1995 (8) TMI 1 - SC - Income Tax

Held that the assessee having failed to appeal against the intimation of the Income-tax Officer refusing to take cognizance of the loss returns filed by the assessee for the assessment years 1952-53 to 1954-55, cannot claim in the assessment proceedings relating to the subsequent years that the loss in the said earlier assessment years (1952-53 to 1954-55) be determined, carried forward and set off against the profits of the subsequent year or years, as the case may be

Summary

Issues Involved:
1. Entitlement to quantify and set off losses for assessment years 1952-53 to 1954-55 against income for assessment years 1960-61 and 1961-62.
2. Jurisdiction of the Appellate Tribunal to direct the Income-tax Officer to quantify losses for the assessment years 1952-53 to 1954-55.
3. Entitlement to set off losses of assessment years 1955-56 to 1959-60 against income for assessment years 1960-61 and 1961-62 under section 24(2)(iii) of the Indian Income-tax Act, 1922.

Issue-Wise Detailed Analysis:

1. Entitlement to Quantify and Set Off Losses (1952-53 to 1954-55) Against Income (1960-61 and 1961-62):
The respondent-assessee, a public limited company, suffered losses from 1945 to 1956 in its business of mining manganese ore. For the assessment years 1952-53 to 1954-55, returns were filed late, and the Income-tax Officer refused to take cognizance of these returns. The Tribunal allowed the assessee's claim to carry forward and set off these losses against income for 1960-61 and 1961-62, which was upheld by the High Court. The Supreme Court, however, held that the assessee could not claim the determination and set-off of these losses in subsequent assessment years since it did not appeal against the Income-tax Officer's refusal to take cognizance of the late returns.

2. Jurisdiction of the Appellate Tribunal:
The High Court initially addressed whether the Tribunal had jurisdiction to direct the Income-tax Officer to quantify the losses for 1952-53 to 1954-55. The Revenue argued that each assessment year is a separate unit and that the Tribunal could not travel outside the scope of the appeal for a particular year. The High Court rejected this argument, stating that the Tribunal must determine the taxable income for the years in question, which includes considering the carry forward and set-off of losses from earlier years. The Supreme Court affirmed this view, emphasizing that the Tribunal's jurisdiction extends to ensuring proper determination of taxable income, including the carry forward of losses if legally permissible.

3. Entitlement to Set Off Losses (1955-56 to 1959-60) Against Income (1960-61 and 1961-62):
The High Court agreed with the Tribunal that the business carried on during the previous years relevant to 1960-61 and 1961-62 was the same as the business carried on during the earlier years. Thus, the assessee was entitled to set off the losses from 1955-56 to 1959-60 against the income for 1960-61 and 1961-62 under section 24(2)(iii) of the 1922 Act. This finding was not challenged before the Supreme Court, and hence, it was affirmed.

Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's judgment regarding the entitlement to quantify and set off losses for 1952-53 to 1954-55 against income for 1960-61 and 1961-62, holding in favor of the Revenue. The Tribunal's jurisdiction to direct the quantification of losses and the set-off of losses for 1955-56 to 1959-60 against income for 1960-61 and 1961-62 was affirmed. The assessee's failure to appeal against the Income-tax Officer's refusal to take cognizance of the late returns precluded it from claiming the determination and set-off of those losses in subsequent years.