Full Judgment Text
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PETITIONER:
THE COMMISSIONER OF INCOME-TAX, MADHYA PRADESH
Vs.
RESPONDENT:
SETH KHUSHAL CHAND DAGA
DATE OF JUDGMENT:
07/03/1961
BENCH:
HIDAYATULLAH, M.
BENCH:
HIDAYATULLAH, M.
KAPUR, J.L.
SHAH, J.C.
CITATION:
1961 AIR 1259 1962 SCR (1) 186
CITATOR INFO :
RF 1975 SC1282 (10)
ACT:
Income Tax-Set-off of loss-Amount computed not notified in
writing-Effect-Income-tax Act, 1922 (XI of 1922), SS. 24,
24(3).
HEADNOTE:
For the accounting year 1941 the assessee’s profits from his
share in an unregistered firm were,. set off against his
losses in the individual business and the Income Tax Officer
determined the loss to be carried forward at RS. 53,840, but
did not notify to the assessee by order in writing the
amount of the loss as computed by him as required by S.
24(3) of the Act. The assessee appealed against the
assessment but did not question the amount of the loss which
had been determined. In the year 1942-43 the assessee
claimed to reopen the question of the loss to be carried
forward stating that it was RS. 2,116760. This contention
was rejected by the Tribunal. The contention was again
raised by the assessee in the assessment years 1948-49 and
1949-50.
The question was whether the loss which had been determined
and ordered to be carried forward must be deemed to have
become final because no appeal was filed against that
determination.
Held, that computation of the amount of loss under S. 24 Of
the Income-tax Act does not become final unless the Income-
tax Officer notifies by order in writing, the amount of the
loss as computed by him to the assessee. The assessee was
entitled to have
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the loss redetermined in a subsequent year though he had not
filed an appeal against the determination of the loss but no
appeal could be filed in the absence of an order in writing.
Seth jamnadas Daga v. The Commissioner of Income-tax, [1961]
3 S.C.R. 174, applied.
JUDGMENT:
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CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 148 to 150
of 1960.
Appeals by special leave from the judgment and order dated
October 31, 1956, of the former Nagpur High Court in Misc.
Civil Case No. 184 of 1953.
K. N. Rajagopala Sastri and D. Gupta, for the appellants.
J. M. Phakar, S. N. Andley, J. B. Dadachanji and
Bameshwar Nath, for the respondents.
1961. March 7. The Judgment of the Court was delivered by
HIDAYATULLAH, J.-These appeals, by special leave, have been
filed by the Commissioner of Income-tax, Madhya Pradesh,
against the assessee, an individual, by name Seth Khushal
Chand Daga. The assessee was a partner in a firm, Messrs.
R. B. Bansilal Abirchand of Nagpur. In the year of account
ending Diwali, 1941, he received his share of assets and
property from this firm, and started business of his own.
In the same year, his sources of income were speculation,
allowance from Government as treasurer, house property and
dividends. The assessee had received some profits from his
share in an unregistered firm against which were set off his
losses in his individual business, and the Income-tax
Officer, who made the assessment, determined the loss to be
carried forward, at Rs. 53,840. The assessee appealed
against the assessment, but did not question the loss which
had been determined.
For the year, 1942-43, the assessee claimed to reopen the
question of the loss to be carried forward, stating that it
was Rs. 2,11,760. This contention was not accepted by the
Department, and on appeal, by the Tribunal. The contention
was, however, raised again by him in the assessments for the
years, 194849 and 1949-50. In these years, he had profits
from
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his share in the unregistered firm, Rs. 1,82,773 and Rs.
1,39,922 respectively, against which were set off his losses
in his individual business, Rs. 1,18,913 and Rs. 60,589
respectively. The contention of the assessee was that the
profits which he had derived. from the unregistered firm
could not be set off against the loss in his individual
business, as the profits of the unregistered firm had borne
tax not in his hands but in those of the firm. This
contention was rejected by the Department; but on appeal to
the Tribunal, it was accepted. On the Tribunal being moved
to make a reference, it referred four questions. Two of
those questions dealt with matters also arising out of these
assessments, but they have not been mentioned by us in this
judgment. The two questions pertaining to these appeals
were:
"(1) Whether the assessee was competent in law
to raise a question with regard to the
determination of loss for the assessment year
1941-42 as finally determined in appeal, in
the course of proceedings for the assessment
year- 1942-43 when the loss brought forward
from 1941-42 was being set off ?
(2) Whether, on the facts and in the
circumstances of the case, the Tribunal was
right in holding that the loss suffered by the
assessee from his personal business (including
his share of ..loss from another firm) cannot
be set off under Section 24(1) against his
taxed share income from an unregistered firm?"
These questions were answered by the High Court against the
Commissioner, who has now appealed, with special leave.
It was conceded by the learned counsel for the Commissioner
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that the second question has now been decided by this Court
in Seth Jamnadas Daga v. The Commissioner of Income Tax (1),
and that the answer must be against the Department. That
portion of the case was thus not argued.
As regards the first question, the only contention raised
was that the loss which had been determined and ordered to
be carried forward must be deemed to
(1) [1961] 3 S.C.R. 174.
189
have become final, because no appeal was filed against that
determination. But it appears that the procedure laid down
by a. 24(3) under which the Income- tax Officer has to
notify to the assessee by order in writing the amount of the
loss as computed by him for the purposes of that section was
not followed. No doubt, under s. 30 an appeal lies, if the
assessee objects to the amount of loss computed and notified
under s. 24; but inasmuch as the Income-tax Officer had not
notified the loss computed by him by order in writing, an
appeal could not be taken on that point. In our opinion,
the assessee was, therefore, entitled to have the loss re-
determined in a subsequent year. Learned counsel for the
Commissioner stated that the Department was not very anxious
for the decision, because this particular assessee has had
only losses in the years following, and no loss would be
occasioned to the Revenue, if the losses brought forward be
redetermined. But that is a matter, with which we are not
concerned. In our opinion, the judgment of the High Court
impugned before us was correct in the circumstances of the
case.
The appeals fail, and are dismissed with costs. One hearing
fee.
Appeals dismissed.