Per Dr. B. P. Saraf, Chief Justice

By this reference under section 256(1) of the Income-tax Act, 1961 ("Act"), the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar ("Tribunal") has referred the following question of law to this Court for opinion at the instance of the revenue:

"Whether on the facts and the circumstances of the case, the Tribunal is correct in law in holding that the assessee is entitled to the benefit of the carry forward of loss determined on the basis of return filed in response to notice u/s 148 of the Income-tax Act."

2. The material facts giving rise to this controversy, briefly stated, are as follows. The assessee, M/s Agro Industries Corporation, was established for promotion of agro industries and improvement of agriculture in the State of Jammu and Kashmir. For the assessment year 1975-76, the assessee did not file its return of income under the Income-tax Act within the period allowed under section 139(1). No notice was issued under section 139(2) of the Act to the assessee by the Income-tax Officer. However, on 27.2.1978, a notice under section 148 of the Act was issued and served upon the assessee. In response to the said notice, the assessee filed its return of income for the said assessment year declaring a loss of Rs. 16,58,038/-. The Income-tax Officer, after considering the assessees claim of depreciation, completed the assessment on net loss of Rs. 16,54,626/-. The Income-tax Officer, however, held that the loss determined by him could not be carried forward since the return had not been filed voluntarily. The assessee appealed to the Commissioner of Income-tax (Appeals). Before the Commissioner (Appeals), it was contended on behalf of the assessee that the return filed pursuant to the notice under section 148 of the Act was also a return within the meaning of section 139(4) read with section 139(1) of the Act. The contention of the assessee was that the action taken pursuant to a notice under section 148 of the Act has to be in accordance with the provisions of section 139(2) of the Act which does not place any embargo on the carry forward of the losses. In support of this contention, the assessee relied upon the decision of the supreme Court in CIT v Kulu Valley Transport Co. Pvt. Ltd (1970) 77 ITR 517. The Commissioner (Appeals) accepted the assessees contention and held that the assessee Corporation was entitled to carry forward the loss determined by the Income-tax Officer as, according to him, notice under section 148 had been issued to the assessee even before the time for filing the return under section 139(4) of the Act had expired. In that view of the matter, he held that the assessee had filed return within the extended time. The appeal of the revenue was dismissed by the Tribunal. Hence this reference at the instance of the revenue.

3. We have heard Mr. Anil Bhan, learned counsel for the revenue. The assessment in the present case was made by the Income-tax Officer in proceedings under section 147 of the Act initiated by issue of notice under section 148 of the Act. The question that arises for consideration is whether in such proceedings, initiated for the purpose of assessment of escaped income, the assessee is entitled to claim determination of loss to enable him to carry forward the same to be set off against the income of subsequent years to the detriment of the revenue. The Income-tax Officer made the assessment in proceedings under section 147 of the Act initiated with a view to assessing income which had escaped assessment and having not found any escaped income, determined a loss of Rs. 16,54,626/-. He, however, held that the loss could not be carried forward since the assessment had been made in proceedings initiated under section 147 of the Act for assessing the escaped income. The assessee appealed to the Commissioner of Income-tax (Appeals) who reversed the order of the Income-tax Officer and held that the assessee was entitled to determination of loss in proceed

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