1968 (11) TMI 6 - HC - Income Tax

Assessee challenged the notice of demand on the grounds that the ITO was bound to make the provisional assessment on the basis of the return filed by the assessee - petition is allowed - notice of demand u/s 141 of the Income-tax Act, 1961, is quashed - It is open to the Income-tax Officer to proceed afresh in accordance with law in order to provisionally assess the petitioner under section 141 of the Act

Summary

Issues:
1. Provisional assessment of tax under section 141 of the Income-tax Act, 1961.
2. Determination of assessable income for the assessment year 1965-66.
3. Carry forward of losses from previous assessment years.
4. Examination of deductions claimed by the petitioner in the return.
5. Validity of the notice of demand under section 141.

Analysis:

The High Court of Allahabad addressed the issue of provisional assessment of tax under section 141 of the Income-tax Act, 1961. The court emphasized that the provisional assessment must be made in a summary manner based on the return filed by the assessee and accompanying accounts and documents. The court highlighted that the Income-tax Officer must give due effect to depreciation allowances and losses carried forward while determining the net assessable income for tax purposes. The court clarified that any excess amount paid towards provisional assessment would be considered as paid towards the regular assessment, and no appeal is allowed against provisional assessments.

Regarding the determination of assessable income for the assessment year 1965-66, the court held that the Income-tax Officer has the authority to examine the accuracy of the assessable income claimed by the assessee in the return. The court stated that if there is a clear violation of the provisions of the Income-tax Act in the computation of assessable income, the Income-tax Officer has the discretion to correct or disregard such deviations. The court emphasized that the factual foundation provided by the return and accompanying documents forms the basis for the Income-tax Officer's assessment of the net assessable income.

The court delved into the issue of carrying forward losses from previous assessment years. It ruled that losses can only be carried forward in accordance with the relevant provisions of the Income-tax Act, specifically sections 72 to 74. The court highlighted that losses must be determined as per the provisions before being carried forward, and any deviation from the determined loss is not permissible. The court cited a previous judgment to support its stance on determining the correct loss to be carried forward.

In examining the deductions claimed by the petitioner in the return, the court scrutinized specific items such as litigation expenses, property income, and depreciation. The court noted that the Income-tax Officer disregarded a deduction claimed for litigation expenses due to lack of details on its admissibility. However, the court found that the assessment proceedings had not reached a stage where such details were mandatory. The court concluded that the Income-tax Officer's error in disregarding a particular deduction was sufficient to invalidate the demand notice under section 141.

Lastly, the court addressed the validity of the notice of demand under section 141 and ruled in favor of the petitioner, quashing the demand. The court granted the Income-tax Officer the opportunity to proceed afresh in compliance with the law for the provisional assessment. The petitioner was awarded costs, and the judgment was agreed upon by both judges presiding over the case.