1952 (3) TMI 48 - HC - Income Tax

Summary

Issues:
- Whether the unascertained loss claimed for a previous assessment year can be set off in the subsequent assessment year under Section 24(2) of the Indian Income-tax Act.

Analysis:
The case involved a merchant engaged in the yarn and cloth business who claimed a loss of Rs. 7,875 for the assessment year 1942-43, which was not determined during assessment. The Income-tax Officer initiated proceedings under Section 34 for the undisclosed income of that year. The assessee contended that the loss should be set off against the profits of the subsequent year 1943-44 under Section 24(2). The revenue authorities rejected the claim, stating that as the loss was not determined in the previous assessment year, the benefit of Section 24(2) could not be availed. The assessee relied on Section 24(3) to argue that the Income-tax Officer was obligated to ascertain the loss, even for the previous year, to grant the benefit under Section 24(2.

The court rejected the assessee's contentions, citing the Anglo-French Textile Co. Ltd. case, which clarified that relief under Section 24(2) could only be granted during the assessment of the total income. The court emphasized that Section 34 proceedings were not intended for total income assessment, hence Section 24(3) obligations did not apply. The court further explained the provisions of Section 24, distinguishing between setting off losses within the same assessment year (Section 24(1) and carrying forward unabsorbed losses to subsequent years (Section 24(2).

The court highlighted that Section 24(2) required an ascertained loss balance, not an undetermined one from a previous year. It clarified that Section 24(3) applied when there were losses and profits within the same assessment year, not for determining unabsorbed losses from a previous year. The judgment emphasized that the Income-tax Act did not mandate assessing losses of an assessee in a year with no assessable income for carry-forward purposes. The court noted a legislative gap in compelling authorities to assess losses for carry-forward, leaving it for legislative consideration.

Ultimately, the court ruled against the assessee, stating that the unascertained loss from the previous year could not be set off in the subsequent year under Section 24(2). The assessee was directed to pay costs to the Commissioner. The reference was answered in the negative, denying the assessee's claim for setting off the unascertained loss in the subsequent assessment year.