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TMI Blog1965 (4) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby the company was exempted from the payment of all taxes including taxes on income for a period of 15 years from the date the company started the manufacture of cement from April, 1953. The petitioners proceed to say that in spite of this agreement the Income-tax Officer assessed the company to income-tax. Aggrieved of this the petitioner-company filed a writ petition before this court whereby it challenged the assessment order on the ground that on account of the immunity of taxes conferred by the Ruler of the former Jaipur State the income-tax department had no jurisdiction to assess the company. This writ petition was, however, dismissed by this court on November 21, 1963. Against that decision, of course, the petitioner-company has obtained a certificate from this court for appealing to the Supreme Court. The company continued to file its income-tax returns and the position about the assessment of these years will be clear from the subjoined statement: Assessment year Returned figure Assessed figure Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 was ₹ 34,62,671 which led to the demand of income-tax at ₹ 8,73,873. In attacking the provisional assessments it is contended that the Income-tax Officer had acted wholly without jurisdiction in ignoring the carry-forward loss of ₹ 1,03,03,935 claimed by the company in its return and the Income-tax Officer had no warrant for substituting this figure by his own figure of a carry-forward loss of ₹ 39,89,731. Relying on the plain language of section 141 of the Act, it is submitted that the Income-tax Officer was duty bound to compute the tax on the basis of the figures given in the return and he had no jurisdiction to travel beyond the return of the documents accompanying it. Thus it is asserted that at the stage of provisional assessment the company was entitled to full allowances for the carry-forward loss claimed by it in computing its total income. The petitioners submit that the company filed representations to higher authorities against the provisional assessment made by the Income-tax Officer and it also filed a revision application before the Commissioner of Income-tax under section 264 of the Act, but without any success. The order of the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 72, 73(2), 74, 75, 76, 77, 78 and 79. Loss from a speculation business or loss under the head 'Capital gains' carried forward from an earlier assessment year can be set off only against income from speculation business or income under the head ' Capital gains' as the case may be-sections 73(2) and 74; (v)Adjustment for unabsorbed allowance on account of depreciation or capital expenditure on scientific research carried forward from earlier assessment year-sections 32(2) and 35(4) read with sections 72(2) and 73(3). Details of the adjustments should be indicated in a statement which should be appended to this return. Section 141 speaks of provisional assessment and the relevant portions thereof run as under : 141. Provisional assessment.-(1) The Income-tax Officer may, at any time after the receipt of a return made under section 139, proceed to make, in a summary manner, a provisional assessment of the tax payable by the assessee, on the basis of his return and the accounts and documents, if any, accompanying it. (2) In making any assessment under this section due effect shall be given to- (a)the allowance referred to in sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and such loss cannot be or is not wholly set off against, income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where the assessee has income only under the head 'Capital gains' and has exercised the option under sub-section (2) of that section or where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and- (i)it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year : Provided that the business or profession for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year ; and (ii)if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on. Section 80 on which reliance was placed for the respondents may also be reproduced hereunder : 80. Submission of return for losses.-Notwithstanding anything contained in this Chapter, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return. As the statement of carry-forward loss is an integral part of the return, due effect, according to learned counsel, has got to be given to the figures about the set-off of carry-forward loss. It is submitted that sub-section (2) of section 141 of the Act casts a duty on the Income-tax Officer himself to make due allowance for the carry-forward losses or for depreciation allowance and the Income-tax Officer is bound to make these allowances even where the return fails to mention claims about carry-forward losses or for depreciation. The main argument on behalf of the respondents was based on the language of section 80 of the Act, as already observed above. When the learned counsel for the respondents was faced with the position taken by the income-tax authorities in allowing losses on the basis of returns for the years 1959-60, 1960-61 and 1961-62, he said that these were allowed out of generosity and contrary to the provisions of law and consequently it did not mean that the petitioners were entitled to the carry-forward loss of ₹ 1,03,03,935 as claimed by the company in the return. The sole question that falls for consideration, in the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of an assesses have to be taken by the Income-tax Officer from the return and the documents accompanying it and he is not entitled to travel beyond that, at the same time he is not entitled to ignore the other statutory provisions. In other words, he is required to apply the law correctly to admitted facts as per return. Thus, it will be within his province to see whether any claim is admissible in accordance with the provisions of the Act or not. Section 80 of the Act, to our mind, lays down a condition about the admissibility of a claim for a set-off in respect of a loss of a previous year. This section begins with a non-obstante clause and to our mind it creates a bar against carrying forward of losses for being set off against the income of subsequent years unless the loss has been first determined in pursuance of the return. Section 72 of the Act also lays down that a loss shall be carried forward to the following assessment year subject to the other provisions of this Chapter, namely, Chapter VI, and section 80 occurs in Chapter VI. The combined effect of the two sections, namely, sections 72 and 80 of the Act, is that a business loss can be carried forward to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income of later years. For the applicability of section 80 it is immaterial whether it is a regular assessment or a provisional assessment under section 141 of the Act, as the requirement of both the assessments is that the tax is to be charged in accordance with and subject to the provisions of the Act. At the same time, it may be observed that we are quite unable to accept the submission made by the learned counsel for the department that the Income-tax Officer had acted out of generosity and contrary to the provisions of law in allowing the losses for the years 1959-60, 1960-61 and 1961-62, on the basis of returns of those years. It is true that undetermined losses cannot be carried forward in law as held by us, but this does not mean that where the Income-tax Officer has failed to discharge his obvious duty of completing the assessment in time and thereby determining the losses, when the assessee has filed his returns regularly, the Income-tax Officer should take advantage of his own inaction and put the assessee in a difficult position. In the present case, however, for the 3 out of the 6 assessment years, losses were determined, namely, for the years 1956-57, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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