the benefit of carry forward loss of Rs. 1,53,199 given in the original assessment and enhanced the total income by that amount.