Law:

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Section 143 of the Income-tax Act, 1961 [Corresponding to section 23(3) of the Indian Income-tax Act, 1922] - Assessment - Issue of notice - Assessment year 1947-48 - Whether where voluntary return declaring loss was filed by assessee and no notice under section 22(2) of 1922 Act was issued but notice under section 23(2) of 1922 Act was duly issued, ITO could not refuse to assess loss shown in return - Held, yes FACTS The assessee-firm made a return for the assessment year 1947-48 on 17-3-1952 declaring a loss of Rs. 74,140. No notice under section 22(2) had been served upon this assessee. When the ITO received this return he issued a notice under section 23(2) fixing the case for 24-3-1952. On that date the Commissioner gave permission to issue a notice under section 34, but in fact no notice under section 34 was issued. The ITO issued one more notice under section 23(2) on 20-2-1953, and the order made by the ITO was "Return has been filed under section 34, claiming a loss of Rs. 74,140 only. Since, however, I find that no income has escaped assessment, proceedings under section 34 are dropped." The assessee's contention was that it had filed a voluntary return on 17-3-1952, that it was a valid return under section 22(3), and as such the order of the ITO passed under section 34 was invalid and bad in law. The Tribunal rejected the contention of the assessee. On reference : HELD In view of the Bombay High Court's decision in Ranchhoddas Karsondas v. CIT [1954] 26 ITR 105, it was to be held in the instant case that since there was a valid return filed by the assessee, the ITO could not refuse to assess the loss shown in the return, more so when he had actually issued a notice under section 23(2) after the return had been made. Note : The decision was in favour of assessee. CASE REVIEW Ranchhoddas Karsondas v. CIT [1954] 26 ITR 105 and Harakchand Makanji and Co. v.CIT [1948] 16 ITR 119followed and relied upon. CASES REFERRED TO CIT v. Ranchhoddas Karsondas [1954] 26 ITR 105 (Bom.) and CIT v. Harakchand Makanji & Co. [1948] 16 ITR 119 (Bom.). JUDGMENT Chagla, C.J.-The answer that we must give to the question submitted to us by the Tribunal is covered directly…

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