TMI Blog1956 (8) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Income-tax Act. The assessee filed a return in 28th October, 1947, declaring an income of ₹ 3,130-9-0, 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 ₹ 5.000. On 17th November, 1949, for the first time, the assessee put in a petition saying that the loss of ₹ 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 and Commissioner upheld the order. The Income-tax Appellate Tribunal also by their order dated 25th April, 1952, rejected the contention on the ground that the loss contemplated by section 24(2) of the Act was the ascertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or vocation for that year; and if it cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year, and so on; but no loss shall be so carried forward for more than six 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 scheme of the aforesaid provisions so far as it is relevant to the question now raised is simple. Though section 6 of the Act gives six different heads of income, profits and gains, income-tax is only one tax levied on the aggregate total of the income classified under different heads. Losses arising under the same source or from a different source under the same head will be set off against the profits under provisions of section 10(2) of the Act in so far as they apply to a particular case. Section 24(1) provides for the setting off of losses of profits or gains under any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have been unnecessary and one section conferring a general right to set off on the assessee and a duty to ascertain the loss on the Income-tax Officer would have met the situation. But the Legislature made the operation of sub-section (2) depend upon sub-section (1), for, in order that sub-section (2) may come into play, it is necessary that during the assessment of a particular year, the losses under one head should be set off against the profits under a different head and the balance of losses in respect of a particular business can be carried over to next year and so on for a period of six years till it is wiped out by setting it off agains the profits of the same business. It is therefore a necessary condition for giving the relief that there should have been a partial set-off during an assessment year. To carry out the scheme of set-off as provided by sub-section (1) and (2), sub-section (3) enjoins the duty on the Income-tax Officer to notify the losses. The words in sub-section (3) which he is entitled to have set off can only refer to the words shall be entitled to have the amount of he loss set off in section 24(1), and therefore unless he is entitled to have th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s but proceeds with the assessment of the income of the heads under which there is profit. Section 24(3), in our opinion, does not help the assessee in his claim that he is entitled to the benefit of section 24(2) and to compel the Income-tax Officer to determine the loss of the previous assessment year 1942-43. We respectfully agree with the aforesaid observations. Though the acceptance of the view leads to some anomalies, the scheme of the provisions compels us to do so. The judgment of the Supreme Court in Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax[1953] 23 I.T.R. 82] throws some light on the interpretation of the provisions. There, for the assessment year 1941-42, the assessee submitted a nil return. The Income-tax Officer accepted the return of income filed by the company and declared it was not liable to tax for the year 1941-42. A year later he started proceedings under section 34(1)(b) of the Act. The assessee again filed a statement showing a loss of ₹ 3,92,357 on its total world income. The assessment officer, after enquiry, accepted the nil return. It was contended that the Income-tax Officer having accepting his statement of loss was bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay High Court in All India Groundnut Syndicate Ltd. v. Commissioner of Income- tax [1954] 25 I.T.R. 90]. There, during the assessment year 1948-49 the assessee sought to set off the losses incurred by him during the assessment years 1944-45, 1945-46 and 1946-47. For the year 1944-45, the assessee submitted a nil return, for the year 1945-46 in his return he showed a loss of ₹ 15,654 and for 1946-47 he submitted a return showing loss without giving any definite figure. The Income-tax Officer passed similar orders in respect of those three years to the effect that he took the income of the company as nil and therefore he exempted it under section 23(3). Though he showed loss, he had failed to notify the loss as required by sub-section (3) of section 24. During the assessment for the year 1948-49, the assessee claimed a set-off. But the Income-tax authorities disallowed it. The Bombay High Court held that the assessee was entitled under section 24(2) to set off the loss against the profits. Chagla, C.J., who delivered the judgment after quoting sub- section (3) of section 24 observed at page 100 as follow: It is clear that this sub-section casts a duty upon the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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