TMI Blog1976 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary ; filed N.D." For the assessment year 1961-62 the order recorded was as follows : " V.O.S. for 1962-63. The return filed on 4th January, 1962, is discussed with Sri A. B. Chowdhury. The loss return is beyond time. Filed as N.D." On the same day the Income-tax Officer concerned addressed a letter to the principal officer of the assessee as follows : " SUB : Assessment years 1960-61 and 1961-62. With reference to above and your authorised representative's discussion with me I am to inform you that the loss returns submitted beyond time for the assessment years under reference being invalid, no action on them is necessary. Hence, the proceedings for both these years are filed." Being aggrieved by the said orders of the Income-tax Officer the assessee preferred an appeal therefrom to the Appellate Assistant Commissioner. In disposing of the appeal, the Appellate Assistant Commissioner held that the Income-tax Officer was wrong in filing the returns filed by the assessee in response to notices under section 22(2) of the Indian Income-tax Act, 1922. Even if the said returns were filed under section 22(2A) of the said Act the same should not have been filed without p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the exact figure of such loss. The words showing " N. D." did not necessarily convey that the total income computed was " zero " and even if the losses claimed by the assessee were allowed the result would still be " no demand ". The Tribunal disposed of the appeal in favour of the revenue. It considered the decisions of the Supreme Court in the case of Commissioner of Income-tax v. Bidhu Bhusan Sarkar [1967] 63 ITR 278 as also the decision in the case of Esthuri Aswathiah v. Income-tax Officer [1961] 41 ITR 539 and held that the action of the Income-tax Officer in concluding the assessment proceedings amounted to " nil " assessments. It also came to the conclusion that from the letter of the Income-tax Officer dated the 12th December, 1962, referred to earlier that the losses claimed by the assessee were not allowed as the returns were rightly or wrongly treated as invalid. This decision of the Income-tax Officer being upheld in appeal the matter was now concluded. Such " nil " assessments could not be treated as non-existent. The Tribunal considered various decisions of different courts showing the scope and effect of reassessment proceedings and held that the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains did not form part of the total income of the respondent which could be brought to charge and were, therefore, not required to be computed under the Act. The Supreme Court held that the concept of carry-forward of loss did not stand in vacuo and involved the notion of set-off. Its sole purpose was to set off the loss against the profits of a subsequent year. If such set-off was not permissible or possible owing to the profits or income of the subsequent year arising from a non-taxable source, there was no question of a loss to be carried forward. Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it also could not be allowed to be carried forward and absorbed against income in a subsequent year, from a taxable source. In its judgment the Supreme Court discussed the concept of " profits and gains " as opposed to loss in the language as follows : " From the charging provisions of the Act, it is discernible that the words " income " or " profits and gains " should be understood as including losses also, so that, in one sense " profits and gains " represent " plus income " whereas losses represent " minus income ". In other words, loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed matters." 2. Kasinath Bagla v. Commissioner of Income-tax [1930] 4 ITC 472 ; AIR 1932 All 1. In this case it was held by the Allahabad High Court that section 34 restricts the jurisdiction of the Income-tax Officer to assess income previously escaping assessment or assessed at too low a rate. No power is conferred to revise the original assessment or to make a new assessment and grant relief on that basis. 3. Madhavjee Damodar Thackersay v. Commissioner of Income-tax [1935] 3 ITR 457 (Bom). In this case the Bombay High Court, following the Calcutta decision in Satyendra Mohen Roy Choudhury v. Commissioner of Income-tax [1930] 4 ITC 447 (Cal) [FB], held that under section 34 it was not open to the assessee to reopen the whole assessment and seek credit in respect of some items claiming over-assessment. But, on the other hand, it is open for an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but has been brought to tax under some other head. 4. Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax [1950] 18 ITR 906 (Mad). This decision of the Madras High Court was ultimately decided in the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been wrongly assessed in respect of matters which are not covered by the notice under section 34......Essentially the proceeding under section 34 with regard to the escaped income relates to the same proceeding which is commenced with the publication of the general notice under section 22(1). In some respects it may lead to supplementary assessment and in other cases it may result in an assessment for the first time." 7. S.Inder Singh Gill v.Commissioner of Income-tax [1963] 47 ITR 284 (Bom). Here the Bombay High Court followed Satyendra Mohen Roy Choudhury v. Commissioner of Income-tax [1930] 4 ITC 447 (Cal) [FB] and Madhavjee Damodar Thackersay v. Commissioner of Income-tax [1935] 3 ITR 457 (Bom) and held that in proceedings under section 34 the assessee was not entitled to claim recomputation of his earlier assessment. 8. K. S. Abdul Sattar v. Commissioner of Income-tax [1963] 47 ITR 621 (AP). In this case the Andhra Pradesh High Court held that after reopening under section 34 the Income-tax Officer was not limited to the information received by him but was entitled to take into account other items which also may have escaped assessment. 9. S. Natarajan v. Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 34 are taken to be validly initiated with regard to two-thirds share of the income, the jurisdiction of the Income-tax Officer cannot be confined only to that portion of the income. Section 34 in terms states that once the Income-tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reassess such income, profits or gains. It is, therefore, manifest that once assessment is reopened by issuing a notice under sub-section (2) of section 22 the previous under-assessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34(1)(b) the Income-tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year." 12. Al. Vr. St. Veerappa Chettiar v. Commissioner of Income-tax [1973] 91 ITR 116 (Mad). In this case the Madras High Court held that once the reassessment proceedings were validly initiated by the Income-tax Officer in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year....... (2B) Where an assessee sustains a loss such as is referred to in sub-section (2A) and the loss cannot be wholly set off in accordance with the provisions of that sub-section, the portion not so set off shall be carried forward to the following year and set off against capital gains for that year, and if it cannot be so set off, the amount thereof not so set off shall be carried forward to the following year and so on, so however, that no such loss shall be carried forward for more than eight years :...... (3) When, in the course of the assessment of the total income of any assessee, it is established that a loss of profits or gains has taken place which he is entitled to have set off under the provisions of this section, the Income-tax Officer shall notify to the assessee by order in writing the amount of the loss as computed by him for the purposes of this section." The corresponding provisions in the Income-tax Act, 1961, are contained in sections 70 and 72. A special s ..... 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