Law: Income Tax Act, 1922

Section: 24(2)

Law: Income Tax Act, 1922

Section: 24(2)

Section 154, read with section 72 of the Income-tax Act, 1961 [Corresponding to section 35, read with section 24(2) of the Indian Income-tax Act, 1922] - Rectification of mistake - Apparent from record - Assessment year 1956-57 - For assessment year 1956-57, ITO made addition in assessee's income as income from undisclosed sources and set off business loss of assessee for assessment year 1955-56 against that income - Subsequently ITO issued notice under section 35 of 1922 Act for rectification of order on ground that business loss of year 1955-56 had been set off against income from undisclosed sources for assessment year 1956-57 - Assessee submitted that income from undisclosed sources was really business income and he was entitled to have loss of previous year 1955-56 set off against that income - ITO rejected assessee's claim - Whether since income from undisclosed sources was not held by ITO as undisclosed profits of any business of assessee, in view of section 24(2) of 1922 Act, business loss of previous year could not be set off against said income - Held, yes - Whether since ITO set off business loss of assessment year 1955-56 against income from undisclosed source for assessment year 1956-57 contrary to section 24(2), he committed a mistake apparent from record and, therefore, he was justified in rectifying assessment order under section 35 of 1922 Act - Held, yes FACTS For the relevant assessment year 1956-57, the ITO made addition of Rs. 40,000 as income from undisclosed sources. To this income, the ITO added the income of the assessee from a registered firm, income from house property and income which the assessee earned from business in the material year, and then set off against this total income the business loss carried forward from the assessment year 1955-56. On this basis an assessment order was passed against the assessee. On appeal the AAC while affirming the decision of the ITO that the cash credit discovered was "income from undisclosed source", reduced that income to Rs. 30,000. During the pendency of the appeal filed by the assessee before the Tribunal, a notice under section 35 of the 1922 Act was issued to the assessee saying that in…

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