Case: Commissioner of Income Tax, Madhya Pradesh Vs. Seth Khushal Chand Daga

Hidayatullah, J.1. These appeals, by special leave, have been filed by the Commissioner of Income-tax, Madhya Pradesh, against the assessee, an individual, by name Seth Khushal Chand Daga. The assessee was a partner in a firm, Messrs. R. B. Bansilal Abirchand of Nagpur. In the year of account ending Diwali, 1941, he received his share of assets and property form this firm, and started business of his own. In the same year, his source of income were speculation, allowance from Government as treasurer, house property, and dividends. The assessee had received some profits from his share in an unregistered firm against which were set off his losses in his individual business, and the Income-tax Officer, who made the assessment, determined the loss to be carried forward, at Rs. 53,840/-. The assessee appealed against the assessment but did not question the loss which had been determined.2. For the year 1942-43, the assessee claimed to reopen the question of the loss to be carried forward, stating that it was Rs. 2,11,760/-. This contention was not accepted by the Department, and on appeal, by the Tribunal. The contention was, however, raised again by him in the assessments for the years 1948-49 and 1949-50. In these years, he had profits from his shares in the unregistered firm, Rs. 1,82,773/- and Rs. 1,39,922. - respectively, against which were set off his losses in his individual business, Rs. 1,18,913/- and Rs. 60,589/- respectively. The contention of the assessee was that the profits which he had derived from the unregistered firm could not be set off against the loss in his individual business as the profits of the unregistered firm had borne tax not in his hands but in those of the firm. This contention was rejected by the Department; but on appeal to the Tribunal, it was accepted. On the Tribunal being moved to make a reference, it referred four questions. Two of those questions dealt with matters also arising out of these assessments, but they have not been mentioned by us in this judgment. The two questions pertaining to these appeals were :"1. Whether the assessee was competent in law to raise a question with regard to the determination of loss for the assessment year 1941-42 as finally determined in appeal, in the course of proceedings for the assessment year 1942-43 when the loss brought forward from 1941-42 was being set off ?2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the loss suffered by the assessee form his personal business (including his share of loss from another firm) cannot be set off under S. 24(1) against his taxed share income from an unregistered firm ?"These questions were answered by the High Court against the Commissioner, who has now appealed, with special leave.3. It was conceded by the learned counsel for the Commissioner that the second question has now been decided of this Court in Jamnadas Daga v. Commr, of Income-tax, Civil Appeal No. 516 of 1959 : (AIR 1961 SC 1139 ) and that the answer must be against the Department. That portion of the case was thus not argued.4. As regards the first question, the only contention raised was that the loss which had been determined and ordered to be carried forward must be deemed to have become final, because no appeal was filed against that determination. But it appears that the procedure laid down by S. 24(3) under which the Income-tax Officer has to notify to the assessee by order in writing the amount of the loss as computed by him for the purposes of that section was not followed. No doubt, under S. 30 an appeal lies, if the assessee objects to the amount of loss computed and notified under S. 24; but inasmuch as the Income-tax Officer had not notified the loss computed by him by order in writing an appeal could not be taken on that point. In our opinion, the assessee was, therefore, entitled to have the loss re-determined in a subsequent year. Learned counsel for the Commissioner stated that the Department was not very anxious for the decision, because this particular assessee has had only losses in the years following, and no loss would be occasioned to the Revenue, if the losses brought forward be re-determined. But that is a matter, with which we are not concerned. In our opinion, the judgment of the High Court impugned before us was correct in the circumstances of the case.

Decision:
0[ds]That portion of the case was thus notit appears that the procedure laid down by S. 24(3) under which the Income-tax Officer has to notify to the assessee by order in writing the amount of the loss as computed by him for the purposes of that section was not followed. No doubt, under S. 30 an appeal lies, if the assessee objects to the amount of loss computed and notified under S. 24; but inasmuch as the Income-tax Officer had not notified the loss computed by him by order in writing an appeal could not be taken on that point. In our opinion, the assessee was, therefore, entitled to have the loss re-determined in a subsequentthat is a matter, with which we are not concerned. In our opinion, the judgment of the High Court impugned before us was correct in the circumstances of the case.