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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 187 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 188 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.