FALSHAW C.J. - The Income-tax Appellate Tribunal has referred the following question to this court under section 66 (1) of the Income-tax Act :
'Whether the losses of Rs. 1,51,520.00 and of Rs. 48,977.00 returned by the assessee in January, 1956, for the assessment years 1953-54 and 1954-55, respectively, require in law to be determined and carried forward under section 24 (2) of the Income-tax Act ?'
The assessee is the Kulu Valley Transport Co. (P.) Ltd. and admittedly no notices were served on the assessee under section 22 (2) of the Act for the assessment years in question. The assessee did not furnish any returns in time in response to the general notices published under section 22 (1), but in January, 1956, submitted returns showing the losses mentioned in the question. The Income-tax Officer refused to take any notice of the returns because they related to losses and had not been filed within the prescribed period, and the held that the company was not entitled to the benefit of carry-forward of losses in subsequent assessments. The assessee appealed unsuccessfully to the Appellate Assistant Commissioner and the Appellate Tribunal, both of whom refused to condone the delay in filing the returns and did not consider that a return showing a loss filed under the provisions of section 22 (2A) of the Act could be filed belatedly as a voluntary return under the provisions of section 22 (3). The relevant provisions of the Act read.
'22. (1) The Income-tax Officer shall, on or before the 1st day of May in each year, give notice, by publication in the press and by publication in the prescribed manner, requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax to furnish, within such period, not being less than sixty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner, setting forth (along with such other particulars as may be required by the notice) his total income and total world income during that year :
Provided that the Income-tax Officer may in his discretion extend the date for the delivery of the return in the case of any person or class of persons.
(2) In the case of any person whose total income is, in the Income-tax Officers opinion, of such an amount as to render such person liable to income-tax, the Income-tax Officer may serve a notice upon him requiring him to furnish, within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner, setting forth (along with such other particulars as may be provided for in the notice) his total income and total world income during the previous year :
Provided that the Income-tax Officer may in the discretion extend the date for the delivery of the return.
(2A) If any person, who has not been served with a notice under sub-section (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 sub-section (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).
(3) If any person has not furnished a return within the time allowed by or under sub-section (1) or sub-section (2), or having furnished a return under either of those sub-sections, discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made.'
The case of the revenue is that an assessee who wishes to file a return showing a loss for the purpose of having the loss carried forward to any subsequent assessment under section 24 (2) must, if he has not been served with notice under sub-section (2), furnish such a return within the period prescribed in the general notice published under sub-section (1) and he is not entitled to the benefit of sub-section (3) which allows the belated filing of an assessment by an assessee who has not furnished a return under sub-section (1) of (2) up to any time before an assessment is actually made for the year in question. However, if that had been the intention of the legislature, one would have thought that when sub-section (2A) was introduced into the Act on the 1st of April, 1952, sub-section (3) would have been suitably amended so as to make it quite clear that it was not meant to be applicable to a loss return filed under sub-section (2A), and it appears to me to be doubtful whether sub-section (2A) detracts in any way from the provision of sub-section (3).
On behalf of the assessee reliance was placed on the decision of the Supreme Court in Commissioner of Income-tax v. Ranchhoddas Karsondas, in which in January, 1950, the assessee has submitted a voluntary return under section 22 (3) in respect of the assessment year 1945-46, showing an income below the level at which the income become taxable. This return was ignored by the Income-tax Officer who issued a notice to the assessee under section 34. It was held that a return showing income below the taxable limit submitted voluntarily in answer to the general notice under section 22 (1) of the Act was a good return and such a return could be filed at any time before assessment under section 22 (3), there being no time-limit. It was, accordingly, held that where in respect of any year a return had been voluntarily submitted before assessment, the Income-tax Officer could not choose to ignore the return and any notice of reassessment and consequent assessment under section 34 ignoring the return was invalid. This decision, however, related to a period before sub-section (2A) was introduced, but it would certainly apply equally to a return showing a loss. Our attention has also been drawn to the decision of the Bombay High Court in Radhakrishna Rungta v. Seventh Income-tax Officer, C-II, Ward, Bombay. In that case the assessee had not been served with notices under section 22 (2) in respect of the assessment years 1958-59 and 1959-60, and he filed returns showing losses for both years in February, 1960, and March, 1962. Both these returns were ignored by the Income-tax Officer on the ground that they had not been filed within the time specified in sub-section (2A) and the assessee approached the High Court under article 226 of the Constitution for a direction to the Income-tax Officer to take up and complete the assessment for the years 1958-59 and 1959-60 before the 31st of March, 1963, and the 31st of March, 1964, respectively. It was held by Y. S. Tambe and V. S. Desai JJ. that voluntary return of loss submitted by an assessee would be a good and valid return under sub-section (3) of section 22 even before the amendment of section 22 of the Act by the insertion of sub-section (2A) if it was made at any time before assessment, and the Income-tax Officer was bound to take the necessary action in respect of such a claim. It was also held that the fact that sub-section (2A), which was added in 1952, applies only to some specified cases does not imply that the right of the assessee to file a loss return which existed prior to the amendment in other cases was sought to be done away with and that sub-section (2A) does not warrant a conclusion that, subsequent to the insertion of the said provision, a voluntary loss return is not capable of being filed by an assessee except as provided in sub-section (2A). It was accordingly held that the returns were good and a direction was issued to the Income-tax Officer to proceed and complete the assessments before the dates in question. This decision applies to the present case.
I may again revert to the provisions of sub-section (2A) according to the closing words of which all the provisions of the Act shall apply to a return filed as provided in this sub-section as if it were a return under sub-section (1), and in Ranchhoddas Karsondass case, the Supreme Court held that the return showing an income under the taxable limit which was filed belatedly by virtue of the benefit of sub-section (3) was a return furnished under sub-section (1). To my mind this reinforces the conclusion that nothing in sub-section (2A) detracts from the general provision in sub-section (3) for the filing of a return at any time before an assessment is actually made. The result is that I would answer the question referred to this court in the affirmative and allow the assessee his costs of the reference. Counsels fee Rs. 250.00
H. R. KHANNA J. - I agree
Question answered in the affirmative.