The assessee is entitled to claim computation and assessment of loss on the basis of returns filed pursuant to a notice under Section 148.

( 1 ) THE Tribunal has referred the following question of law to this court under Section 256 (1) of the Income-tax Act, 1961 :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer was entitled to drop the proceedings initiated by him under Section 147 on ascertaining that there was no escapement of income, and that the Income-tax Officer was not obliged to determine the loss on the basis of the said returns on the ground that the returns in question had been filed within the time available to the assessee for filing the return in terms of subsection (4) of Section 139 ?"

( 2 ) THE assessment years involved in this reference are the assessment years 1973-74 and 1974-75, for which the relevant accounting period were the years ending on October 31, 1972, and October 31, 1973, respectively.

( 3 ) THE facts of the case as narrated by the Tribunal in the statement of case are as under :"the assessee is a limited company. Returns of income for the assessment years 1973-74 and 1974-75 were not filed by it suo motu within the time prescribed under Section 139 (1) or for that matter in the financial years concerned, namely, financial years 1973-74 and 1974-75. The Income-tax Officer, therefore, initiated proceedings against the assessee-company under Section 148 by issuing notices under the said section in respect of the aforesaid two years on May 12, 1975. The notices in question came to be served on the assessee-company on June 21, 1975. The assessee-company filed its returns of income in compliance with the aforesaid notices declaring losses of Rs. 64,699 and Rs. 30,644 in respect of the two years referred to above. The Income-tax Officer called for the account books of the assessee-company in respect of the two years and, after examination thereof, he was convinced that the net result of the assessee's business in respect of the aforesaid two years was loss as declared by the assessee-company. He, therefore, refused to proceed further and accordingly he dropped the proceedings under Section 147/148 in respect of the two years. The operative part of the order of the Income-tax Officer reads in respect of both the assessment years as follows : "after examination of accounts, I find that the net result of the business was loss. As, under Section 147, loss cannot be determined, the proceedings with the issue of notice under Section 148 are hereby dropped. "

( 4 ) THE Commissioner of Income-tax (Appeals) affirmed the order of the Income-tax Officer on this point. There was a further appeal to the Tribunal by the assessee in which the Tribunal held, inter alia, as follows :"the Tribunal, after examining the rival submissions, observed that resort to provisions of Section 147 could be had only if the Income-tax Officer came to the conclusion on the basis of the returns filed under Section 147 that there was no escapement of income, the Income-tax Officer could drop the proceedings initiated under Section 147. The action of the Income-tax Officer according to the Tribunal was, therefore, correct. "

( 5 ) IT must be noted that, under Section 152 (2), the Income-tax Officer has been specifically empowered to drop a proceeding initiated under Section 147 only where the assessment is reopened in circumstances falling under Clause (b) of Section 147. There is no specific power given to the Income-tax Officer to drop the proceedings after initiating a proceeding under the circumstances mentioned in Section 147 (a ). In the instant case, no return was filed by the assessee for the relevant two assessment years. The reopening of the assessment, therefore, was on the ground of non-filing of the return which would be under Section 147 (a ).

( 6 ) THE Income-tax Officer has recorded in the assessment order that since the assessee had not filed the return even within the extended time, the assessee's income chargeable to tax had wholly escaped assessment