O M AHAMED SAHIB Vs. COMMISSIONER OF INCOME-TAX
HIGH COURT OF MADRAS
O. M. AHAMED SAHIB
COMMISSIONER OF INCOME-TAX
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SATYANARAYANA RAO, J. -
(1.) THE question referred to us for decision under Section 66(1) of the Income-tax Act by the Income-tax Appellate Tribunal is "whether on the facts of the case, the loss of Rs. 7,875 claimed, but which had not been determined in the assessment for the year 1942-43 can be set off in the assessment for the year 1943-44 under Section 24(2) of the Indian Income-tax Act "" THE assessee is a merchant carrying on business in yarn and cloth. He apparently started his business only in 1941-42 and in the course of the assessment for the year 1943-44 the Income-tax Officer discovered that the assessee was doing business in the assessment year 1942-43 also, though he did not submit a return of his income and therefore he issued a notice to the assessee under Section 34 of the Act read with Section 22(2) on 21st September, 1945 THE assessee submitted a return of his income, but it was discovered thereafter by the Income-tax Officer that there was no income at all during that period. During the assessment year 1943-44 the assessee claimed that his loss in the previous assessment year 1942-43 was Rs. 7,875 and that he was entitled to set it off against the profits of the year 1943-44 under Section 24(2) of the Indian Income-tax Act. This claim was rejected by the revenue authorities on the ground that as the loss was not determined in the previous assessment year the assessee could not claim the benefit of Section 24(2) of the Act
(2.) ON behalf of the assessee two contentions were raised on the strength of the provision in Section 24(3) which states
"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 first contention was that in the proceedings under Section 34, the Income-tax Officer was bound, under Section 24(3) of the Act to ascertain the amount of the loss, and his failure to discharge the statutory duty cannot be now taken advantage of by the department to disentitle the assessee to claim the benefit of the provision in Section 24(2) of the Act. This argument is answered by the decision in Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax, Madras : No. 4, where it was pointed out that the relief contemplated by Section 24(2) could be granted only in the course of the assessment of the total income of the assessee, and as the proceeding initiated under Section 34 was not a proceeding intended to assess the total income of the assessee, the duty under Section 24(3) is not cast on the Income-tax Officer, as that provision is not attracted by Section 34 of the Act. Counsel for the assessee attempted to draw a distinction between that case and the present on the ground that in that case there was a nil return, whereas in the present case there was no assessment at all and there was no return. But we think that this distinction does not make any difference in the application of the principle.
(3.) THE scope of a proceeding under Section 34, as pointed out in that decision, which follows earlier decisions, is very limited, and is not in the nature of a proceeding for assessing the total income under Section 22 and the other sections of the Act THE next contention urged on behalf of the assessee was that in any event, in this assessment year 1943-44 the Income-tax Officer should have, for the purpose of giving the benefit to the assessee of the provision in Section 24(2), determined the loss which the assessee had suffered during the previous year and for this he relied again on Section 24(3). His contention was that the language does not restrict the duty of the Income-tax Officer to determine the loss only of the particular assessment year which was being considered, but he was bound to determine the amount of the loss of even the previous year with a view to give the benefit to the assessee of Section 24(2). At first sight the argument might appear to be attractive as there is no express restriction in the sub-section limiting the duty of the Income-tax Officer to the determination of the loss of the particular assessment year with which he was dealing because it says "it is established that a loss of profits or gains has taken place" and does not say whether the loss took place in the assessment year under consideration or in the previous year. THErefore it was argued that whenever a right to set off is claimed under the provisions of Section 24, the Income-tax Officer was bound to ascertain the amount of loss under Section 24(3).;
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