TMI Blog1970 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... used to determine the loss, observing : " This is a loss case and the return has been filed after the statutory time. The company is therefore not entitled to the benefit of carry forward of loss in the subsequent assessments. The case is, therefore, filed." Against the order of the Income-tax Officer, appeals were preferred to the Appellate Assistant Commissioner. That officer rejected the company's request for extension of time for filing the returns, and dismissed the appeals, observing : " The return made under section 22(2A) can only be taken to be a return under sub-section (1) of section 22 for the purpose of this Act, if it is made within the statutory time prescribed in sub-section (2A) of section 22." The Income-tax Appellate Tribunal in second appeal held that the expression " all the provisions of this Act shall apply as if it were a return under sub-section (1) " in sub-section (2A) only applies to a valid return, i.e., a return which is filed within the time-limit prescribed under sub-section (1). The Tribunal rejected the contention that a voluntary return disclosing loss of income submitted after the expiry of the period for filing a return under sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1) but before the assessment is made, must still be entertained as a return filed under sub-section (3), even if it returns a loss of income under the head " Profits and gains of business, profession or vocation ". In the view of the High Court, sub-section (3) of section 22 applies to all returns whether disclosing profit or loss, and whether made voluntarily or pursuant to a notice under sub-section (2), and on that account even if the return is filed beyond the period prescribed by section 22(1), and discloses a loss, the Income-tax Officer was bound to determine the loss so that it may be carried forward in the following year. In reaching that conclusion the High Court purported to rely upon Commissioner of Income-tax v. Ranchhoddas Karsondas and Radhakrishna Rungta v. Seventh Income-tax Officer, C-II Ward, Bombay. The view expressed by the High Court cannot, in my judgment, be sustained. The assessee who has sustained loss of income under the head " Profits and gains of business, profession or vocation " and who has not been served with a notice under sub-section (2) to qualify for carrying forward the loss in any subsequent year of assessment must furnish within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee. In Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax (No. 4) the assessee-company had submitted a " nil return " pursuant to a notice under section 22(2). The Income-tax Officer computed the income of the company under section 23(1) of the Income-tax Act, 1922, as " nil ". Proceedings were later started under section 34 of the Income-tax Act to assess the income which the Income-tax Officer believed to have escaped assessment. The assessee then claimed that the loss of profits sustained in the previous year should be determined in the proceeding under section 34 and such loss should be allowed to be carried forward and set off against the income which may be determined for the year for which the notice under section 34 was issued. The High Court of Madras decided the case on a point which is not relevant here. The case was carried to this court in appeal. In Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax this court held that where no return was filed by an assessee at any stage of the case disclosing any income, profits or gains at all and proceedings were later started under section 34, the assessee could not claim in the course of those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sub-section (2) of section 24 and added the words " so much of the loss as is not so set off or the whole loss where the assessee had no other head of income " after the words "cannot be wholly set off under sub-section (1) ". This was intended to supersede a part of the decision of this court in Anglo-French Textile Co. Ltd's case. Sub-sections (1), (2), (2A) and (3) of section 22 must be interpreted in this background. Undeniably, sub-section (3) confers upon the assessee a right to submit a return at any time before the assessment is made. Such a return must be voluntary or pursuant to a notice under sub-section (2). The return may disclose income or loss ; if however the return was made before the Act was amended by the incorporation of sub-section (2A) in section 22, and it disclosed loss only, according to the decision of this court loss will not be determined if there be a single source of income. If it be a return filed not pursuant to a notice under sub-section (2) of section 22, and discloses a loss of income under the head " Profits and gains of business " the loss will be determined and carried forward only if it is made within the period specified in sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals arise from a judgment of the Punjab High Court answering the following question which had been referred to it by the Income-tax Appellate Tribunal in the affirmative and in favour of the assessee. " Whether the losses of Rs. 1,51,520 and of Rs. 48,977 returned by the assessee in January, 1956, for the assessment years 1953-54 and 1954-55, respectively, require in law to be determined and carried forward under section 24(2) of the Income-tax Act ? " The assessee, Kulu Valley Transport Co (P.) Ltd., is a private company incorporated under the Indian Companies Act, 1913, having its registered office at Pathankot. In January, 1956, the company voluntarily filed returns under section 22(3) of the Income-tax Act, 1922, hereinafter called the " Act ", showing losses of Rs. 1,51,520 and Rs. 48,977 for the assessment years 1953-54 and 1954-55, respectively. No notice had been served on the company under section 22(2) of the Act. The Income-tax Officer held that since the returns had been filed after the statutory period the company was not entitled to carry forward the losses for both the years in the subsequent assessments. Before the Appellate Assistant Commissioner two main po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the first day of May in each year by publication in the prescribed manner requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income-tax to furnish within such period not being less than 60 days as might be specified in the notice a return of his total income and total world income during that year. The Income-tax Officer could in his discretion extend the date for the delivery of the return. Under section 22(2) if the Income-tax Officer was of the opinion that income of any person was of such amount as to render him liable to income-tax he could serve a notice on him requiring him to furnish within such period not being less than 30 days a return showing his total income and total world income during the previous year. The date for delivery of the return could again be extended in the discretion of the Income-tax Officer. Section 22(3) provided that if any person had not furnished a return within the time allowed by or under sub-section (1) or sub-section (2) or having furnished a return under either of those sub-sections discovered any omission or wrong statement therein, he could furnish a return or a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2). If that is possible, there is no reason or justification for holding that, although he could claim the benefit of section 24(2) by filing a voluntary return in the given illustration, he would be deprived of that benefit if he filed a return voluntarily showing a loss except in compliance with section 22(2A). On the other hand, the contention on behalf of the revenue is that section 22 before its amendment in the year 1953 did not make any provision for the filing of a loss return voluntarily. Under section 22(1), returns which were invited were only of taxable income. No return which in the opinion of the person making it was a loss return was intended to be filed under section 22(1). It was only under section 22(2) that the return that was required to be filed was in pursuance of the individual notice given by the Income-tax Officer. Since by this notice a return in the prescribed form had to be filed by a person to whom the notice was issued whether it was profit or loss, a loss return could, therefore, be filed only in pursuance of a notice served under section 22(2) but not voluntarily. It is by virtue of the provisions contained in section 22(2A) that a loss return can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Now, the question which was submitted for the opinion of the High Court, in the present case, consisted of two parts, viz., (1) whether the loss returned by the assessee for the assessment years in question was required in law to be determined by the Income-tax Officer and (2) whether those losses could be carried forward after being set off under section 24(2) of the Act. The first part of the question stood concluded by the decision of this court in Ranchhoddas Karsondas' case. The Income-tax Officer could not have ignored the return and had to determine those losses. Section 24(2) confers the benefit of losses being set off and carried forward and there is no provision in section 22 under which losses have to be determined for the purpose of section 24(2). The question which immediately arises is, whether section 22(2A) places any limitation on that right. This sub-section which has been reproduced before simply says that in order to get the benefit of section 24(2) the assessee must submit his loss return within the time specified by section 22(1). That provision must be read with section 22(3) for the purpose of determining the time within which a return has to be submit ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
