TMI Blog1982 (6) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... iation to the extent of Rs. 9,976. With a view to get this loss determined by the ITO as well as to get it notified under s. 157 of the I.T. Act, 1961, the company filed a return disclosing the loss within the time allowed under s. 139(3) of the Act. No action was taken on this return by the ITO till the company enquired of the ITO as to why no action had been taken. In reply to the company's letter dated 28th February, 1966, incorporating the file number of the assessee that no action had been taken as the return was not accompanied by a statement of accounts and auditor's report and, as such, the return was treated as invalid. The ITO stated as follows: "Re: Assessment year 1961-62: In reply to your letter dated 28th February, 1966, I am to inform you that no action was taken as the return was invalid for the above assessment year. It was not accompanied by the statement of accounts and audited report and certificate." The assessee went up in appeal against the order of the ITO as contained in the said communication which we have set out hereinbefore. The AAC was of the view that the letter of the ITO could not be considered as an appealable order in terms of s. 246 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn was not accompanied with the audited accounts, the ITO was justified in treating the return as invalid and as no competent appeal had been filed in terms of s. 246, the AAC was justified in dismissing the appeal in limine on the ground of in competency. It was open to the assessee to seek alternative remedies but as far as the appeal before the Tribunal was concerned, there was no remedy whatsoever. After hearing both parties and considering, inter alia, the provisions of s. 139(3) and rr. 12 12A of the I.T. Rules, 1962, the Tribunal held that the return filed by the assessee disclosing a loss of Rs. 24,271 was a-valid return and that the letter of intimation, as provided by the Act, was issued by the ITO on 11th May, 1965, and, as such, was an order prejudicial to the assessee. It, then, proceeded to discuss the scope and ambit of s. 30 of the Indian I.T. Act, 1922, and referred to the Supreme Court decision in the case of Mela Ram and Sons [1956] 29 ITR 607, referred to hereinbefore, and also to the decision of the Calcutta High Court in the case of Kooka Sidhwa and Co. [1964] 54 ITR 54, among others and held that an appeal would always lie before the AAC in a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gains, he shall, subject to the provisions of that chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head. In view of the problems involved in this case, we are not directly concerned either with s.70 or s. 71 of this Act. Section 72 deals with " carry forward and set off of business losses ". Section 72 is in the following terms: " Where for any assessment year, the net result of the computation under the head. ' Profits and gains of business or profession ' is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or where the assessee has income only under the head 'Capital gains' relating to capital assets other than short-term capital assets and has exercised the option under sub-section (2) of that section or where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res for remedy. In this connection, we may refer to s. 80 which enjoins that notwithstanding anything contained in that chapter, no loss which has not been determined in pursuance of a return filed under s. 139 shall be carried forward and set off under sub-s. (1) of s. 72 or sub-s. (2) of s. 73 or sub-s. (1) of s. 74 or sub-s. (3) of s. 74A. This is material. Unless the loss has been determined and notified to the assessee, he is not entitled to carry forward. Section 157 of the Act provides for intimation of loss and is in the following terms : " Intimation of loss. When, in the course of assessment of the total income of any assessee, it is established that a loss has taken place which the assessee is entitled to have carried forward and set off under the provisions of sub-section (1) of section 72, sub-section (2) of section 73, subsection (1) of section 74 or sub-section (3) of section 74A, the Income-tax Officer shall notify to the assessee by an order in writing the amount of the loss as computed by him for the purposes of sub-section (1) of section 72, sub-section (2) of section 73, sub-section (1) of section 74 or subsection (3) of section 74A. " While we are on the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustice at pp. 100, 101 of the report, observed as follows: " Now, Sir Nusserwanji has argued that the order of the Income-tax Officer has become final inasmuch as no appeal was preferred against that order. We fail to understand which is the order of the Income-tax Officer which has become final. All that the Income-tax Officer says is " Income nil ", and he says that in order to come to a decision that no income of the assessee is liable to tax and, therefore, there is no assessment under section 23(3). Now, the only right to appeal that is given to the assessee is under section 30 and that right of appeal is in respect of the amount of loss computed under section 24. Therefore, if the Income-tax Officer had computed the loss and if the assessee had been dissatisfied with that computation, he had a right of appeal under section 30, and if he refused to exercise that right the computation would have become final. In this case the assessee has actually submitted his return, that return has not been challenged or disputed by the Income-tax Officer, he comes to no conclusion on that, he does not give a finding, he does not compute the loss. All he says is 'Income nil'. It is difficu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment orders determining the result as " nil " have to be taken to mean that the Income-tax Officer has determined the result as neither loss nor income.' When the loss was actually submitted in the return at a certain amount, when the Income-tax Officer has not computed what the loss is, when all that the Income-tax Officer says is that his income is ' nil ' yet the Appellate Assistant Commissioner considers it possible to come to the conclusion that the Income-tax Officer has determined that the assessee company did not suffer any loss. " The aforesaid observations indicate that Chief Justice Chagla emphasised that the assessee has a right to setoff the loss. Because there was a failure on the part of the ITO to compute that loss, the assessee was entitled to have the loss computed for the purpose of set-off in the subsequent year. The question with which we are concerned in the instant reference is that in the year in question in which loss was claimed, was not computed by the ITO for the grounds as we have set out hereinbefore. Factually, as will appear, return in the instant case has been considered to be incomplete for the alleged reasons given by the ITO while in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 246, inter alia, provides for appeal where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed. In this case the proper effect of the order is computation of loss at nil. Any other construction may lead to great hardship and an anomalous situation. For example, where the ITO refuses to assess the income or refuses to compute the loss on flimsy or arbitrary grounds or on grounds not legally tenable, then the assessee would be at a loss and will suffer without any remedy, because in view of the scheme of s. 72 read with s. 80 he would have no right, if the loss is not determined, to carry forward that loss to subsequent years, to which he is otherwise entitled. Such a consequence of constructions of the statute, if possible, in our opinion, should be avoided. Incidentally, we may note that the decision of the Bombay High Court was considered by the Supreme Court in the case of CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569, and certain observations of the Division Bench of the Bombay High Court was approved by the Supreme Court in preference to the observations of the Calcutta High Court on some other matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined for the purpose of s. 24(2). Section 22(2A) simply said that in order to get the benefit of s. 24(2), the assessee must submit his loss return within the, time specified by s. 22(1). That provision must be read with s. 22(3) for the purpose of determining the time within which a return has to be submitted. It could well be said that s. 22(3) is merely a proviso to s. 22(1). Thus, a return submitted at any time before assessment was made, was a valid return. In considering whether a return made was within time, sub-s. (1) of s. 22 must be read along with sub-s. (3) of that section. A return whether it was a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it was made within the time specified in s. 22(3). So, actually, there, the question was also different from the one with which we are concerned. It emphasised that the assessee had a right to have his loss set off in appropriate cases and to carry forward the loss within a specified period of time. On behalf of the assessee it was contended that the expression denying his liability " to be assessed in s. 246 of the I.T. Act, 1961, was wide enough to bring wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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