Holding

A refusal by the Income Tax Officer to make an assessment and determine loss (by refusing to take cognizance of belated returns) is an appealable order under Section 30 of the 1922 Act; if the assessee does not appeal, the loss cannot be re‑agitated or carried forward in later assessment years.

Summary

Mis Dalmia Cement, a public limited company, filed loss returns for assessment years 1952‑53 to 1954‑55 after the prescribed time. The Income Tax Officer refused to take cognizance of those returns, stating that no assessment could be made. For later years (1955‑56 to 1959‑60) losses were assessed, and for 1960‑61 the company sought to set off the earlier losses. The Tribunal and High Court allowed the set‑off, but the Revenue appealed. The Supreme Court held that the officer’s refusal to make an assessment is an order appealable under Section 30 of the 1922 Act; if the assessee does not appeal such an order, the loss cannot be re‑agitated or carried forward in subsequent assessment years. Consequently, the company could not claim the losses of 1952‑53 to 1954‑55. The Court also clarified that Section 24(3) is mandatory only after an assessment has been made, distinguishing it from a refusal to assess. The Revenue’s appeal was allowed, setting aside the High Court judgment.

Issues considered

Whether the Income Tax Officer’s intimation that no cognizance would be taken of returns filed beyond the prescribed period constitutes an appealable order under Section 30 of the Income Tax Act, 1922
Whether a failure to appeal such an intimation bars the assessee from later determining and carrying forward the loss for those assessment years
Whether the mandatory nature of Section 24(3) of the 1922 Act applies when no assessment has been made
Whether the ratio in Commissioner of Income‑Tax, Madhya Pradesh v. Khushal Chand Daga applies to the present facts

Legislation cited

Income Tax Act, 1922s. 22(1), s. 22(2A), s. 23(3), s. 24(3), s. 30
Income Tax Act, 1961s. 143(3), s. 157, s. 246(1), s. 71, s. 72

Subjects

Income TaxLoss carry forwardAssessment yearSection 24(3)Section 30AppealabilityIntimation1922 Act1961 ActTax assessment

Judgment

..---
'
A COMMISSIONER OF INCOME TAX, MADRAS AND ANR.
v.
MIS DALMIA CEMENT

AUGUST 16, 1995
B
[B.P. JEEVAN REDDY, SUHAS C. SEN AND G.T. NANAVATI, JJ.]

Income tax Act, 1922-Sections 23(3) and 24(3}-Detennination and
intimation of loss-Sub section (3) of Section 24 must be construed to be
mandat01y--Section 23(3) to be read alongwith Section 24(3)-ln case of
c loss-Mandatory upon Income Tax Officer to notify to assessee the amount
of loss-Income Tax Act, 1961...,-Sections 143(3) and 157.

Sections 23(3), 24(3) and 30-Retums showing losses-Order of refusal
to make assessment as returns filed beyond period stipulated-Appealable u/s
D 30-If not appealed against-Question cannot be reagi,tated in assessment
proceedings relating to a subsequent assessment yea1'--lncome Tax Act,
1961-Sections 143(3), 157, 246(1).

The respondent assessee, a public limited company filed its returns,
for the first time in the year 1956 for the previous years relating inter-alia
E to assessment years 1952-53 to 1954-55. The Income Tax Officer informed
the assessee that no cognizance could be taken of the said returns as they
had been filed beyond the period stipulated u/ss 22(1) and 22(2A) of the
Income Tax Act, 1922. In respect of the assessment years 1955-56 to
1959-60, the Income Tax Officer found that the assessee had suffered losses
F and determined the same for each of the said years. For the assessment
year 1960-61, the assessee filed a return showing a loss after bringing
forward and setting off the losses of the earlier assessment years commenc-
-:
ing from the assessment years 1950-51. The assessee's claim that it was
entitled to bring forward and set off the losses of the earlier years against
the profits for the previous relating to the assessment year 1960-61 was
G rejected. It was held that the business in which losses arose in the earlier
years was not the same business which was carried on during the previous
year relevant to assessment year 1960-61. On appeal, the Appellate Assis-
tant Commissioner affirmed the Income Tax Officer's view. On further
appeal, the Tribunal allowed assessee's claim holding that the business
H carried on during the previous year and the business carried on during
708
COMMR. OF INCOME TAX v. DALMIA CEMENT 709

the earlier years was one and the same. the Tribunal rejected the conten- A
tion urged by the Revenue that inasmuch as the losses had not been
quantified for the year assessment years 1952-53 to 1954-55, the assess-
ment was not entitled to carry forward the losses of those years for being
set off. It also rejected the Revenue's contention that during the course of
assessment for the assessment year 1960-61or1961-62, the Tribunal could
B
not direct the quantification of the losses in respect of the said three earlier
assessment years, 1952-53 to 1954-55. Against the decision of the Tribunal,
the Revenue applied for referring the matter for the opinion of the High
Court.

The Revenue urged that under the Income Tax Act, each assessment C
year is an unit by itself; that while dealing with an appeal in relation to a
particular assessment year, the Tribunal cannot travel outside the scope
of the appeal and deal with matters relating to other assessment years;
that in respect of the assessment years 1952-53 to· 1954-55, no loss was
determined by the Income Tax Officer for the reason that the returns were D
filed beyond the period prescribed and on the basis of such returns, no
loss could have been determined and allowed to be carried forward in view
of provisions contained in Sec. 22(2A); that the assessment in respect of
the said three assessment years had become final and Tribunal had no
jurisdiction, while dealing with appeal relating to the assessment year
1960-61 or 1961-62, to reopen the assessment and determine the loss for E
those earlier assessment years, carry it forward and set it off against the
profits made during the year relevant to assessment year 1960-61 of
1961-62.

The High Court rejected revenue's case. Hence this appeal. F

The assessee submitted that inasmuch as the requirement of Section
24(3) had not complied with in respect of the three earlier assessment
years (1952-53 to 1954-55), the assessee was entitled to claim in the
assessment proceedings relating to the assessment year 1960-61and1961-
62 that the loss sustained during· earlier assessment years be determined, G
be carried forward and set off against the profits arising during the
previous years relating to assessment years 1960-61and1961-62; that the
intimation given by the Income Tax Officer that no cognizance could be
taken of the returns of the said three assessment years on the ground that
they were filed beyond the period stipulated u/ss 22(1) and 22(2A) was H
\

710 SUPREME COURT REPORTS [1995]SUPP. 2 S.C.R.

A neither an order of assessment nor an order within the meaning of Section
24(3) and, therefore, the assessee was entitled to have the losses for the
said three assessment years determined and carried forward to be set off
against the profits of the subsequent assessment years.

The Revenue contended that the intimation of the income Tax officer
B that no cognizance could be taken of the returns filed with respect to the
said three assessment years was an order which could have been appealed
against by the assessee and since the assessee failed to prefer an appeal
against the said intimation, his right to have the losses determined for
those years stood negatived and in such a case he could not re-agitate or
C seek to re-open the very same question in the assessment proceedings
relating to subsequent years.

Allowing .the appeals, this Court

HELD : 1.1. Where the Income Tax officer refused to make an assess-
D ment and determine the loss on the ground that returns were filed beyond
the prescribed period, the assessee must appeal against such intimation
and have the Income Tax Officer compelled to make an assessment. If the
refusal to make an assessment is not appealed against, that question can-
not be re-agitated in the assessment proceedings relating to a subsequent
assessment year. The assessee, having failed to appeal against the intima-
E tion of the Income Tax Officer refusing to take cognizance of the loss
returns filed by the assessee for the assessment years 1952-53 to 1954-55,
could not claim in the assessment proceedings relating to subsequent years
that the loss in the said earlier assessment years (1952-53 to 1954-55) be
determined, carried forward and set off against the profits of the sub-
F sequent years or years, as the case may be. (731-F, 732-F]

1.2. Refusal to make an assessment is wholly different and distinct
from the failure to intimate the amount of loss determined as required by
Section 24(3) of the Income Tax Act, 1922. The stage of intimation of
quantum ofloss u/s. 24(3) arises only after making an assessment u/s 23(3)
G and after determining the loss. [731-D]

Commissioner of Income Tax, Madhya Pradesh v. Khushal Chand
Daqa, (1961) 42 I.T.R. 177 and Commissioner of Income Tax, Uttar Pradesh
v. Man Mohan Das, 59 I.T.R. 699, distinguished.

H Commissioner of Income Tax, Punjab v. Kulu Valley Transport Co. Pvt.
COMMROFINCOMETAX v. DALMIACEMENT[B.P.JEEVANREDDY,J.} 711

Ltd., (1970) 77 ITR 518, distinguished. A
Income Tax Officer v. \furlidhar Bhagwan Das, (1964) 52 I.T.R. 355
and Commissioner of Inc01)'(' Tax v. Manick Sons, (1969] 74 I.T.R. 1,
referred to.

An order assessment would not only determine the income but also B
the loss; even so Section 23(J) has to be read along with Section 24(3) of
the 1922 Act. In case of loss, it was mandatory upon the Income Tax Officer
to notify to the assessee by order in writing the amount of the loss as
computed by him for the purposes of this Section. Sub-section (3) of
Section 24 must be construed to be mandatory in view of absence of words C
in sub-section (3) of Section 23 regarding the determination and intima-
tion of loss. (727-D-E]

CIVIL APPELLATE .1 URISDICTION : Civil Appeal Nos. 745-46
of 1976.
D
From the Judgment and Order dated 27.9.73 of the Madras High
Court in T.C. No. 103 of 1968.

J. Ramamurthy, B.S. Ahuja, R. Sathish and S.N. Terdol for the
Appellants.
E
Hari Har Lal, R. K. Maheshwari and Vineet Maheshwari for the
Respondents.

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Cardozo, J. had once exclaimed: "The F
precedents have turn upon us and they are engulfing and annihilating us,

-·· engulfing and annihilating the very devotees that worshipped at their
share". We were inclined to repeat his observation after hearing this matter,
a feeling which will be borne out as the judgment proceeds.
G
The matter arises under the Indian Income Tax Act, 1922
(hereinafter referred to as "1922 Act"). Of the six questions referred by the
Tribunal for the opinion of the Madras High Court under Section 66(1) of
the Act, only Questions 2, 3 and 4 are relevant for our purpose. They read:

"2. Whethe-, on the facts and in the circumstances of the case, the H
712 SUPREME COURT REPORTS [1995] SUPP.2S.C.R.

A assessee was entitled to have the losses for the assessment years
1952-53 to 1954-55 quantified and set-off against its share income
from the partnership firm of Dalmia Magnesite. Corporation for
the assessment years 1960-61 and 1961- 62? .. -
3. Whether the Appellate Tribunal has jun:->diction to direct the
B Income-tax Officer to quantify the losses for the assessment years
1952-53 to 1954-55 and allow the set-off against the share income
from the partnership firm for 1960-61and1961- 62?

4. Whether on the facts and in the circumstances of the case, the
c . assessee was entitled to have the losses of the assessment years
1955-56 to 1959-60 set off against its share income from Dalmia
Magnesite Corporation for the assessment years 1960-61and1961-
62 under the provisions of Section 24(iii) of 1he Indian Income-tax
Act, 1922?

D We shall state the facts insofar as they are relevant to the said
questions alone.

The respondent-assessee is a public limited company carrying on the
business of mining Manganese Ore and selling it as such or after calcining
it . During the years 1945 to i956, it claimed to have suffered losses in that
E business. On april 23, 1956 the respondent-assessee filed it returns, for the
t
first time, for the previous years relating inter alia to assessment years
1952-53 to 1954-55. The Income Tax Officer issued a notice under Section
23(2) and the matters were posted for hearing on May 7, 1956 but later the
Income Tax Officer informed the assessee that no cognizance can be taken
F of the said returns as they had been filed beyond the period stipulated
under Section 22(1) and Section 22(2A) of the Act. In respect of the
assessment years 1955-56, 1956-57, .1957-58, 1958-59 and 1959-60, for
which years the returns were filed in time, the Income Tax Officer found
that the assessee had suffered losses and determined the same for each of
G the said years.

For the assessment year 1960-61, the assessee filed, in the first
instance, a return disclosing a profit of Rs. 1,00,136.00 but later filed a
revised return showing a loss of Rs. 60,351.00 after bringing forward and
setting off the losses of the earlier assessment years commencing from the
H assessment year 1950-51. The Income Tax Officer rejected the assessee's
COMMR.OFINCOMETAX v. DALMIACEMENT[B.P.JEEVANREDDY,J.) 713
r-
claim that it was entitled to bring forward and set-off the losses of the A
earlier against the profits for the previous year relating to the assessment
year 1960-61 in view of clause (ii) of sub-section (2) of Section 24. In other
words, he was the opinion that the business in which losses arose in the
earlier years was not the same business which was carried on during the
previous year relevant to assessment year 1960-61. On appeal, the Appel- B
late Assistant Commissioner affirmed the Income Tax Officer's view that
the income of the previous year relevant to assessment year 1960-61 arose
from a business which was different from the business which was carried
on during the earlier years. On further appeal, however, the Tribunal
agreed with the assessee. It held that the business carried on during the
previous year relevant to 1960-61 and the business carried on during the c
earlier years was one and the same. The Tribunal also rejected the conten-
tion urged by the Revenue before it that inasmuch as the losses have not
been quantified for the assessment years 1952-53 to 1954-55, the assessee
was not entitled to carry forward the losses of those years for being set-off.
It also rejected the Revenue's contention that during the course of assess- D
ment for the assessment year 1960-61 or for that matter 1961-62, the
Tribunal cannot direct the quantification of the losses in respect of the said
three earlier assessment years, viz., assessment years 1952-53 to 1954-55.
Aggrieved with the said decision of the Tribunal, the Revenue applied for
referring the aforesaid questions for the opinion of the High Court, as E
stated above.

Of the three questions concerned herein (Question Nos.2, 3 and 4),
the High Court took up Question No. 3 for consideration first. The
contentions urged by the Revenue were to the following effect: under the
~· Income Tax Act, each assessment year is an unit by itself. While dealing F
with an appeal in relation to a particular assessment year, the Tribunal
cannot travel outside the scope of the appeal and deal with matters relating
to other assessment years. In respect of the assessment years 1952-53 to
1954-55, no loss determined by the Income Tax Officer for the reason that
the returns were filed beyond the period prescribed. On the basis of such G
returns, no loss could have been determined and allowed to be carried
forward in view of the provision contained in sub-section (2A) of Section
- 22. In any event, the assessment in respect of the said three earlier
assessment years - whether right or wrong-had become final and the
Tribunal had no jurisdiction, while dealing with appeal relating to the H
714 SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A assessment year 1960-61 (or assessment year 1961-62, as the case may be),
to reopen the assessment relating to the said three earlier assessment years,
determine the loss for those years, carry it forward and set it off against
the profits made during the year relevant to assessment year 1960-61 (or
1961-62). Reliance was placed on Income Tax Officer v. Murlidhar Bhagwan
Das, (1964) 52 I.T.R. 335 and Commissioner of Income Tax v. Manick
B
Sons, (1969) 74 I.T.R. 1 in support of the above propositions. The said
contentions were rejected by the High Court in the following words:

"On the facts of this case, it cannot be said that the Tribunal has
exceeded its jurisdiction in directing the Income-tax Officer to
c quantify the losses in relation to the assessment years 1952-53 to
1954-55 and to allow a set-off of the losses for those years in
relation to the assessment years 1960-61 and 1961- 62. The Tribunal
while disposing of the appeal relating to the assessment years
1960-61 and 1961-62 has to actually determine the taxable income
of the assessee for these years and for this purpose it has neces-
D
sarily to find out whether the assessee is entitled to carry forward
the losses and set them off against the profits of the years in
question. If, in law, the assessee is entitled to carry forward and
set off the losses of the previous years in the assessment years in
question, then the Tribunal cannot refuse to consider that question
E of the ground that the losses in respect of which the set off has
been claimed relate to some earlier years. As a matter of fact, an
identical question came to be considered by the Supreme Court
in Commissioner of Income-tax Madhya Pradesh v. Khushal Chand
Daga, (1961) 42 1.T.R. 177. The question there was whether the
F Tribunal could direct the quantification of the losses for the earlier
years while dealing with an appeal relating to the subsequent
assessment year. The Supreme Court held that the assessee is
entitled to have the losses re-determined in the subsequent year if
the Income-tax Officer had not duly followed the provisions of
the statute in determining the quantum of losses in the earlier
G years. Though that case did not relate to the jurisdiction of the
Tribunal, the principle of the said decision has to be applied to
the facts of this case.

Admittedly, the assessee, in this case, applied for extension of
H time for the submission of the returns for the assessment years
COMMR. OF INCOME TAX v. DALMIA CEMENT [B.P. JEEVAN REDDY, J.] 715

1952-53 to 1954-55 and infact obtained the required el.tension from A
the bicome-tax Officer himself. It is also seen that after the sub-
mission of the returns within the extended time, the matters were
posted for enquiry and the assessee was asked to produce materials
in support of the said returns. But, somehow, the Income-tax
Officer chose to close the proceedings saying that he will not take B
cognizance of those returns as they had not been filed within the
time provided in Section 22(1) or section 22(2A). But it has been
held by the Supreme Court in Conunissio11er of Income-tax, Punjab
v. Kulu Valley Transport Co. P. Ltd., (1970) 77 ITR 518 that though
a return disclosing the loss is not filed in time as fixed in the general C
notice under section 22(1) or section 22(2A), the provisions of
section 24(1) and (2) of the Act should be taken into account for
the purpose of granting relief to the assessee, in relation to the
assessment for the subsequent year. It has, therefore, to be taken
that the non-consideration of the returns and the non-determina-
tion of the losses in relation to the years 1952-53 to 1954-55 by the D
Income-tax Officer cannot be said to stand in the way of the
assessee getting the relief under section 24(1) or section 24(2) in
relation to the assessment years 1960-61and1961-62. We have to,
therefore, hold that the Tribunal, in this case, while dealing with
the assessment for the years 1960-61 and 1961-62 is justified in E
directing the Income-tax Officer to determine the losses in relation
to the assessment years 1952-53 to 1954-55 for the purpose of
granting relief to the assessee under section 24(1) and section
24(2) in relation to the assessment years in question. The third
question is, therefore, answered in the affirmative and against the F
revenue."

The High Court then took up Questions 2 and 4 which related to the
merits so of the claim, viz., whether the business carried on during the
previous year relating to assessment year 1960-61 (and 1961- 62) is the
same as the business carried on during the earlier years including the G
previous years relevant to the afore&aid three assessment years. The High
Court agreed with the Tribunal that it was the same business. Accordingly,
the questions were answered in favour of the assessee and against the
Revenue. The correctness of the opinion expressed by the High Court is
questioned in these appeals. H
716 SUPREME COURT REPORTS (1995] SUPP. 2 S.C.R.

A The appeals had come up earlier before a Bench comprising one of
us (B.P. Jeevan Reddy, J.) and S.P. Bharucha, J. The learned counsel for
the respondent assessee placed strong reliance upon the decision of this
Court in Commissioner of Income -tax, Madhya Pradesh v. Klmshal Chand
Daga, 42 l.T.R. 177 - which was also relied upon by the High Court. On a
B careful perusal of the said judgment, however, the Bench found some
difficulty with respect to the precise ratio of the judgment. The Bench was
of the opinion that the matter requires consideration by a larger Bench for
the reasons mentioned in its order of reference. The matter was accord-
ingly directed to be placed before the Hon'ble Chief Justice of India for
placing it before a larger Bench. The appeals have now .come up before
c this three- Judge Bench. We have heard the counsel for both the sides at
some length.

Relevant Provisions of the 1922 Act and the Corresponding
Provisions of the present Act:
D
Sub-section (1) of Section 22 of the 1922 Act provided that before
the 1st day of May in each year, the Income Tax Officer shall give notice,
by publication in the press and by publication in the prescribed manner,
requiring every person whose total income during the previous year ex-
E ceeded the taxable limit to furnish within sixty days a return in the
prescribed form, verified in the prescribed manner and containing the
requisite particulars. There is no corresponding provision in the present
Act. Sub-section (2) of Section 22 provided that in the case of any person
whose total income is, in the opinion of the Income Tax Officer, such as
to render such person liable to income tax the Income Tax Officer may
F serve a notice upon him requiring him to furnish within the prescribed
period, not. being less than thirty days, a return in the prescribed from
containing the requisite particulars. The corresponding provision in the
1961 Act is sub-section (2) of Section 139. Both the old and the new
provisions empower the Income Tax Officer to extend the period for filing
G the return on proper cause being shown. Sub-section (2A) of Section 22
provided that where a person claimed to have suffered losses and to carry
them forward under sub-section (2) of Section 24, he must furnish his
return within the time specified in the general notice issued under Section
22(1) or within such further time as the Income Tax Officer may allow in
H any case. It would be appropriate to set out the sub-section in its entirety:
COMMR OF INCOME TAX v. DALMIACEMENf (B.P.JEEVANREDDY,J.] 717

"22(2A). If any person, who has not been served with a notice A
under sub-section (2) has sustained a loss of profits of gains in any
year under the head 'profits and gains of business, profession or
vocation', and such loss or any part thereof would ordinarily have
been carried forward under sub-section (2) of section 24, he shall,
if he is to be entitled to the benefit of the carry forward of loss in
B
any subsequent assessment, furnish within the time specified in the
general notice given under sub-section (1) or within such further
time as the Income-tax Officer in any case may allow, all the
particulars required under the prescribed form of return of total
income and total world income in the same manner as he would
have furnished a return under sub-section (1) had his income c
exceeded the maximum amount not liable to income-tax in his case,
and all the provisions of this Act shall apply as if it were a return
under sub-section (1)."

The corresponding provisions in the present Act are Section 139(3) and D
Section 80.

Sub-section (3) of section 23 dealt with assessment. It provided that
on the day specified in the notice issued under Section 23(2) or on any
subsequent date, the Income tax Officer shall, after hearing the evidence
produced by the assessee, pass an order in writing assessing the total E
income of the assessee and also determine the amount payable by him as
tax on the basis of such assessment. The corresponding provision in the
... present Act is sub-section (3) of Section 143. Section 143(3), however,
speaks specifically of determining not only the income of the assessee but

- also the loss - and as would be emphasised later, this is a very relevant
distinction between the two provisions.

Section 24 of the 1992 Act contained provisions relating to set- off
F

of losses in computing the aggregate income. The main limb of sub-section
(1) provided that "where any assessee sustains a loss of profits or gains in
any year under any of the heads mentioned in section 6, he shall be entitled G
to have the amount of the loss set-off against his income, profits or gains
under any other head in that year". The corresponding provision in the
present Act is Section 71.

Clause (ii) of Sub-section (2) of section 24 contained a limitation
upon the right of the assessee to carry forward the losses. The limitation H
718 SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A was that the losses could be carried forward and set-off only if the same
business was continued in the subsequent year as well. The corresponding
provision in the present Act is clause (i) of sub-section (1) of Section 72.

Sub-section (3) of Section 24 provided that "when in the course of
the assessment of the total income of any assessee, it is established that a
B loss of profits or gains has taken place which he is entitled to have set-off
under the provisions of this section, the Income-tax Officer shall notify to
the assessee by order in writing the amount of the loss as computed by him
for the purposes of this section". (emphasis added). This provision is of
crucial relevance to_ the question at issue herein. The corresponding
c provision in the present Act is Section 157.

[When we referred to the "corresponding provision" in the present
Act, we meant only a broad correspondence.]

Contentions of the Parties :
D
The submission of the learned counsel for the assessee in the appeals
before us is that inasmuch as the requirement of Section 24(3) has not been
complied with in respect of the aforesaid three earlier assessment years
(1952-53 to 1954-55), the assessee is entitled to claim in the assessment
proceedings relating to the assessment year 1960-61 (and 1961-62) that the
E loss sustained during those three earlier assessment years be determined
now, be carried forward and set-off against the profits arising during the
previous year relating to assessment year 1960-61 (and 1961-62). It is
further submitted that the intimation given by the Income Tax Officer that
no cognizance can be taken of the returns of the said three assessment
F years on the ground that they were filed beyond the period stipulated under
Section 22(1) and Section 22(2A) is neither an order of assessment nor an
order within the meaning of Section 24(3). For this reason also, the
assessee is entitled to have the losses for the said three assessment years
determined and carried forward to be set-off against the profits of the
G subsequent assessment years 1960-61 (and 1961-62). Strong reliance in
support of the above proposition is placed upon the decisions of this Court
in Khushal Chand Daga, Commissioner of Income-tax, Punjab v. Ku.llu
Valley Transport Company Private Limited, (1970) 77 I.T.R. 518 and Com-
missioner of Income Tax, Uttar Pradesh v. Manmohan Das 59 I.T.R. 699.

H On the other hand, the contention of the learned counsel for the
COMMR.OFINCOMETAX v. DALMIACEMENT(B.P.JEEVANREDDY,J.) 719

Revenue is that the intimation of the Income Tax Officer that no cog- A
nizance can be taken of the returns filed by the assessee with respect to
the said three earlier assessment years was an order which could have been
appealed against by the assessee, if he so choose. (In such a situation, the
question of intimation of the amount of loss determined under Section
24(3) could not have arisen, says the counsel.) Since the assessee failed to
prefer an appeal against the said intimation, his right to have the losses
B
determined for those years stood negatived. In such a case, he cannot
re-agitate or seek re-open the very same question in the assessment
proceedings relating to subsequent assessment year(s) inasmuch as each
assessment year is a separate unit under the Income Tax Act. Reliance is
placed upon certain decisions of this Court in support of the said proposi- c
tion to which we shall refer at the appropriate stage.

A few clarification by way or clea1i11g the ground :

The first feature to be noted in this case is that the assessee did not D
choose to file an appeal against the intimation given by the Income tax
Officer that he would not take cognizance of the returns filed for the
assessment years 1952-53 to 1954-55 on the ground that they were filed
beyond the period prescribed by law. Had the assessee preferred appeal(s)
against that intimation, the majority decision of this. Court in Kullu Valley
Transp01t Company Private Limited could probably have come to its rescue. E
Indeed, the facts of that case are more or less similar to the facts of this
case, with the crucial difference that in that case the assessee preferred
appeals against a similar intimation and it is in those proceedings that it
was held by this Court ultimately, by a majority, that under the provisions
of the 1922 Act, a return of loss filed before making the assessment is a F
valid return and the Income Tax Officer is obliged to determine the loss
on the basis of such return.

Strong reliance is placed by the learned counsel for the assessee upon
the decision of this court in Manmohan Das. In our opinion, however, the
principle of the said decision is of no relevance to the facts and circumstan- G
ces of this case. The main question considered in the said decision was
whether income received by the assessee under the agreement dated
January 2, 1931 (whereunder he was appointed as the Treasurer of the
Allahabad Bank) was business income assessable under Section 10 or
salary income under Section 7 or income from other sources under Section H
720 SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.

A 12. The Income Tax Officer and the Appellate Assistant Commissioner
held that it was not business income while the Tribunal held that it was
business income. The other question concerning Section 24 arose in the
following circumstances: for the assessment year 1950-51, though the asses-
see suffered a net loss of Rs. 38,027.00 the Income Tax Officer declared
that "the loss computed in that year could not be carried forward to the
B next year under Section 24(2) of the Income Tax Act as it was not a
business loss". (This was consistent with his holding that the income of the
assessee accruing under the said agreement, whereunder the loss was
incurred, was not business income). The Tribunal however, held that the
income accruing under the said agreement (whereunder the said loss was
c incurred) was business income and accordingly allowed the loss to be
carried forward and set-off against the income of the succeeding year. The
matter was carried to this Court mainly on the question as to the nature
of the income. The entire discussion in the decision pertained to the said
question. Before taking up the said main question, however, Shah, J., (who
D delivered the opinion of the Court) took up the other question (concerning
Section 24) more by way of clearing the ground for the main question. The.
learned Judge observed:

"Whether the loss of profits or gains in any year may be carried
forward to the following year and set off against the profits and
E gains of the same business, profession or vocation under Section
24(2) has to be determined by the Income-tax Officer who deals
with the assessment of the subsequent year. It is for the Income-tax
Officer dealing with. the assessment in the subsequ~nt year to
determine whether the loss of the previous year may be set off
against the profits of that year. A decision recorded by the Income-
F
tax Officer who computes the loss in the previous year . under
section 24 (3) that the loss cannot be set off against the income of
the subsequent year is ncit binding on the assessee."

G The decision thus lays down that it was not the function of the Income Tax
Officer while making the assessment. to decide or declare whether the loss
determined by him for that assessment year can be carried forward and set
off against the income of the future year (s) under Section 24(2) of the Act
or not. The question whether the loss determined for a previous year is to ..
.be carried ft>l'Ward and set off against the income of the succeeding year,
H it is held, is a ·matter to be decided by the Income Tax Officer dealing with
•
COMMR OF INCOME TAX v. DALMIA CEMENT [B.P. JEEVAN REDDY, J.) 7~1

the assessment relating to the subsequent year in which year the loss is A
sought to be set off by carrying it forward from the previous year. On that
basis, it is held that the declaration made by the Income Tax Officer in the
assessment order relating to the assessment year 1950-51 that the loss
incurred in that year cannot be carried forward was beyond his jurisdiction.
Since this Court held agreeing with the Tribunal and High Court, that the B
income arising under the agreement aforesaid was business income, itheld
that the loss determined in the previous assessment year can be carried
forward and set off against the profits of the succeeding/subsequent assess-
ment year under Section 24(2) of the Act. It is for this reascn, we say that
the ratio or the principle of this decision has no application to the facts of
this case. C

MAIN ISSUE:

Now coming to the main contention of the assessee, which is based
upon the language of Section 24(3) and the decision qf this Court in D
Khushal Chand Daga, it would be appropriate to first ascertain the facts
of the said decision. The decision of this Court records that ".!.earned
counsel for the commissioner (commissioner was the appellant before this
Court) 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 E
forward be re-determined". Though this Court observed that it was not
really concerned with the said aspect, yet it appears that the lack of interest
on the part of the appellant led to certain errors in stating the relevant
facts. With a view to ascertain the correct factual position, we turned to
the decision of the High Court reported in Seth Khushal Chand Daga v. F
Commissioner of Income-tax, Madhya Pradesh, 311.T.R. 417, a decision of
the Nagpur High Court. The report contains the statement of the case
submitted by the Tribunal as well. The statement of the case shows that
the questions referred to the High Court therein related to two different
sets of assessment years. The first set of assessment years is 1941-42 and
1942-43. The question referred for these assessment years, at the instance G
of the assessee, was to the following effect :

"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 proceed- H
722 ~UPREME COURT REPORTS (1995] SUPP. 2 S.C.R.

A ings for the assessment year 1942-43 when the loss brought forward
from 1941-42 was being set off?

The other set of assessment years concerned in the said case is 1948-49
and 1949-50. In respect of these assessment years, the following two
questions were referred at the instance of the assessee, viz., "(1) Whether
B Section 12-B of the Indian Income-tax Act of 1922 is ultra vires the Indian
Legislature; and (2) whether on the facts and in the circumstances of the
case the profit of Rs. 16,400 on the sale of the three houses can be said to
be covered by the second proviso to Section 12B(l) of the Act." For these
assessment years, (1948-49 and 1949-50), yet another question was referred
c at the instance of the Revenue viz.,

"Whether on the facts and in the circumstances of the case, the
Tribunal was right in holding that the loss suffered by the assessee
from his personal business (including his share of loss from another
firm) cannot be set off under Section 24(1) against his taxed share
D
income from an unregistered firm?"

(The wording of the question suggests that it must have been referred at
the 'instance of the assessee. Be that as it may, we go by the statement of
the case.) Thus, there were two questions involving Section 24, viz., one
E relating to the first set of assessment years (1941-42 and 1942-43) referred
at the instance of the assessee and the other concerning the second set of
assessment years (1948-49 and 1949-50) referred at the instance of
Revenue. The report in Seth Khushal Chand Daga (311.T.R. 417) does not
contain the reasons for which the question, referred at the instance of the
F Revenue, relating to assessment years 1948-49 and 1949-50 was answered
against the Revenue. Para 10 of the report merely says; "As regards the
question raised in Miscellaneous Civil Case No. 98 of 1954 decided by us
today, for the reasons stated therein we answer the question in the affirm-
ative." The report (decision), however, contains the reasons for which the
other questions referred at the instance of the assessee (one relating to
G assessment year 1942-43 and the other two questions relating to assessment
years 1948-49) were answered for or against the assessee, as the case may
be. We must refer to the same. So far as the question relating to the validity
of Section 12B was concerned, the High ·Court answered it against the
assessee relying upon the decision of this Court in Naveenchandra Mafatlal
H v. Commissioner of Inconie-tax, Bombay City, 26 l.T.R. 758. The other
COMMROFINCOMETAX v. DALMIACEMENT[B.P.JEEVANREDDY,J.) 723

question regarding the applicability of the second proviso to Section 12- A
B(l) was also answered against the assessee in view of the finding of feet
recorded by the Tribunal. So far as the question relating to assessment year
1942-43 is concerned, the High Court answered it in favour of the assessee
and against the Revenue. (In reality, the said question arose in the
assessment proceedings relating to assessment year 1942-43, though it
B
involved consideration of the question relating to carrying forward of the
loss incurred in the previous assessment year 1941-42). The facts relevant
)
to this question, as stated in the order of the Tribunal (as extracted in the
State of the Case) are the following : "The assessee was a partner of an
unregistered firm in the year of account relevant for the assessment year
1941-42. His share of profits in that unregistered firm amounted to Rs. c
1,75,256 according to the assessment order. The assessee, it appears, had
suffered a loss of more than Rs. 2 1/2 lakhs. The Income-tax Officer set
off the assessee's share of profit in the unregistered firm against the loss
of Rs. 2 1/2 lakhs. Thus, according to the Income-tax Officer there was only
a loss of Rs. 53,840 to be carried forward to the next year." In the D
assessment proceedings relating to assessment year 1942-43, the assessee
raised a contention that the figure of loss determined in the previous year
(viz., Rs. 53,840.00 is incorrect and that it should be much more. this
contention was rejected by the Income Tax Officer and Appellate Assistant
Commission. The Tribunal too rejected it observing that such a contention
could only have been raised in the appeal against the assessment order for E
the assessment year 1941-42 and that it could not be raised in the appeal
preferred against the assessment order relating to the subsequent assess-
ment year, i.e., 1942-43. As a matter of fact, the Tribunal found from the
records before it that the assessee had preferred an appeal against the
assessment order relating to the assessment year 1941-42 but he did not p
take up this contention in that appeal. The Tribunal accordingly refused to
permit the assessee to raise the said contention in the assessment proceed-
ings relating to the subsequent year. The High Court, however, upheld the
contention of the assessee on a reasoning, which may be set out in full in
its own words :
G
"The first questions raised by the assessee is whether he is entitled
... to raise a question with regard to the determination of loss for the
assessment year 1941-42 in the course of proceedings for the
assessment year 1942-43 when the loss brought forward from 1941-
42 was being set off. A similar question arose in All India H
724 SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A Groundnut Syndicate Ltd. v. Commissioner of Income-tax, (1954)
25 ITR 90 and was answered as below:

'It is then urged that inasmuch as the loss was not computed
in the relevant year of assessment, there is no right left to the
assessee in the assessment year 1948-49. That contention,
B again, is based upon a misapprehension. The right to claim a
relief which the assessee is claiming only arose to the assessee
in the assessment year 1948-49 when the assessee had made
profits and sought to set off the losses incurred during the
previous years against the profits. The fact that the Income-
c tax Officer has not computed the loss of the earlier years can
have no bearing upon the right of the assessee which arises
in the year 1948-49. There is nothing to prevent the Income-
tax Officer from computing those losses which the assessee
may have incurred earlier and which he has failed to do'.

In that case the question was as to the effect of the failure of the
Income-tax Officer to notify the loss of the previous years as
required by section 24(3) of the Act, but that does not make any
difference to the principle enunciated above. No question arose in
the assessment year 1941-42 in this case of computing the amount
E of the loss. The question arose in the assessment year 1942-43.
Therefore, what was done in the preceding year does not affect
the right of the assessf e to get the amount of the loss which was
liable to be carried forward duly determined in the subsequent
proceedings. We accordingly answer the question in the affirm-
ative."
F
(Emphasis supplied to indicate the error in the reasoning. As a
matter of fact, loss was determined at Rs. 53,840 in the assessment
proceedings relating to assessment year 1941-42)

A reading of the above paragraph shows that the decision of the High
G Court was mainly influenced by the decision of the Bombay High Court in
All India Groundnut Syndicate Limited. It is perhaps on the basis of the
observations inI the said decision that
.
the High Court held that "no question
arose in the assessment year 1941-42 in this case of computing the amount
of loss (and that) that question arose in the assessment year 1942-43",
H though as a matter of fact there is a substantial difference between the
COMMR. OF INCOME TAX v. DALMIA CEMENT [B.P. JEEVAN REDDY, J.] 725

material facts of both the cases. (The facts in the Bombay decision are A
referred to at a later stage of this judgment.) It is one the same basis, it
appears, the Nagpur High Court made the following further observation:
"what was done in the preceding year does not affect the right of the
assessee to get the amount of the loss which was liable to be carried
forward duly determined in the subsequent proceedings". The High Court B
also took note of the fact that the Income Tax Officer had failed to notify
the loss for the previous year (assessment year 1941- 42) as required by
) Section 24(3) of the Act but it observed at the same time that such failure
does not make any difference to the principle enunciated in All India
Groundnut Syndicate Limited. We find the reasoning of the High Court
rather involved and difficult to follow but that need not detain us since we C
are concerned only with the ratio and the principle of the decision of this
Court in appeal. We now turn to the decision of this Court.

The facts as stated in the first two paragraphs shows that this Court
was led to assume that the question raised in the assessment proceedings D
. relating to assessment year 1942-43 was again raised in the assessment
proceedings relating to assessment years 1948-49 and 1949-50 which is not
the correct factual position as would be evident from the Statement of the
Case contained in Seth Klzushalchand Daga (311.T.R. 417). The question
involving Section 24 regarding the assessment years 1948-49 and 1949-50
was based upon altogether different facts. Be that as it may, the relevant E
question (relating to 1942-43 and involving 1941-42) was dealt with and
answered in the following words :

"As regards the first question, the only contention raised was that
the loss which had been determined and ordered to be carried F
forward must be deemed to have become final, because no appeal
was filed against that determination. But it appears that the proce-
dure laid down by Section 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 section 30 an appeal lies, if the assessee G
objects to the amount of loss computed and notified under section
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 H
726 SUPREME COURT REPORTS [1995] SUPP.2S.C.R.

A 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
B us was correct in the circumstances of the case."

(Emphasis supplied) l

A reading of the above paragraph that the only ground upon which
C this Courts held that the assessee was entitled to claim in the assessment
proceedings relating to the assessment year 1942-43 that the loss computed
in the previous year be re-opened and re-determined for the purpose of
being carried forward and set-off against the profits of the assessment year
1942-43 is the failure of the Income Tax Officer to notify by an order in
D writing the amount of loss computed by him in the previous assessment
year as required by Section 24(3) of the Act. This Court also observed that
because of the failure of the Income Tax Officer to notify the loss by an
order in writing, an appeal could not also be taken on that point. (As a
matter of fact, it may be reiterated, under the order of assessment made
in respect of the assessment year 1941-42, the Income Tax Officer had
E determined loss at Rs. 53,840.00 and that the assessee had preferred an
appeal against the said order of assessment though he did not choose to
urge therein any ground with respect to the correctness of the amount of
loss determined by the Income Tax Officer.) In our opinion, the ratio of
the said decision must be understood in the light of the legal position
p . obtaining under the 1922 Act. As pointed out by us hereinbefore, under
Section 23(3) of the Act the Income Tax Officer was required to "assess
the total income of the assessee and determine the sum payable by him on
the basis of such assessment". The sub-section did to expressly ~peak of
determining the loss as well as the amount of refund as is provided by
Section 143(3) of the present Act; that was left to be provided by Section
G 24(3). It would be appropriate to set out sub-section (3) of Section 23 of
1922 Act and sub-section (3) of Section 143 of the present Act to bring out
the contrast.

"Section 23(3). On the day specified in the notice issued under
H sub-section (2), or as soon afterwards as may be, the Income-tax
- COMMR OF INCOME TAX v. DALMIACEMENT [B.P.JEEVANREDDY,J.) 727

Office, after hearing such evidence as such person may produce A
and such other evidence as the Income-tax Officer may require,
on specified points, shall, by an order in writing, assess the total
income of the assessee, and determine the sum payable by him on
the basis of such assessment."
B
"Section 143(3). On the day specified in the notice issued under
sub-section (2), or as soon afterwards as may be, the Income-tax
Officer, after hearing such evidence as the assessee may produce
and such other evidence as the Income-tax Officer may require on
specified points, and after taking into account all relevant material
which the Income-tax Officer has gathered, shall, by an order in C
writing, assess the total income or loss of the assessee, and deter-
mine the sum payable by him or refundable to him on the basis of
such assessment."

It is true that an order of assessment would not only determine the D
income but also the loss, even so Section 23(3) has to be read along-with
Section 24(3) of the 1922 Act. So read, it would mean that in case of loss,
it was mandatory upon the Income-tax Officer to "notify to the assessee by
order in writing the amount of the loss as computed by him for the purposes
of this Section". Sub-section (3) of Section 24 must be construed to be
mandatory in view of absence of words in sub-section (3) of Section 23 E
regarding the determination and intimation of loss. Inasmuch as in Khushal
Chand Daga the Income Tax Officer failed to notify to the assessee the loss
computed by him (for the assessment year 1941-42), this Court said that
. the assessee could not question that amount of loss so determined by way
.of an appeal. [Section 30 provided an appeal inter alia against an order F
computing the loss under Section 24, which means and refers to the order
in writing contemplated by Section 24((3)]. It is for this reason that this
Court held in Khusltal Chand Daga that the computation of loss by the
Income TaX Officer in the assessment proceedings relating to assessment
year 1941-42 was not final and could be re-opened and re-agitated by the
assessee in the assessment proceedings relating to assessment year 1942-43. G
It is obvious that such a plea would not be available under the present Act
inasmuch as sub-section (3) of section 143 expressly provides the deter-
mination of not only the total income but also the loss. Because of the
language of sub-section (3) of Section 143 of the present Act, the provision
contained in Section 157 of the present Act (correspondent to Section H
A
728 SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

24(3) of the 1922 Act) cannot be deemed to be mandatory but only
directory. In other words, the position under the present Act is that even
if the intimation in writing contemplated by Section 157 is not given by the
--
assessee, yet the assessee will not be entitled to raise a question similar to
the one raised by the assessee in Khushal Chand Daga because under the
B present Act he can, and should, raise that question in the appeal preferred
against the order of assessment since an order of assessment under the
present Act determines not only the assessee's income, if there is one, but
also the loss, if there is one.

The question then arises, how far does the ratio of Klzushal Chand
C Daga help the assessee before us. In this case, the Income Tax Officer
intimate the assessee that since the loss returns filed for the assessment
years 1952-53 to 1954-55 were filed beyond the period prescribed by law,
he would not take cognizance of the said returns. In other words, he
refused to make an assessment. True it is that this stand of Income Tax
D Officer was wrong in law as held in Kulu Valley Transport; but that only
means that he failed to do his duty by law, viz., refused to make an-order
of assessment on the basis of such returns and to determine the loss. Had
he made an assessment and determined the loss then, he would have been
obliged to intimate the assessee of the same under and as required by
Section 24(3). As against this, in Khushal Chand Daga, an assessment was
E duly made for the previous assessment year (1941-42) and loss also com-
puted but the failure of the Income Tax Officer lay in not sending an
intimation specifying the amount of loss determined as contemplated by
Section 24(3). It was held that such failure to intimate under Section 24(3)
disabled the assessee from questioning the quantum of loss determined by
F way of an appeal. To put in the different words, while the failure in Khushal
Chand Daga related to the second stage (failure to intimate the amount
of loss determined), the failure in the case before us relates to the anterior
stage (failure to make an assessment and determine the loss). In this
context, it is essential to keep the language of section 24(3) and Section
30(1) in mind. Section 24(3) provided that "when in the course of the
G assessment of the total income of any assessee, it is established that a loss
of profits or gains has taken place which he is entitled to have set off under
the provisions of this section, the Income-tax Officer shall notify to the
assessee by order in writing the amount of the loss computed by him for the
purposes of this Section". Section 30(1), which provided for appeal against
H the Income Tax Officer's order read thus (insofar as is relevant): "any
COMMR.OFINCOMETAX v. DALMIACEMENT[B.P.JEEVANREDDY,J.) 729

assessee objecting to the amount of income assessed under section 23 or A
section 27 or the amount of loss computed under Section 24....... may
appeal to the Appellate Assistant Commissioner against the assessment or
against such refusal or order". Khushal Chand Daga seems to say that
where such intimation is not given, the assessee cannot question the
quantum of loss determined by way of appeal and that such a plea cannot B
be urged in the appeal preferred against the order of assessment. This
holding - rendered in the light of the language of Section 24(3) and Section
30(1) - is different from a refusal to make the assessment altogether as has
happened in the case before us. To repeat, the failure in this case pertained
to the anterior stage and could have been appealed against as a "refusal"
to make an assessment order under Section .30(1) as was done in Kulu C
Valley Transport, whereas in Khushal Chand Daga, no appeal could be
preferred - according to the holding in that case - disputing the quantum
('amount') of loss determined in assessment proceedings in the absence
of an intimation under Section 24(3). This is the qualitative difference
between both cases and hence the principle of Khushal Chand Daga has D
no application herein.

.. The learned counsel for the assessee relied strongly upon the
decision of. the Bombay High Court in All India Groundnut Syndicate
Limited - referred to and relied upon in Seth Khushal Chand Daga, 31
I.T.R. 417. In this case, the assessee filed a return of loss of three assess- E
ment years, but the Income Officer treated the income of the assessee as
nil. Because he took the income as nil and did not determine any loss,
obviously there was no occasion for notifying the loss to the assessee under
and as contemplated by section 24(3). In the next assessment year, the
assessee made profits and claimed to set off the loss incurred during the F
earlier three assessment years against the profit made in the subsequent
assessment year. The Income Tax Officer disallowed the claim on the
ground that the loss was not notified under Section 24(3) of the Act for
the three earlier assessment years. When the matter came to the High
Court, it was held that the Income Tax Officer was at fault in not deter-
mining the loss on the basis of the loss-returns filed by the assessee for the G
three previous years. The High Court observed :

"In this case the assessee has actually submitted his return that
return has not been challenged or disputed by the Income-tax
Officer, he comes to no conclusion on that, he does not give a H
730 SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.
t
A finding, he does not compute,, the loss. All he says is "income nil".
It is difficult to understand how, when the Income- tax Officer does
not give a finding and doe~ not compute the loss made by the
assessee, the computation of the loss by the assessee has become
appealable under Section 30 of the Act and no appeal having. been
preferred, the computation becomes final. Before we reach this
B stage, there must be a computation. But in this case there is no
computation and no question therefore of either its finality or
appealability arises."

Accordingly, it was held that the assessee was entitled to have the losses
c in the three previous assessment years determined, carried forward and set
off against the profits of the later assessment year in the assessment
proceedings relating to the later assessment year. The learned counsel for
the Revenue dispute the correctness of the view taken in this decision. He
says that the intimation of assessment of income as 'nil' was an appealable
D order and that non-filing of appeal against it disentitled the assessee from
seeking to re-open and re-agitate the said issue in the course of assessment
proceedings for the subsequent assessment year. He points out that in Kulu
Valley Transport, precisely such an intimation was appealed against. Coun-
sel also relies upon two decisions of High Courts in this behalf, to which a
reference would be in order. The first one is the decision of the Madhya
--
E Pradesh High Court in Jaikishan Gopikishan and Sons. v. Commissioner of
Income-tax,Madhya Pradesh (84 l.T.R. 645). In this case, the assessee filed
a return of loss beyond the time prescribed under the notification issued
under Section 22(1) of the 1922 Act. The Income Tax Officer simply 'filed'
the return on the ground that it was filed beyond the time. The High Court
F held, following the decision of this Court in Kulu Valley Transport, that in
such a case the order 'filing' the return should be treated as an order by
which the Officer has determined the loss as .nil and therefore, appealable
under Section 30 of the Act. The other decision is that of Patna High Court
in Bihar State Electricity Board v. Cominissiolier of Income-tax, Bihar, 101
I.T.R. 740. This was also a case where the returns were filed beyond the
G period prescribed by the 1922 Act as well as the 1961 Act. The Income
Tax Officer intimated the assessee that since the returns were filed beyond
the prescribed period, no action was being taken by him thereon and that
. the loss for those years would not be carried forward for being set off
against the income of the subsequent years. Following the decision of this
H Court in Kulu Valley Transport, the High Court held that the intimation of
COMMR. OF INCOME TAX v. DALMIA CEMENT [B.P. JEEVAN REDDY, J.] 731

the Income Tax Officer must be held to be an order computing the loss as A
nil and, therefore, appealable.

It is enough for us to say that we do not accept the reasoning of the
Bombay High Court in full. The true position has already been indicated
by us hereinbefore while indicating the distinction between the facts and B
ratio of Khushal Chand Daga and the case before us. The intimations of
the nature concerned in the said there decisions of the High Courts, as also
the intimation concerned in the case before us, should be understood and
construed as a refusal to make an assessment and to compute the loss,
which is appealable under Section 30 of the 1922 Act as rightly held by the
Madhya Pradesh and Patna High Courts, which necessarily means that if C
not appealed against, that question cannot be re-agitated in the assessment
proceedings relating to a subsequent assessment year. Moreover, as eludi-
cated hereinabove, refusal to make an assessment is wholly different and
distinct from the failure to intimate the 'amount' of loss determined as
required by Section 24(3). They are two different things and two different D
stages. The stage of intimation of quantum of loss under Section 24(3)
arises only after making an assessment under Section 23(3) and after
determining the loss. Now, a return showing loss need not be accepted
implicity. On making the assessment, the Income Tax Officer may find that
it is not a case of loss but one of profits - or he may agree that there is
loss. The amount of loss is also a matter of assessment. In other words, an E
assessment is necessary for determining the loss. Only after such deter-
mination, could the intimation contemplated by Section 24(3) be given
specifying the amount of loss. Without an assessment being made, no one
can assume that the return showing loss is correct one. Where the Income .
Tax Officer refused to make an assessment and determine the loss on the F
ground that returns were filed beyond the prescribed period, the assessee
must appeal against such intimation and have the Income Tax Officer
compelled to make an assessment.

We must reiterate that the controversy of the above nature cannot
arise under the present Act. Under the present Act, Section 143(3) re- G
quires the Assessing Officer to determine not only the profits/income
taxable but also to determine the loss, if there is one. In this view of the
matter, Section 157 of the present Act [corresponding to Section 24(3)]
loses its significance. It must be understood as merely directory. Under the
present Act, the assessee is entitled to and ought to question the amount H
732 SUPREME COURT REPORTS (1995] SUPP. 2 S.C.R.

A of loss determined in the appeal preferred against the assessment order
itself. He need not wait till he receives the intimation under SectioO: 157.
Nor does he suffer any disability on account of not appealing against such
intimation, if he has already preferred an appeal against the order of
assessment. In this connection, the language of clause (a) of sub-section
(1) of Section 246 of the 1961 act is worth noting. It provides an appeal
B against "any order of assessment under sub-section (3) of Section 143 or
Section 144 where the assessee objects to the amount of income assessed,
or to the amount of tax determined, or to the amount. of loss com-
puted ........ ". Section 246 does not provide for an appeal against the intima-
tion under Section 157 of the Act. For that matter, none of the provisions
c in the present Act corresponding to the provisions in Section 24 of the 1922
Act find a mention in Section 246. It can even be said that an intimation
by the Income Tax Officer refusing to take cognizance of return - or a
similar intimation - implying his refusal to make an assessment and deter-
mine the loss is "an order against the assessee" within the meaning of clause
D (1) of sub-section (1) of Section 246 of the present Act and is appealable
as such.

For the reasons recorded hereinabove, the appeals are allowed, the
judgment of the High Court is set aside and Question No. 3 of the three
questions set out at the inception of the judgment is answered in favour of
E the Revenue and against the assessee. So far as Questions 2 and 4 are
concerned, the opinion expressed by the High Court therein has not been
questioned before us. We hold that the assessee having failed to appeal
against the intimation of the Income Tax Officer refusing to take cog-
nizance of loss returns filed by the assessee for the assessment years
1952-53 to 1954-55, cannot claim in the assessment proceedings relating to ...
F subsequent years that the loss in the said earlier assessment years (1952-53
'

to 1954-55) be determined carried forward and set off against the profits
of the subsequent year or years, as the case may be.

No costs.

R.A. Appeals allowed.