THE COMMISSIONER OF INCOME-TAX, MADHYA PRADESH vs. SETH KHUSHAL CHAND DAGA

CIVIL APPEAL No. 148/1960Supreme Court[1962] 1 S.C.R. 18607 March 1961Bench: 3 JudgesAuthor: J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH SUPREME COURT REPORTS4 pages
AI SummaryDismissed

What were the facts?

The assessee, Seth Khushal Chand Daga, had an unregistered firm. In the accounting year 1941, his share of profits from this firm was set off against his individual business losses. The Income Tax Officer determined the loss to be carried forward at Rs. 53,840 but failed to notify this amount in writing to the assessee as required by Section 24(3) of the Income-tax Act, 1922. The assessee appealed the assessment but did not dispute the determined loss. In subsequent assessment years (1942-43, 1948-49, and 1949-50), the assessee sought to re-open the determination of the carried-forward loss, claiming it to be Rs. 2,11,760. This was rejected by the Department and the Tribunal initially, but the assessee persisted.

What did the Supreme Court hold?

The Tribunal held that the computation of loss under Section 24 of the Income-tax Act does not become final unless the Income-tax Officer notifies the amount of loss, as computed by him, to the assessee in writing. Since the Income-tax Officer failed to issue a written order notifying the loss for the assessment year 1941-42, the assessee was entitled to have the loss re-determined in a subsequent year, even though no appeal was filed against the initial determination. The Tribunal noted that an appeal under Section 30 would only lie if the assessee objected to a loss computed and notified in writing. The Court applied the principle from Seth Jamnadas Daga v. The Commissioner of Income-tax. The second question regarding the set-off of losses was conceded by the revenue to have been decided against them by a previous Supreme Court judgment. Therefore, the appeals were dismissed.

What were the issues?

1. Whether the assessee was legally competent to raise a question regarding the determination of loss for the assessment year 1941-42, as finally determined, during the proceedings for the assessment year 1942-43, when the loss from 1941-42 was being set off? 2. Whether, on the facts and in the circumstances, the Tribunal was correct in holding that the loss suffered by the assessee from his personal business (including his share of loss from another firm) could not be set off under Section 24(1) against his taxed share income from an unregistered firm? Assessee's arguments: The assessee contended that the loss determined in 1941-42 should be re-determined because the Income Tax Officer had not complied with Section 24(3) by failing to notify the computed loss in writing. Therefore, the determination had not become final. The assessee also argued that profits from an unregistered firm, which had already borne tax at the firm level, could not be set off against individual business losses. Revenue's arguments: The revenue argued that the loss determined in 1941-42 had become final as no appeal was filed against that determination. The revenue also relied on the High Court's decision on the second question.

Which sections of the Income-tax Act were involved?

Section 24,Section 24(1),Section 24(3),Section 30

AI-generated summary — verify with the full judgment below

186 SUPREME COURT REPORTS [1962] r96r persons and was rightly so assessed to Income-tax - and Excess Profits Tax.

The Commission"

Th ] h c ]] d · h of Income-tax, e appea s are t ere1ore a owe wrt costs. One Poona hearing fee. v.

Buldana District Main Cloth Importers Group Kapur 1 March 7. Appeals allowed. THE COMMISSIONER OF INCOME-TAX, MAD HY A PRADESH v. SETH KHUSHAL CHAND DAGA (J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.)

Income Tax-Set-of! of loss-Amount computed not notified in writing-Effect-Income-tax Act, 1922 (XI of 1922), ss. 24, 24(3).

For the accounting year 1941 the assessee's profits from his share in an unregistered firm were set off against his losses in the individual business and the Income Tax Officer determined the loss to be carried forward at Rs. 53,840, but did not notify to the assessee by order in writing the amount of the Joss as computed by him as required by s. 24(3) of the Act. The asses- see appealed against the assessment but did not question the amount of the loss which had been determined. In the year 1942-43 the assessee claimed to re-open the question of the Joss to be carried forward stating that it

The order continues below.

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