BISHAMBHAR DAYAL C.J. - This is a reference under section 66(1) of the Indian Income-tax Act, 1922. The question referred is 'whether the order of the Income-tax Officer filing the return showing loss as out of time was appealable order ?'
The facts which gave rise to this reference are not in dispute. The assessee filed a return out of time showing a loss of Rs. 18,427-11-3. The Income-tax Officer passed the following order :
' The return showing loss of Rs. 18,427-11-3 submitted by you on July 10, 1961, for the assessment year 1960-61 has been filed by me as out of time.'
The result of this order was that the Income-tax Officer refused to permit the assessee to carry forward the loss of this year into his return for the next year. Although the language of the order is merely filing the return, it is quite clear that the order has been passed filing the return, after knowing that the return is one of loss and that there would be no revenue out of it. This clearly showed that the Income-tax Officer wanted to shake off the responsibility of assessing the loss and permit the assessee to carry forward the loss into his return for the next year. Against this order the assessee filed an appeal and the learned Appellate Assistant Commissioner held that no appeal lay and dismissed the appeal. In second appeal, the Tribunal also held that no appeal lay against the order of the Income-tax Officer merely filing the return as it was not covered by the language of section 30, but at the request of the assessee made this reference as mentioned above.
So far as interpretation of section 22(2A) of the Act is concerned, we need not go into the original discussion because the matter has been thoroughly discussed by their Lordships of the Supreme Court in Commissioner of Income-tax v. Kilo Valley Transport Co. P. Ltd. By the majority opinion it has been held that a return filed under section 22(2A) of the Act is also a return which must be taken into consideration if it is filed before the assessment is made by virtue of section 22(3) of the Act, and cannot be ignored by the Income-tax Officer simply because it was beyond time. That being so, the question squarely arises what is the meaning of the order which has been passed by the Income-tax Officer. Section 30 of the Act under which the assessee can file an appeal provides an appeal against an order by 'any assessee objecting to... the amount of loss computed under section 24. ....' Now, the order passed by the Income-tax Officer clearly has the effect of refusing to permit the assessee the benefit of carrying forward his loss. If the Income-tax Officer had performed his duty of assessing the loss on the return filed he could have brought about that effect only by assessing the loss as nil. In law every officer must be deemed to perform his duty according to law. By this order the Income-tax Officer having come to know that the return was one of loss applied his mind to the facts of the case superficially and came to the conclusion that the assessee should not be permitted to carry forward this loss and to bring about that effect he passed an order that because the return had been filed beyond time, therefore, the whole proceedings should be dropped. The shelter behind the filing of the return beyond time was obviously wrong. As stated above, their Lordships of the Supreme Court have already held that even such a return filed beyond time cannot be ignored. That being so, the order can only amount to saying that there was no loss and, therefore, the assessee is not permitted to carry forward any loss. If this view is not taken and section 30 and the right to appeal are taken in a very literal way, then the Income-tax Officer can utilise all kinds of ingenuity in using such language as not to be covered by section 30 and bringing about an effect that the assessee will lose his remedy simply because the Income-tax Officer has chosen to use a language which would deny the assessee a right of appeal. The right of appeal, although a right given by the statute, must be determined according to the effect of the order upon the rights of the assessee and not merely upon the formal language which the Income-tax Officer has used in his order. We have no doubt that by passing this order in the circumstances in which the Income-tax Officer passed it, the clear intention was not to allow the assessee to carry forward the loss and according to law this will only be attained by passing an assessment order showing the loss as nil. This order of the Income-tax Officer, therefore, must be read as such and an appeal was thus competent against that order.
We accordingly answer the question as follows :
'The order of the Income-tax Officer filing the return showing loss as out of time was an appealable order.'
Costs of this reference will be borne by the parties as incurred.
BHAVE J. - I agree that the question referred to us should be answered in the manner proposed by my Lord the Chief Justice. I would, however, like to add a few words.
The assessee filed a return showing loss beyond the time prescribed under section 22(2A) of the Indian Income-tax Act, 1922. The Income-tax Officer thereupon passed an order to the effect :
'The return showing loss of Rs. 18,427-11-3 submitted by you on July 10, 1961, for the assessment year 1960-61 has been filed by me as out of time.'
The appeals preferred by the assessee to the Appellate Assistant Commissioner and the Income-tax Tribunal were rejected by the said authorities on the ground that the order in question was not one of those orders which are made appealable under section 30 of the Income-tax Act.
Section 24(2) of the Act provides that where any assessee sustains a loss of profits or gains in any year in any business, profession or vocation, and the loss cannot be wholly set off under sub-section (1) [i.e., against profits or gains from other heads of income], so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year. This provision makes it clear that the assessee has a right to get the fact of loss determined which can be carried forward for the assessment of the next year. It is also clear from section 30 of the Income-tax Act that if an assessee is not satisfied with the order passed by the Income-tax Officer under section 24, he can prefer appeals against the said order. The question that arises for consideration then is as to whether the Income-tax Officer can, in law, avoid his duty of passing an order under section 24 on the ground that the return of loss was filed by the assessee after the period of limitation prescribed under section 22(2A) of the Act.
There was difference of opinion amongst some High Courts as to the effect of late filing of the return under section 22(2A) of the Income-tax Act. But that difference has been resolved by the Supreme Court in Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd., wherein the majority view was expressed to the effect that a return filed under section 22(2A) was like any other return filed under other provisions of section 22 and even if it was filed beyond the time prescribed, an Income-tax Officer was under obligation to consider it if it was filed before the assessment order was passed, that being the effect of section 22(3) of the Act. This decision, therefore, makes it clear that the Income-tax Officer is bound to consider the return even if it is filed late and is bound to pass an order one way or the other, that is, accepting the full loss claimed or determining the loss at any other figure deemed proper by him. If the Income-tax Officer passes an order on misapprehension of law of simply filing the return as having been filed out of time, the only rational interpretation that can be put on such an order is to say that the Income-tax Officer determined the loss as at nil, the return having been filed late. If any other interpretation is put on such an order, it would enable the Income-tax Officer to defeat the claim of an assessee to carry forward the loss by simply filing it on one pretext or the other. The decision of the Supreme Court, referred to above, clearly makes it obligatory on the Income-tax Officer to consider the return even if it is filed late and to pass suitable orders.
In this view of the matter, I am clearly of the opinion that the order in question was one passed under section 24 of the Income-tax Act, 1922, and was as such appealable under section 30 thereof. I, therefore, concur in answering the question in the manner proposed by my Lord the Chief Justice and also with the direction that the parties shall bear their own costs.