NARASIMHULU K CH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) PURSUANT to a requisition made by the High Court under section 66(2) of the Indian Income-tax Act, hereinafter referred to as the Act, the Income-tax Appellate Tribunal, Bombay, submitted the following question

(2.) THE facts are simple and are not in dispute. THE assessee was an abkari contractor. He had last been assessed till 1943-44 when a tax of Rs. 30 was demanded from him. For the year 1944-45, though the assessee asserted that he filed a return, it was found that he did not. He did not also file any return for the assessment year 1946-47. But the Income-tax Officer, acting on information furnished by the Excise Department to the effect that the assessee had made considerable profits from arrack shops bid by him during the year, issued a notice to the assessee on 12th September, 1947, under section 34 read with section 22(2) of the Income-tax Act. THE assessee filed a return on 28th October, 1947, declaring an income of Rs. 3, 130-90, but it turned out that the income related only to the assessment year 1947-48. At the time of the enquiry he filed another return for the accounting year 1945-46 showing a net loss of Rs. 5, 000. On 17th November, 1949, for the first time, the assessee put in a petition saying that the loss of; Rs. 60, 000 incurred by him in the year 1944-45 must be set off in the assessments for the years 1945-46, 1946-47 and 1947-48. THE assessment for 1946-47 was completed on 6th December, 1949. THE Income-tax Officer refused to allow the loss. On appeal, the Appellate Assistant Commissioner upheld the order. THE Income-tax Appellate Tribunal also by their order dated 25th April, 1952, rejected the contention of the ground that the loss contemplated by section 24(2) of the Act was the ascertained balance of the earlier years, and as in the present case, the loss was not ascertained for the assessment year 1944-45, it could not be set off against the profits for the assessment year 1946-47Learned counsel for the assessee contends that under section 24(3) of the Act, an assessee has a right during the course of the assessment of his total income of any year to demand that his losses for the previous year or years be ascertained and set off against the profits of the assessment year irrespective of the fact whether the losses were ascertained during the relevant years, and the Officer has the duty to do so, and that his right and the Officer's duty exist even in a case where the assessment is reopened under section 34 of the Act. To appreciate this contention, it is necessary to read the relevant provisions of the Act as it stood before the Income-tax (Amendment) Act of 1953

(3.) THIS implies that unless there was a set-off of ascertained loss against profits under another head in the manner prescribed by section 24(1), no question of setting off would conceivably arise in subsequent years