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TMI Blog1985 (7) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... return disclosing a loss of Rs. 4,00,755 which was revised to loss of Rs. 5,31,351. For the assessment year 1980-81 the assessee disclosed a loss of Rs. 4,331 which was assessed at Rs. 81,571. The assessee's claim before the ITO was that he should be allowed carry forward of loss as determined for the assessment year 1976-77 of Rs. 5,31,351 which should be set off only against the income for the assessment year 1979-80 and the balance loss for against the income for the assessment year 1980-81. The ITO on the other hand did not accept this submission and reduced the loss for the assessment year 1976-77 as aforesaid by a sum of Rs. 79,384 being the profit for the assessment year 1977-78 and by further amount of Rs. 51,212 being the profit for the assessment year 1978-79. In other words, the assessee's claim was that the loss as determined for the assessment year 1976-77 should be carried forward as it was so determined and set off against the income for the assessment years 1979-80 and 1980-81 without reducing the same by the profits for the assessment years 1977-78 and 1978-79 as aforesaid. The assessee's claim was founded on the ground that as the assessment for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years 1977-78 and 1978-79 was not in order. Thus, the assessee was not entitled to carry forward the reduced loss as determined by him after setting off the income for the said years. Thus, the claim of Shri Kaji was that the income for the years under appeal should be reduced by the amount of gross loss as aforesaid and not by the reduced loss as determined by the ITO. In support of this contention Shri Kaji submitted that the assessments for the assessment years 1977-78 and 1978-79 had become barred by limitation. According to section 72 of the Income-tax Act, 1961 ('the Act'), the loss which is determined for the assessment year 1976-77 is to be set off against the profits and gains 'assessable' for the succeeding year or years. The word 'assessable' according to Shri Kaji, would mean what is subjected to the process of assessment and cannot be considered de hors the assessment made by the ITO. Thus, unless the loss was set off in course of assessment for any year such loss cannot be reduced notionally by the ITO. The assessment having become barred by limitation there was no assessment at all and, therefore, the gross loss cannot be subjected to reduction in the manner the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied forward in view of the provisions of section 80. There is no dispute that for the assessment year 1976-77 the loss was determined by the ITO at Rs. 5,31,351. 5. The next such stage is the stage of carry forward as laid down in section 72(1)(ii). The loss as determined for any year shall be carried forward to the following assessment year and in the first place it shall be set off against the profits and gains, if any, of any business or profession carried on by the assessee and assessable for that assessment year subject to the conditions laid down in the proviso (with which we are not concerned). Further, 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. So that no loss shall be carried forward for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed. The word assessable according to Shri Mehta clearly assumes considerable force. The word assessable has not been defined and, therefore, in ordinary sense it would mean liable to assessment. Now the profits and gains as returned by the assessee for the assessment years 1977-78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: (3) No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed." Section 80 provides : "Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed under section 139, shall be carried forward and set off under sub-section (1) of section 72 or..." Under section 72(1) ; read with section 80, loss of the previous year under the head 'income from profits and gains from business, profession or vocation' may be carried forward to the next succeeding years only if it has been determined in pursuance of a return filed under section 139 of the Act. If it is not so determined in the assessment of the subsequent year the loss cannot be carried forward and set off against the profits of the subsequent year or years. These observations are found in the decision of the Supreme Court in Jaipur Udyog Ltd. v. CIT [1969] 71 ITR 799 at p. 803. Again their Lordships of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and assessable for that assessment year. In other words, if the profits and gains are found to be assessable for any assessment year though not actually assessed against such profits and gains the loss which is carried forward is required to be set off and the unabsorbed loss after such adjustment is required to be carried forward in the following assessment year and so on. Thus, the concept of carry forward and set off postulates a continuous process without interruption and without ignoring the assessment years in respect of which the profits and gains are returned by an assessee. It is immaterial whether such profits and gains are actually assessed or not. 7. We can also look at the controversy from a slightly different angle. The assessee had submitted valid returns or revised returns in course of the assessment for the assessment years 1977-78 and 1978-79 and on basis of those returns the assessee was assessable. However, due to the period of limitation prescribed under section 153 of the Act the assessment(s) could not be made and, therefore, the assessable profits were not subjected to assessment. Therefore, no tax liability could be fastened on the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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