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TMI Blog1990 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 154 of the Income-tax Act, 1961 ?" Shortly stated, the facts are that the assessee incurred losses in the assessment years 1968-69, 1970-71, 1971-72 and 1972-73. The losses were carried forward and set off against profits of the assessment years 1969-70 and 1973-74 onwards. In setting off such losses, the Income-tax Officer, who made the original assessments for the assessment years 1974-75 and 1975-76, did not make any distinction between unabsorbed depreciation and business loss and allowed a total loss of Rs. 8,63,760 for the assessment year 1968-69, Rs. 1,72,066 for the assessment year 1970-71, Rs. 14,97,375 for the assessment year 1971-72, and Rs. 42,16,245 for the assessment year 1972-73. In the assessment year 1973-74, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the assessee that in the original assessments for the assessment years 1968-69 and 1970-71, no distinction was made between business loss and unabsorbed depreciation. The assessee further contended before the Commissioner of Income-tax (Appeals) that, if at all there was a mistake, such mistake was committed in the assessment orders for the assessment years 1968-69 and 1970-71, and unless these assessment orders were rectified, the Income-tax Officer was not justified in rectifying the assessment orders for the assessment years 1974-75 and 1975-76. The Commissioner of Income-tax (Appeals) accepted this argument of the assessee and cancelled the orders passed by the Income-tax Officer under section 154 of the Income-tax Act. Being agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in sections 28 to 43A of the Act. Therefore, it is only with effect from the assessment year 1976-77 that section 44B of the Act is made applicable and the profit is computed at a sum equal to 7 1/2% of the aggregate of the amounts specified in section 44B(2) of the Act and no loss due to unabsorbed depreciation is allowed as a set off against the said profits. But the business loss may be carried forward and allowed as a set off as fixity of profit at a steady percentage overrides only sections 28 to 43A of the Act. The short-cut in profit computation under the changed law may, for the assessment year 1976-77 onwards, call for bifurcation of the loss due to unabsorbed depreciation and the business loss. But such ascertainment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Courts in the light of the aforesaid decision of the Supreme Court. In any event, the loss due to unabsorbed depreciation and business loss has to be ascertained by investigating into the facts for the assessment years 1968-69 and 1970-71 which was not the subject-matter for rectification. Such investigation of facts is not permissible in a proceeding under section 154 of the Act. In any event, if there is a mistake in not ascertaining the business loss and loss due to unabsorbed depreciation for the assessment years 1968-69 and 1970-71, in that event, the orders for those years called for rectification if at all under section 154 of the Act. As no proceeding for rectification under section 154 of the Act could be initiated for the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hole evidence and the law applicable to ascertain whether there was an error. If he doubts the written down value of the previous year, it is open to him to check up the previous calculations and if he finds any mistake, it is open to him to make fresh calculations in accordance with the law applicable including the rules made thereunder. After section 44B came into force on April 1, 1976, the question might have arisen as to whether any unabsorbed depreciation could be carried forward against the business income or income under that head from the assessment year 1976-77. This court in Universal Cargo Carriers Inc. v. CIT reported in [1987] 165 ITR 209, observed that, in view of the clear language of section 44B, while it is open to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 976-77. In making the assessment for the assessment year 1976-77, he could have looked into the records to find out the extent of the business loss which would be set off against the income in view of the provisions of section 44B. As a matter of fact, he issued a notice under section 154 for the assessment year 1976-77, but ultimately dropped the said proceedings.. The Income-tax Officer is not, in our view, entitled to do indirectly what he was not permitted to do directly. So long as the provisions of section 44B did not come into operation, the assessee was entitled to set off the business loss as well as unabsorbed depreciation against the income of the years in question and, as a matter of fact, from the chart which has been relied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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