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Issues Involved:
1. Set-off of Losses: Whether the assessee is entitled to set off the losses incurred in the assessment years 1944-45, 1945-46, and 1946-47 against the profits of the assessment year 1948-49. Issue-wise Detailed Analysis: 1. Set-off of Losses The primary issue is whether the assessee company can set off losses from the assessment years 1944-45, 1945-46, and 1946-47 against the profits of the assessment year 1948-49 under Section 24(2) of the Indian Income-tax Act. Background: - The assessee, All India Groundnut Syndicate Ltd., incurred losses in the assessment years 1944-45, 1945-46, and 1946-47. - For the assessment year 1948-49, the assessee returned an income of Rs. 4,593 and sought to set off the accumulated losses of Rs. 68,049 from previous years. - The Income-tax Officer allowed the set-off for the losses of 1943-44 and 1947-48 but disallowed it for 1944-45, 1945-46, and 1946-47, citing a lack of notification under Section 24(3). Tribunal and Appellate Assistant Commissioner: - The Tribunal upheld the Income-tax Officer's decision, stating that the losses for the years 1944-45, 1945-46, and 1946-47 were not notified as required by Section 24(3). - The Appellate Assistant Commissioner noted that the determination of "nil" income for some years did not amount to a determination of loss. High Court Judgment: - The High Court found the department's actions "unjustifiable and entirely indefensible." - It emphasized that Section 24(3) imposes a duty on the Income-tax Officer to notify the loss but does not condition the assessee's right to carry forward losses on such notification. - The court stated, "The right to carry forward the loss of the previous years for a period of six years is an absolute unqualified right." - The court criticized the department for trying to benefit from its own default, stating, "It is an elementary principle of law that no person can put forward his own default in defense to a right asserted by the other party." Conclusion: - The court concluded that the assessee's right to set off losses is not contingent upon the Income-tax Officer's notification under Section 24(3). - The court stated, "The right to claim a relief which the assessee is claiming only arose to the assessee in the assessment year 1948-49 when the assessee had made profits and sought to set off the losses incurred during the previous years against the profits." - The court answered the question in the affirmative, allowing the assessee to set off the losses from 1944-45, 1945-46, and 1946-47 against the profits of 1948-49. Final Judgment: - The reference was answered in the affirmative, and the Commissioner was ordered to pay the costs. This judgment underscores the principle that procedural lapses by tax authorities should not deprive taxpayers of their statutory rights. The court emphasized the absolute and unqualified right of the assessee to carry forward and set off losses, irrespective of procedural defaults by the Income-tax Officer.
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