- (1.) The followling question was formulated by the High Court of Calcutta while granting the certificate of fitness to file these appeals against the judgment of the Division Bench of that Court dated 17th November, 1975 : (reported in 1977 Tax LR 716): "Where an item unconnected with the escapement of income has been concluded finally against the assessee how far in reassessment on an escaped item of income it is open to the assessee to seek a review of the concluded item for the purpose of computation of the escaped income. The circumstances leading to the formulation of the aforesaid question and the grant of certificate of fitness to file the appeals are as follows:
(2.) Respondent in both the appeals is the assessee for the assessment year 1960-61, the assessee filed the return of income on 17th of November, 1960, showing a loss of Rs. 35,418/-. For the assessment year, 1961-62, the return of income was filed on 4th October, 1961, declaring a loss of Rs. 24,314/-. The Income-tax Officer after discussion with the authorised representative of the assessee. Shri A. S. Chowdhary, considered both the returns on 12-12-1962. and in respect of the return for the assessment year 1960-61 recorded on the order sheet that the return filed beyond time. No action is necessary filed "N.D.". For the assessment year 1961-62 the I.-T.O. recorded "the loss return is beyond time. Filed as N.D. The Incometax Officer conveyed to the appellant vide communication dated 12-12-1962. 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 return 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. The assessee challenged the order of the Income-tax Officer before the Appellate Assistant Commissioner. The appellate Authority held that the Income-tax Officer was wrong in filing the returns without proper, scrutiny and without first computing the loss in accordance with law. The Appellate Assistant Commissioner also opined that it could only be known after proptrcomputation whether assessment'would result in a loss or not. However, the appellate authority finally held that since the Income-tax Officer had filed the returns no relief could be granted to the assessee in the appeals and dismissed both the appeals. The assesse did not prefer any further appeal from the order of the Appellate Assistant Commissioner and, thus, the orders of the Income-tax Officer relating to the assessment years 1960-61 and 1961-62 in respect of the "loss returns" became final.
(3.) It transpires from the record that subsequent to the proceedings as noticed above, the assessee filed a disclosure petition in respect of some Hundi loans and a settlement was arrived at between the assessee and the Revenue as a result whereof the assessee became assessable for the disclosed sum of Rs. 27,000/- for the assessment year 1960-61 and for the sum of Rs.-9,0001/- for the assessment year 1961-62. The Income-tax Officer considered the aforesaid amounts for the two assessment years as 'escaped income'. A notice as required by S. 148 of the Income-tax Act, 1961 (hereinafter, the Act) was issued within the statutory period calling upon the assessee to show cause why the "escaped income" of Rs. 27,000/ - and Rs. 9000/ respectively. for the two assessment years be not brought to tax under S 147(a) of the Act. After hearing the parties and considering the objections, an order under S. 141(a) of the Act was made and the escaped income was brought to tax. Aggrieved by the order of the Income-tax Officer made under S. 147(a) of the Act, the assessee went up in appeal and the Appellate Assistant Commissioner accepted the plea of the assessee that the Income-tax Officer should have redetermined the loss as declared in the original returns and set it off against the escaped income from other sources and even carry forward the loss, if necessary to the subsequent assessment years. Accordingly, the Appellate Assistant Commissioner allowed the appeal and directed the Income-tax Officer. that in the reassessment proceedings not only to redetermine the loss as per the original loss returns and set it off against the escaped income from other sources but also that the unabsorbed loss, if any, should be carried forward and set off against the income in the subsequent years.;