Narayana Pai, J.
1. In this reference at the instance of the assessee relating to his assessment for the assessment year 1957-58, the question referred is :
'When the assessee has filed a return of loss and when the Income-tax Officer has concluded the assessment as N. A. (not assessable) whether the assessment must be presumed to have been completed under section 23(1) of the Act, and whether the loss returned must be deemed to have been determined and accepted ?'
2. The return of loss referred to in the question was with reference to the immediately preceding assessment year 1956-57, in which he declared a loss of Rs. 12,862. The In come-tax Officer issued office to him under section 23(2) and 22(4) and concluded he assessment with the following observations :
'So this case falls under the higher exemption limit of Rs. 8,400. N. A. for 1956-57.'
3. The assessee throughout this assessment contended that the above order of the preceding year had the legal effect of accepting the loss of Rs. 12,862 returned by him and that therefore he was entitled to have the said sum carried over to the subsequent assessment year 1957-58. Before all the authorities he relied upon the ruling of the Supreme Court in Esthuri Aswathiah v. Income-tax Officer. All the authorities have rejected the argument and also taken the view that the decision of the Supreme Court is not applicable to the facts of this case.
4. The material facts in the case decided by the Supreme Court were that the assessee had filed 'Nil' return which the officer had disposed of with the order reading 'Non proceeding. ' The argument advanced by the assessee when the department wanted to reopen the same under section 34 of the Act of 1922, was that no final disposal having been given to his return, the original assessment must be taken to be pending. That argument was rejected by the Supreme Court with the following observation occuring at page 543 of the reports :
'The appellants had in their return dated September 8, 1952, submitted that they had no assessable income for the year in question and on this return, the Income-tax Officer had passed the order 'no proceedings'. Such an order in the circumstances of the case meant that the Income-tax Officer accepted the return and assessed and income as 'Nil'.'
5. The only distinction upon facts between that case and this case is that the assessment in that case was completed under sub-section (1) of section 23. The officer accepted the return as correct and completed without calling upon the assessee to produce evidence. But, in the present case, the case was not disposed of without issuing any notice to the assessee. As already stated notices were issued and it is after hearing the assessee on the question of status, etc., that the order mentioned above came to be passed. Hence, it cannot he said that the assessment must be deemed to have been concluded under sub-section (1) of section 23. But what can be said as a matter of law, applying the law stated by the Supreme Court, is that the assessment was undoubtedly concluded by the order cited above. What remains is to interpret that order.
6. According to the department the order merely held that the income of the assessee was less than the exemption limit of Rs. 8,400, but according to the assessee, the decision was that the loss returned was correct and because the exemption limit of income liable to tax was below the amount of the loss, the case was not one for assessment and recovery of tax.
7. It appears to us that the interpretation passed on behalf of the assessee is in the circumstances of the case correct or should be accepted as correct. Even if it should be possible to say that the view passed on behalf of the department is not wholly impossible, there is letter support is reason for the view pressed on behalf of the assessee.
8. It is therefore to be held that the order on the return for the assessment year 1956-57, had the effect of computing the loss of the assessee for the said year at the amount returned, namely, Rs. 12,862 and that therefore the assessee was entitled to have the same carried over to the subsequent assessment year 1957-58.
9. Our answer to the question therefore, is the following :
The order of the Income-tax officer on the return filed by the assessee for the assessment year 1956-57 need not be regarded as an assessment completed under sub-section (1) of section 23, but should be read as amounting to computation of loss for the said year to the extent of Rs. 12,862.
10. No costs.