SUHAS CHANDRA SEN, J. - (1.) THE Tribunal has referred the following question of law under S. 256(1) of the IT Act, 1961 ("the Act") : "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that, in the income disclosed under the Voluntary Disclosure Scheme, 1975, the speculation loss should be set off against the other income of the assessee notwithstanding the prohibition contained in S. 73(1) of the IT Act, 1961 ?"
(2.) THE assessment years involved are 1971-72 and 1972-73 for which the relevant years of account were years ending 28th Oct., 1970 and 17th Oct., 1971. The facts as narrated by the Tribunal in the statement of case are as under. The respondent-assessee is Sumati Kumar Sunil Kumar, a partnership firm, the concerned assessment years being 1971-72 and 1972-73. The material facts which are common to both the years are that there was a search and seizure in the case of the assessee on 12th June, 1973. The original assessment for 1971-72 was made on 19th March, 1974, on a total income of Rs. 25,913 and the original assessment for 1972-73 was made on 25th Feb., 1975, on a total income of Rs. 28,000. The documents seized during the search and seizure operation were under scrutiny. On 30th Dec., 1975, the assessee made a disclosure under S. 14(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975. In the said disclosure petition, the assessee disclosed concealed income of Rs. 6,16,000 for the asst. yr. 1971-72 and Rs. 4,73,000 for the asst. yr. 1972-73. Both the assessments for 1971-72 and 1972- 73 were, thereupon, reopened under S. 147 of the Act and proceedings were initiated by issue of notices under S. 148 of the Act in order to bring under assessment the concealed income which was detected by the Department in the course of search and seizure. In the course of assessment proceedings, the ITO found that, for the asst. yr. 1971-72, the income of Rs. 6,16,000 disclosed by the assessee under S. 11(1) of the Act was made up as below : For the asst. yr. 1972-73, the income of Rs. 4,73,000 disclosed by the assessee was made up as below : The ITO determined the assessee's income from jute business at Rs. 7,08,146 for the asst. yr. 1971-72 and at Rs. 5,33,846 for the asst. yr. 1972-73. He did not allow set off of the speculation loss in determining the assessee's income from business. The AAC, on appeal, rejected the assessee's contention that, under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, the ITO was bound to accept the net amount of concealed income as declared by the assessee and that he was not justified in making any adjustment thereto. The AAC was of the view that speculation losses had to be considered separately under the Act and had to be excluded for the correct computation of income of the assessee. In the second appeal that followed, the Tribunal accepted the assessee's stand in this behalf. Broadly stated, the reasoning of the Tribunal was that as there was no reference or mention in the charging S. 3, the special concepts in the Act, as for example, speculation loss, could not be imported into the proceedings arising out the Voluntary Disclosure of Income and Wealth Ordinance.
(3.) THE question is whether the ITO is entitled to disallow speculation loss in a case of voluntary disclosure even though the assessee had deducted such loss from its business income. Under the provisions of the Act, loss incurred in speculation business cannot be set off against the business income of an assessee.;