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Commissioner of Income-tax Vs. Kamla Oil Mills - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 204 of 1967
Judge
Reported in[1970]78ITR272(MP); 1970MPLJ559
ActsIncome Tax Act, 1922 - Sections 22(2A), 23(2), 23(3) and 24
AppellantCommissioner of Income-tax
RespondentKamla Oil Mills
Appellant AdvocateM. Adhikari and ;P.S. Kirwadkar, Advs.
Respondent AdvocateV.V. Kulkarni, Adv.
Excerpt:
- - the income-tax officer had, for reasons best known to him, filed the return as presented out of time after issuing notice to the assessee under section 23(2) of the act and after examining the account books of the assessee a few times......act, examined its accounts a number of times and passed an order inthe order sheet saying: 'the loss returned is out of time. the same is, therefore, filed.' 3. the assessee appealed to the appellate assistant commissioner, who allowed the appeal saying: 'the objection of the appellant is two-fold. firstly, that the income-tax officer, having issued a notice under section 23(2), had condoned the delay... i find that the tribunal has in another case taken the view that when the income-tax officer issued a notice under section 23(2), he condoned the delay in filing the return. this is what the tribunal has stated in that case: 'he condoned the delay in filing the voluntary return under section 22(1) for the assessment year 1954-55 when he issued a notice under section 23(2) and,.....
Judgment:

Naik, J.

1. This is a reference under Sub-section (1) of Section 66 of the Indian Income-tax Act, 1922 (hereinafter referred to as 'the Act') at the instance of the Commissioner of Income-tax, Madhya Pradesh.

2. The assessee is an unregistered firm. Without being noticed under Section 22(2) of the Act, even though the. non-applicant was a regular assessee on the file of the department, the assessee filed a voluntary return for the assessment year 1955-56 showing a loss of Rs. 69,578. The Income-tax Officer, thereafter, issued to the assessee a notice under Section 23(2) of the Act, examined its accounts a number of times and passed an order inthe order sheet saying: 'The loss returned is out of time. The same is, therefore, filed.'

3. The assessee appealed to the Appellate Assistant Commissioner, who allowed the appeal saying:

'The objection of the appellant is two-fold. Firstly, that the Income-tax Officer, having issued a notice under Section 23(2), had condoned the delay...

I find that the Tribunal has in another case taken the view that when the Income-tax Officer issued a notice under Section 23(2), he condoned the delay in filing the return. This is what the Tribunal has stated in that case:

'He condoned the delay in filing the voluntary return under Section 22(1) for the assessment year 1954-55 when he issued a notice under Section 23(2) and, therefore, he should have completed the assessment and computed the loss to be carried forward.' With respect I am bound by the view taken by the learned Members of the Tribunal and on that view the Income-tax Officer, having condoned the delay in filing the return by the appellant by the issue of notice under Section 23(2), he is directed to proceed on the basis of the return and compute the correct amount of loss according to law.'

4. Pursuant to the aforesaid order of the Appellate Assistant Commissioner, the Income-tax Officer by his order dated July 12, 1963, computed the loss at Rs. 48,938 but said :

'As the loss return for this year was not filed in time by virtue of the provisions of Section 22(2A), the assessee is not entitled to the carry forward of the loss (including depreciation).'

5. In consequence, he also did not allow a set-off to the assessee against the total income of Rs. 52,830 finally determined against the assessee for the assessment year 1959-60.

6. The assessee again appealed in respect of the assessment for the year 1955-56, as also for the year 1959-60, claiming that it was entitled to carry forward the loss determined for 1955-56 and set it off against the income for the year 1959-60. The Appellate Assistant Commissioner allowed the appeal holding:

'In my view, it is now not open to me to see whether the order of my predecessor was right or not, or whether I would have come to the same conclusion, if I have to consider the case in all its aspects. When my predecessor passed the order directing the Income-tax Officer to compute the loss and by a clear implication to carry it forward, the Income-tax Officer had no option but to follow his directions. If the view of my predecessor was not acceptable, the department should have gone in appeal. Once the order of the Appellate Assistant Commissioner has not been challenged, it isto be implemented. The order of the Income-tax Officer refusing to carry forward the loss is, therefore, contrary to the order of the Appellate Assistant Commissioner and cannot stand.

I, therefore, direct that the Income-tax Officer should carry forward the loss determined and the assessee should have benefit of carry forward of loss.

Subsequent assessments may be modified by the Income-tax Officer in view of this order.'

7. The department then went up in appeal to the Income-tax Appellate Tribunal; but the appeals were rejected. The Tribunal held that the department, having not appealed against the first Appellate Assistant Commissioner's order dated December 9, 1960, for 1955-56 allowing the assessee's appeal, could not now object to the implementation of that decision. It also held that the department was not right in their view that under Section 22(2A) the Income-tax Officer had no power to condone the delay in filing a loss return with the object of getting the loss computed and carried forward. In the opinion of the Tribunal, the power to condone delay was implicit in the power to extend the time for filing the return given in Section 22(2A).

8. On the aforesaid facts and at the instance of the revenue, the following question of law has been referred to this court for decision:

'Whether, on the facts and in the circumstances of the case, the assessee is entitled to have its loss for the assessment year 1955-56 carried forward and set off against the income for 1959-60 ?'

9. The controversy centres round the interpretation of Section 22(2A) of the Act, which reads as follows:

' If any person who has not been served with notice under subsection (2) has sustained a loss of profits or gains in any year under the head 'profits and gains of business, profession or vocation,' and such loss or any part thereof would ordinarily have been carried forward under Subsection (2) of Section 24, he shall, if he is to be entitled to the benefit of the carry forward of loss in any subsequent assessment, furnish within the time specified in the general notice given under Sub-section (1) or within such further time as the Income-tax Officer in any, case may allow, all the particulars required under the prescribed form of return of total income and total world income in the same manner as he would have furnished a return under Sub-section (1) had his income exceeded the maximum amount not liable to income-tax in his case, and all the provisions of this Act shall apply as if it were a return under Sub-section(1).'

10. Under the aforesaid section, in order, to be entitled to the benefit of the carry forward of the loss in any subsequent assessment, the assessee must furnish: (a) within the time specified in the general notice under Section22(1) or (b) within such further time as the Income-tax Officer in any case may allow, all the particulars required under the prescribed form of return of total income and total world income in the same manner as he would have furnished a return under Section 22(1) had his income exceeded the maximum amount not liable to income-tax in his case. When the return was filed by the assessee, admittedly the time specified in the general notice had long expired. The question, therefore, is whether the case of the assessee is covered by the provision 'within such further time as the Income-tax Officer in any case may allow'.

11. The Income-tax Officer has thus the power to allow further time, and this further time may be allowed expressly or by implication. There being no express order granting further time, we shall have to see whether further time had been allowed by implication. In the instant case, if the return were not to be considered because it had been filed late, the Income-tax Officer could have initially summarily rejected it on that ground. But, instead of doing that, he issued a notice to the assessee to produce or cause to be then produced before him evidence in support of the return. The only inference, therefore, is that the Income-tax Officer was not prepared to reject the return as filed beyond time, but was prepared to consider it on merits on the footing that the delay was liable to be endoned. In our opinion, in view of the fact that the Income-tax Officer had power to grant further time under Section 22(2A) of the Act, his acting under Section 23(2) was consistent and consistent only with the inference that he was impliedly granting to the assessee further time for the filing of the return by condoning the delay in its late filing. If this inference were not permissible, we would be accusing the Income-tax Officer of wasting his time in a useless exercise of examining the account books of the assessee in support of a return which was to serve no useful purpose, even if found true on its examination.

12. We may also look at the matter in another manner. The Income-tax Officer had, for reasons best known to him, filed the return as presented out of time after issuing notice to the assessee under Section 23(2) of the Act and after examining the account books of the assessee a few times. On appeal, the Appellate Assistant Commissioner set aside the aforesaid order and, in view of the decision in another case, remanded the case to the Income-tax Officer 'to proceed on the basis of the return and compute the correct amount of loss according to law'. In the case referred to in the order, the direction of the Tribunal to the Income-tax Officer was to complete the assessment and compute the loss to be carried forward. No doubt, the order of the Tribunal in 'the case referred was more specific and exact; but, even so, there is no reason to impute to the Appellate Assistant Commissioner that, having held that the Income-tax Officer should bedeemed to have condoned the delay when he issued a notice to the assessee under Section 23(2) of the Act, he intended to nullify the effect of his order by not directing the Income-tax Officer to compute the assessment for the purpose of carrying forward the loss to be set off against the income of the subsequent years, the only purpose for which the return of loss was filed by the assessee. The effect of the order of the Appellate Assistant Commissioner was :

(a) That he was holding that by issuing a notice under Section 23(2) of the Act the Income-tax Officer should be deemed to have granted further time for the filing of the return ;

(b) that as, in his view, the Income-tax Officer had granted further time to the assessee for the filing of the return, his (the Income-tax Officer's) order filing the return as filed out of time was to be set aside ;

(c) that as the enquiry on the return had not been completed, it had to be completed; and

(d) that as the only purpose of the loss return filed by the assessee was to get the loss computed by the Income-tax Officer for the purpose of carrying it forward, the loss determined by the Income-tax Officer was to be carried forward to be set off against the income for subsequent years.

13. It is true that the order of the Appellate Assistant Commissioner was rather inapt, but that its purpose was what has been held to be its import and meaning by the Appellate Assistant Commissioner; and the Tribunal cannot be gainsaid; and we entirely agree with their inference of it, namely, as long as that order stood and as it had not been challenged in appeal, its effect was that the Income-tax Officer had to complete the assessment and carry forward the loss to be set off against the income of the assessee for the year 1959-60.

14. We, therefore, answer the reference in the affirmative saying that, on the facts and in the circumstances of the case, the assessee is entitled to have its loss for the assessment year 1955-56 carried forward and set off against the income for 1959-60.

15. The costs of this reference shall be paid by the applicant-Commissioner of Income-tax. Counsel's fee Rs. 100.


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