1976 (11) TMI 29 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Income-tax Officer's action in treating the returns as invalid.
2. Scope of reassessment proceedings and whether losses can be recomputed.
3. Whether the Tribunal was justified in disallowing the assessee's losses.

Summary:

1. Validity of the Income-tax Officer's Action:
For the assessment years 1960-61 and 1961-62, the assessee filed returns showing losses. The Income-tax Officer dismissed these returns as they were filed beyond time, marking them as "N.D." (No Demand). The Appellate Assistant Commissioner held that the Income-tax Officer was wrong in filing the returns without proper scrutiny and computation of the losses. However, the appeals were disallowed on the ground that no appeal lay against the action of the Income-tax Officer in filing the returns.

2. Scope of Reassessment Proceedings:
The Income-tax Officer reopened the assessments u/s 147(1) of the Income-tax Act, 1961, and reassessed the income based on a settlement regarding hundi loans. The Appellate Assistant Commissioner directed the Income-tax Officer to redetermine the losses and set them off against the income from other sources. The Tribunal, however, held that the original assessments amounted to "nil" assessments and that the losses claimed by the assessee were not allowed as the returns were treated as invalid. The Tribunal concluded that the determination of losses was not open for review in the reassessment proceedings.

3. Justification of Tribunal's Decision:
The Tribunal's decision was challenged, and the court examined whether the losses should be recomputed during reassessment. The court noted that the Income-tax Officer must compute the loss for set-off against the income or for carry forward to subsequent years. The court held that the losses claimed by the assessee must be computed for determining the income that escaped assessment, even if there is no carry forward of unabsorbed losses.

Conclusion:
The court answered the question in the negative and in favor of the assessee, stating that the losses claimed must be computed for the purpose of reassessment. However, any unabsorbed loss would not be carried forward to subsequent years. No order as to costs was made.