1970 (4) TMI 14 - SC - Income Tax

Return Disclosing Loss - voluntarily return - return was strictly governed by the terms of sub-s. (2A) of s. 22 and upon such a return the company could not claim that loss of income be determined and carried forward - Revenue s appeal dismissed

Summary

Issues Involved:
1. Timeliness of filing income tax returns.
2. Entitlement to carry forward of losses.
3. Interpretation of Section 22(2A) of the Income-tax Act, 1922.
4. Validity of voluntary returns filed under Section 22(3).

Issue-wise Detailed Analysis:

1. Timeliness of Filing Income Tax Returns:
The company did not file returns for the assessment years 1953-54 and 1954-55 within the period specified under Section 22(1) of the Income-tax Act, 1922. The returns were filed voluntarily in January 1956, disclosing losses. The Income-tax Officer refused to determine the loss, stating, "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."

2. Entitlement to Carry Forward of Losses:
The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld the Income-tax Officer's decision, emphasizing that the returns were not filed within the statutory time. The Tribunal stated, "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)."

3. Interpretation of Section 22(2A) of the Income-tax Act, 1922:
Section 22(2A) was added by Act No. 25 of 1953, effective from April 1, 1952. It mandates that to carry forward losses, the return must be filed within the time specified in the general notice under Section 22(1) or within an extended time allowed by the Income-tax Officer. The High Court held that a voluntary return filed after the expiry of the period specified in Section 22(1) but before the assessment is made must still be entertained as a return filed under Section 22(3), even if it discloses a loss. However, this view was not sustained by the Supreme Court, which stated, "A return not filed within the time prescribed by sub-section (1) or time extended by the Income-tax Officer does not comply with the requirement of sub-section (2A), and the assessee cannot claim that the loss be determined and carried forward."

4. Validity of Voluntary Returns Filed Under Section 22(3):
The Supreme Court acknowledged that Section 22(3) allows for the filing of returns at any time before the assessment is made, but this does not override the specific requirements of Section 22(2A) for carrying forward losses. The Court observed, "Sub-section (3) cannot in my judgment be read as implying that notwithstanding the restrictions placed by sub-section (2A) a return disclosing loss of income computable under section 10 will not only be entertained but the loss determined and declared under section 24(3) so as to enable the assessee to carry it forward."

Judgment by Shah J.:
Shah J. concluded that the assessee could not claim the benefit of carrying forward losses as the returns were not filed within the specified period under Section 22(1) or the extended time allowed by the Income-tax Officer. He stated, "I would, therefore, answer the question in the negative."

Judgment by Grover J.:
Grover J. agreed with the High Court that the losses should be determined and carried forward, emphasizing that Section 22(3) allows for the filing of returns at any time before the assessment is made. He stated, "It can well be said that section 22(3) is merely a proviso to section 22(1). Thus, a return submitted at any time before the assessment is made is a valid return."

Final Order:
The appeals were dismissed with costs. The majority decision upheld that the returns filed by the company were valid and the losses should be determined and carried forward. "The appeals fail and are dismissed with costs, one hearing fee."

Appeals Dismissed.