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Issues Involved:
1. Entitlement to claim and carry forward loss under Section 24(2) of the Indian Income-tax Act. 2. Interpretation of Section 24(3) of the Act. 3. Applicability of Section 24(3) in assessments reopened under Section 34 of the Act. Detailed Analysis: 1. Entitlement to Claim and Carry Forward Loss under Section 24(2) of the Indian Income-tax Act: The primary issue was whether the assessee could claim the loss incurred during the accounting year 1944-45 and have it carried forward and set off under Section 24(2) in subsequent years. The assessee, an abkari contractor, did not file returns for the years 1944-45 and 1946-47. The Income-tax Officer, based on information from the Excise Department, issued a notice under Section 34 read with Section 22(2). The assessee's return for 1947-48 showed income, but his return for 1945-46 showed a net loss. The assessee later claimed a loss of Rs. 60,000 for 1944-45 to be set off in subsequent years. The Income-tax Officer, Appellate Assistant Commissioner, and Income-tax Appellate Tribunal all rejected this claim, stating that the loss contemplated by Section 24(2) must be an ascertained balance from earlier years, which was not the case here. 2. Interpretation of Section 24(3) of the Act: The assessee's counsel argued that under Section 24(3), an assessee could demand that losses from previous years be ascertained and set off against profits of the assessment year, even if the losses were not ascertained during the relevant years. The court examined the relevant provisions of the Act as they stood before the 1953 amendment. Section 24(1) allows setting off losses under different heads within the same year, while Section 24(2) allows carrying forward losses from the same business to subsequent years. Section 24(3) requires the Income-tax Officer to notify the assessee of the loss computed for the purposes of this section. The court concluded that Section 24(3) does not confer a right independent of Sections 24(1) and (2). It only prescribes a procedure for notifying losses already established under these subsections. 3. Applicability of Section 24(3) in Assessments Reopened under Section 34 of the Act: The court noted that Section 24(3) presupposes an entitlement to set off losses under Sections 24(1) and (2). The right to set off under Section 24(1) and the carry-forward provision under Section 24(2) form an integrated scheme. The court cited the Supreme Court judgment in Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax, which held that unless there was a set-off under Section 24(1), no question of carrying forward under Section 24(2) would arise. The court also referred to the Madras High Court decision in Ahamed Sahib v. Commissioner of Income-tax, which supported the view that the balance of loss contemplated under Section 24(2) must be an ascertained balance. The Bombay High Court's judgment in All India Groundnut Syndicate Ltd. v. Commissioner of Income-tax was distinguished on the basis that it dealt with a different factual scenario where the Income-tax Officer failed to notify the loss. The court did not need to address whether Section 24(3) applies to assessments under Section 34, as the assessee would not be entitled to the relief sought even if it did. The Supreme Court in Anglo-French Textile Co. Ltd. left open the question of whether an assessee could reopen the whole assessment under Section 34, but the court in this case did not find it necessary to address this issue. Conclusion: The court answered the question in the negative, ruling that the assessee was not entitled to claim the loss incurred in 1944-45 and have it carried forward and set off under Section 24(2) in subsequent years. The assessee was ordered to pay costs of Rs. 250 to the respondent.
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