# MIS. JAIPUR UDYOG LID. & ANR v. COMMISSIONER OF INCOME-TAX, DELHI, RAJASTHAN AND ANOTHER

- **Citation:** [1969] 2 S.C.R. 193
- **Court:** Supreme Court of India
- **Decided:** 1968-09-24
- **Case number:** Civil Appeals Nos. 586588 of 1967
- **Bench:** J. C. Shah, Acting C.J, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-jaipur-udyog-lid-anr-v-commissioner-of-income-tax-delhi-rajasthan-and-4483
- **Pages:** 8

## Headnote

lnc<lme-tax Act (43 of 1961), ss. 72, 80, 141 and 210(3)-Provisional assessment under s. 141-/f income-tax officer can determine disputed claims-Whether s. 80 applies to provisional assessments-S. 210
(3)-Advance lax payable on the basis of 'prmisional assessment'-
Refers to valid provisional assessment.
The appellant filed its returns for the assessment years 1954-55 to
1964-65.
The Income-tax Officer passed orders of assessment for the
years 1954-55 to 1959-60. While the appeals to the Appellate Assis·
tant Commissioner for those years, and the assessment proceedings before
the Income-tax Officer for the years 1960-61 to 1962-63, were.still pending, for the assessment year 1963-64 (the return for which was filed
under s. 139 of the Income-tax Act, 1961), the Income-tax Officer made
a provisional assessment under s. 141. He held that the appellant was
not entitled to deduct the aggregate amount of losses as claimed by it
during the previous years and allowed only a much smaller sum as Joss
which could be carried forward from the earlier years. For the assessment
year 1964-65, the Income-tax Officer made a provisional assessment without allowing any deduction of loss claimed by the appellant; and for the
assessment year 1965-66 the Income-tax Officer called upon the appellant
to pay a certain sum as advanee tax under s. 210(3). The appellant
filed writ petitions in the High Court for quashing the orders of the
Income-tax Officer for each of the three years, but the petitions we:ce
dismissed. The High Court held : ( 1) that under s. 141 the provisional
assessment of tax must also be made in accordance with and subject to
the provisions of the Act, and that the combined effect of ss. 72 and 80
was that a business loss can be carried forward to subsequent assessment
years only when it has been determined in pursuance of a return filed
under s. 139; and (2) that under s. 210(3) as inserted by Act 13 of
1963 and modified by Act 31 of 1964, the Income-tax Officer was entitled
to make an order for payment of advance tax for 1965-66 on the provisional assessment for the year 1964-65.
In appeal to this Court,
HELD: (1) Section 141 bars an enquiry, at the stage of making a
provisional assessment, into disputed questions of law and fact : it is
immaterial that the dispute raised is complicated or easy. Therefore the
Income-tax Officer was not justified in ignoring
the
appellant's claim .
[198 D-FJ
Under s. 80 loss of a pre,vious year under the head of income from
profits and gains may be carried forward only if it has been determiN!d
in pursuance of a return filed under s. 139; that is, if it is not so determined it cannot be carried forward and set off against the profit of the
subsequent year or years.
But the section applies only to a regular
assessment.
In the case of a provisional assessment under s. 141, if
there has been such a determination of the allowances mentioned
in
sub-s. 2 in a regular assessment for an earlier year, then under s. 141 (2)
194
SUPREME COURT REPORTS
(1969] 2 S.C.R.
the income-tax officer must whether the assessee has claimed or not give
effect to the allowances so determined. But he has no power to adjudi·
cate upon a .~!aim for deduction made by the assessee when making a
JJ<OVisional assessment. [196 G; 197 A-198 B; 199 B-C)
The section has been enacted with the object of expediting collection
of tax on the basis of the return made by the assessee. The assessment
so made is summary and is based only on the return and the accounts
and documents filed by the assessee. If there be discrepancy between
the return made and the accounts and documents accompanying the
return the Income-tax Officer may ask the assessee to explain the discrepancy but he must
make a provisional
assessment on the basis
of
the return initially filed or clarified, but cannot hold that certain claims
made by the assessee are in law unjustified. The provisional assessment
does not bind the assessee nor the department and the tax paid pur

## Text

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193
MIS. JAIPUR UDYOG LID. & ANR.
v.
COMMISSIONER OF INCOME-TAX, DELHI, RAJASTHAN
AND ANOTHER
September 24, 1968
[J. C. SHAH, ACTING C.J., V. RAMASWAMI
AND A. N. GROVER, JJ.]
lnc<lme-tax Act (43 of 1961), ss. 72, 80, 141 and 210(3)-Provisional assessment under s. 141-/f income-tax officer can determine disputed claims-Whether s. 80 applies to provisional assessments-S. 210
(3)-Advance lax payable on the basis of 'prmisional assessment'-
Refers to valid provisional assessment.
The appellant filed its returns for the assessment years 1954-55 to
1964-65.
The Income-tax Officer passed orders of assessment for the
years 1954-55 to 1959-60. While the appeals to the Appellate Assis·
tant Commissioner for those years, and the assessment proceedings before
the Income-tax Officer for the years 1960-61 to 1962-63, were.still pending, for the assessment year 1963-64 (the return for which was filed
under s. 139 of the Income-tax Act, 1961), the Income-tax Officer made
a provisional assessment under s. 141. He held that the appellant was
not entitled to deduct the aggregate amount of losses as claimed by it
during the previous years and allowed only a much smaller sum as Joss
which could be carried forward from the earlier years. For the assessment
year 1964-65, the Income-tax Officer made a provisional assessment without allowing any deduction of loss claimed by the appellant; and for the
assessment year 1965-66 the Income-tax Officer called upon the appellant
to pay a certain sum as advanee tax under s. 210(3). The appellant
filed writ petitions in the High Court for quashing the orders of the
Income-tax Officer for each of the three years, but the petitions we:ce
dismissed. The High Court held : ( 1) that under s. 141 the provisional
assessment of tax must also be made in accordance with and subject to
the provisions of the Act, and that the combined effect of ss. 72 and 80
was that a business loss can be carried forward to subsequent assessment
years only when it has been determined in pursuance of a return filed
under s. 139; and (2) that under s. 210(3) as inserted by Act 13 of
1963 and modified by Act 31 of 1964, the Income-tax Officer was entitled
to make an order for payment of advance tax for 1965-66 on the provisional assessment for the year 1964-65.
In appeal to this Court,
HELD: (1) Section 141 bars an enquiry, at the stage of making a
provisional assessment, into disputed questions of law and fact : it is
immaterial that the dispute raised is complicated or easy. Therefore the
Income-tax Officer was not justified in ignoring
the
appellant's claim .
[198 D-FJ
Under s. 80 loss of a pre,vious year under the head of income from
profits and gains may be carried forward only if it has been determiN!d
in pursuance of a return filed under s. 139; that is, if it is not so determined it cannot be carried forward and set off against the profit of the
subsequent year or years.
But the section applies only to a regular
assessment.
In the case of a provisional assessment under s. 141, if
there has been such a determination of the allowances mentioned
in
sub-s. 2 in a regular assessment for an earlier year, then under s. 141 (2)
194
SUPREME COURT REPORTS
(1969] 2 S.C.R.
the income-tax officer must whether the assessee has claimed or not give
effect to the allowances so determined. But he has no power to adjudi·
cate upon a .~!aim for deduction made by the assessee when making a
JJ<OVisional assessment. [196 G; 197 A-198 B; 199 B-C)
The section has been enacted with the object of expediting collection
of tax on the basis of the return made by the assessee. The assessment
so made is summary and is based only on the return and the accounts
and documents filed by the assessee. If there be discrepancy between
the return made and the accounts and documents accompanying the
return the Income-tax Officer may ask the assessee to explain the discrepancy but he must
make a provisional
assessment on the basis
of
the return initially filed or clarified, but cannot hold that certain claims
made by the assessee are in law unjustified. The provisional assessment
does not bind the assessee nor the department and the tax paid pursuant
to such provisional assessment is liable to be adjusted in the light of the
final order in the regular assessment, and it is open to the Income-tax
Officer to impose a penalty in appropriate cases after the regnlar assessment is completed. If it is held that the Income-tax Officer has jurisdiction to hold an enquiry into disputed matters, the expression 'provisional
assessment' loses all significance : the Incime-tax Officer may, under such
a summary.. assessment, without giving an opportunity to the assessee to
explain his claim negative it and the assessee has no redress under the
Act . against any erroneous or arbitrary action because, the Income-tax
Officer is not bound to give notice to the assessee o'r hear witnesses and
an appeal against a provisional assessment is expressly barred.
.
[196 D-E; 198 B-C; 199 C-EJ
(2) Under s. 210(3) the Income-tax Officer is entitled to make an
order for payment of advance-tax on the basis of provisional assessment
under s. 141, but it predicates a valid
provisional
assessment.
Since
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the provisional assessment in the present case, for the year 1964-65 is
E
invalid, an order fqr payment of advance-tax or the ye<1r 1965-66 could
not 'be made. [200 A-CJ
. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 586588 of 1967.
Appeals from the judgment and order dated April 20, 1965
of the Rajasthan High Court in D. B. Civil Writ Petitions Nos. 51
F
of 1964, and 26 and 67 of 1965.
M. C. Chagla, Bishambar Lal, H. K. Puri, M. K. Garg and
K. K. Jain, for the appellants.
·
S. T. Desai, N. D. Karkhanis, R. N. Sachthey and B. · D.
Sharma, for the respondents.
G
The Judgment of the Court was delivered by
Shah, J.
Jaipur Udyog Ltd.-a Company-registered under
the Indian Companies Act, 1913, established in 1953 a cement
factory at Sawai Madhopur in the State of Rajasthan. From
time ·to time the Company filed its returns under the Income-tax
Act, 1922, and after the repeal of that Act under the Act of
1961. The following chart sets out the income or loss returned
by the Company for the years 1954-55 to 1964-65 and the
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JAIPUR UDYOG V. C.I.T. (Shah, J.)
19 &
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income or loss computed for the years by the Income-tax Officer
1>n assessment
Year of
Assessment
1954-55
Income or loss returned
by the Company
, 61,24,270 (Loss)
Income or loss computed by the I. T. 0.
B
1955-56
I 4,59,963 (Profit)
I 12,92,958 (Profit)
l 23,05,305 (Loss)
22,53,457 (Loss)
19,84,447 (Profit)
16,88,480 (Profit)
12,53,222 (Loss)
31,48,707
(Loss)
20,62,180 (Loss)
Assessment i:ending.
1956-57
1957-58
1958-59
1959-60
1960-61
1961-62
1962-63
1963-64
. 40,44,779 (Loss)
28,77,487 (Loss)
lll,35,365 (Loss)
66,086 (Loss)
..
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1964-65
: 44,93,236 (Profit)
74,52,402 (Profit)
59,89,757 (Profit)
..
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Against the orders of assessment made by the Income-taic
Officer for the years 1954-55 to 1959-60 determining its net
income or loss as set out in the chart the Company appealed to
the Appellate Assistant Commissioner, and the
appeals
were
pending at the dates of commencement of the petition, in the
High Court of Rajasthan which give rise to the proceedings in
this Court. Assessments for the years
1960-61, 1961-62,
1962-63, 1963-64 and 1964-65 were however then not completed. In its return of income for the assessnwnt year 1963-64
the Company claimed to set off against the income returned
Rs. 1,03,03,935 being the aggregate amount of loss which it
claimed it had suffered in the previous years and was entitled to
set off against the income of that year. The Income-taic Officer
made a provisional assessment of tax under s. 141 of the Incometaic Act, 1961, and against the income returned by the Company
he allowed deduction of Rs. 39,89,731 as loss carried forward
from the earlier years, and made a demand for Rs. 8,73,873 as
taic provisionally due and Rs. 87,387 as penalty for default in
compliance with the demand.
The Company moved petition
No. 51 of 1964 in the High Court of Rajasthan and challenged
the order claiming that the Income-tax Officer was bound to
accept the return made by the Company and could not assess it
to tax on income not admitted.
For the assessment year 1964-65 the Company returned a net
income of Rs. 59.89,757 as profit, and claimed to set off against
that amount Rs. 36,01,735 as loss of the previous years and
paid Rs. 12,12,596-65 as tax due by it in accordance withs. 140A
( 1) of the Act. But the Income-tax Officer made a provisional
assessment and computed the tax on the total income of
Rs. 59,89,757 returned by the Company without allowing any
deduction claimed and ordered the Company to pay an additional
amount of Rs. 17,32,768-60. Against that order the Company
moved petition No. 26 of 1965, for an order quashing the demand
196
SUPREME COURT REPORTS
(1969] 2 S.C.R.
of tax and for an injunction restraining the Income-tax Officer
from enforcing the demand.
For the assessment year 1965-66 the Income-tax Officer
relying upon s. 210(3) of the Act called upon the Company to
pay Rs. 29,45,365-25 as advance-tax.
The Company moved
petition No. 67 of 1965 in the High Court of Rajasthan, for an
order quashing the demand.
The High Court rejected the three petitions. Against the
orders passed by the High Court, these three appeals have been
preferred by the Company.
Section 141 of the Income-tax Act,
1961, authorises the
Income-tax Officer to make a provisional assessment of the
income of the assessee on the basis of the return made under
s. 139 and the accounts and documents, if any, accompanying
the return. The assessment so made is summary and is based
-only on the return and the accounts and documents filed by the
assessee. The Income-tax Officer is not bound to make any enquiry before making a provisional assessment : he is not bound
even to give to the assessee any notice of his intention to make
a provisional assessment, nor to hear the assessee. He may, if
he desires, call upon the assessee to elucidate the return or the
entries posted in the accounts and documents, but he is not
obliged to do so. Section 141 has been enacted with the object
of expediting collection of tax on the basis of the return made by
the assessee.
The Act contains several provisions for collection
of tax before regular assessment, e.g. payment of advance-tax,
deduction of tax at source from salary and dividends, provision
for self-assessment etc. The object of these provisions is to
collect tax on certain classes of income before regular assessment. The provisional assessment does not bind the assessee nor
the Department : the quantum of tax computed and levy
thereof are not binding upon the assessee and the Revenue. Tax
paid pursuant to provisional assessment is liable to be adjusted in
the light of the final order in the regular assessment. An appeal
against the order is expressly prohibited. The Income-tax Officer
must, however, apply the rate operative in the assessment year
by virtue of the Finance Act and give effect to the allowances
mentioned in sub-s. (2) of s. 141 whether the assessee has
claimed them or not.
But the assessee has no right to be heard
or to explain or elucidate and has no right of appeal against the
.::omputation or the levy of tax.
The Company claimed that it was entitled to deduct the aggre-
~ate of losses which it had suffered since the year 1954-55 year
after year from the profits of the year 1963~64. It is true that
the loss returned by the Company year after year was in excess
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JAIPUR UDYOG v. C.I.T. (Shah, J.)
197
of the amount of loss determined by the Income-tax Officer. But
in respect of the orders of assessment appeals were pending.
Counsel for the Revenue concedes that assessment under s. 141
being provisional, the Income-tax Officer cannot make an enquiry
into disputed questions of fact or law, but he submits, relying
upon sub-s. (2) of s. 141, that the assessee cannot claim, and
the Income-tax Officer cannot allow, loss in respect of previous
years in excess of the loss certified by the Income-tax Officer. That
he says is the effect of ss. 72 and 80 of the Income-tax Act, 1961.
Section 72 provides :
" ( 1) Where for any assessment year, the net result
of the computation under the head "Profits and gains
of business or profession" is a Joss to the assessee,
. . . . and such loss cannot be or is not wholly set
off against income under any head of income in accordance with the provisions of section 71, so much of the
loss as has not been so set off or, .
. or where
he has no income under any other head, the whole loss
shall, subject to the other provisions of this Chapter,
be carried forward to the following assessment year,
and-
(i) it shall be set off against the profits and gains,
if any, of any business or profession carried on by him
and assessable for that assessment year :
Provided that the business or profession for which
the loss was originally computed continued to be carried
on by him in the previous year relevant for that assessment year; and
(ii) if the loss cannot be wholly so set off, the
amount of loss not so set off shall be carried forward
to the following assessment year and so on.
(2)
( 3) No loss shall be carried forward under this
section for more than eight assessment years imme·
diately succeeding the assessment year for which the
loss was first computed."
Section 80 of the Act provides :
"Notwithstanding
anything
contained in
this
Chapter, no loss which has not been determined in
pursuance of a return filed under section 139, shall be
carried forward and set off under sub-section ( 1)
of section 72 or .
.
.
.
.
. "
Under s. 72 ( l) read with s. 80 loss of a previous year under the,
head of income from profits and gains of business,
profession
198
SUPREME COURT REPORTS
[1969] 2 S.C.R.
or vocljtion may be carried forward to the next succeeding year
only if it has been determined in pursuance of a return filed under
s. 13 9. If it is not so determined in the assessment of the subsequent year the loss cannot be carried fonVard and set off against
the profit of the subsequent year or years.
By sub-s.
(2) of
s. 141 the Income-tax Officer is enjoined to give effect to the
loss so certified and carried forward.
But it does not follow
therefrom that when the assessee claims that out of the income
of the year returned by him certain amounts are liable to be
deducted in computing the taxable total income, the Income-tax:
Officer may adjudicate upon the validity of the claim in making
a provisional assessment. In our judgment, if it be granted that
the Income-tax Officer has jurisdiction to hold an enquiry into
disputed matters, the expression "provisional assessment"
may
lose all significance : the Income-tax Officer may
under a
summary assessment without giving an opportunity to the assessee
to explain his claim negative it and the assessee has no redress
under the Act against any erroneous or arbitrary action. The
Court would not, unless compelled by the phraseology of the
statute or by the clear implication arising therefrom, be justified
in accepting that view.
The clearest implication of s. 141 bars
an enquiry at the stage of making a provisional assessment into
disputed questions of Jaw and fact : it is a matter of no moment
that the dispute raised is complicated or is easy of solution. In
our judgment, once a dispute is raised by the assessee the Incometax Officer has no discretion. By sub-section (2) of s. 141 the
Income-tax Officer is enjoined to give effect to the provisions of
s. 32(2), 72(1), 73(2) and 74(1) of the Act: sub-s. (2) does
not enlarge his jurisdiction under sub-s. (I).
The High Court was of the view that the basic scheme of the
Act is ·that tax is to be charged at the rate or rates prescribed for
the year on the total income of the assessee and in accordance
with the provisions of the Act, and that this basic scheme applies
alike to a provisional assessment as to a regular assessment.
Consequently in construing the provisions of s. 141 of the Act,
assessment of tax must also be made in accordance with and
subject to the provisions of the Act, i.e. in making'n provisional
assessment the "necessary facts" about the income of the ass·essee
must be taken by the Income-tax Officer froin the return and the
documents accompanying it and he should not travel beyond ·but
in making the provisional assessment he cannot ignore the ~ther
statutory provisions : he must apply the law correctly to the
admitted facts as per return. The High Court proceeded to
observe :
''The combined effect of the two sections, namely,
sections 72 and 80 of the Act, is that a business Joss can
be carried forward to the subsequent assessment years
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JAIPUR UDYOG V. C.LT. (Shah, J.)
only when it has been determined in pursuance of a
return filed under section 139 of the Act."
199
The claim of the Company that it was entitled to the benefit of
carry forward losses of previous years, me~ely beca.use it had
shown such losses in the returns, could not, m the VIew of the
High Court, be accepted : to give effect to the claim of the Company, in the view of the High Court, will be to ignore the provisions of s. 80 which apply both to a regular assessment and a
provisional assessment under s. 141.
We are unable to accept the opinion of the High Court. If
it be assumed that provisional assessment has to be made in
accordance with and subject to the provisions of the Act, distinc·
tion between a provisional assessment and a regular assessment
gets completely blurred. The scheme of s. 141 is to call upon
the assessee to pay tax provisionally at the appropriate rate on
what he admits is his taxable income, subject to the benefit of
the allowances under sub-s. (2). The section does not permit
an enquiry to be made whether the total income returned by the
assessee exceeds the amount admitted by him, nor whether the
allowances or deductions claimed are admissible. If there be a
discrepancy between the return made and the accounts and documents accompanying the return, the Income-tax Officer may ask
the assessee to explain the discrepancy, but he must make a provisional assessment on the basis of the return initially made or
clarified and the accounts and documents filed. He cannot make
a provisional assessment by holding that certain claims made by
the assessee are in law unjustified. If it transpires that the
assessee has without reasonable cause concealP.,d particulars of
his income or has furnished inaccurate particulars of his income,
it may be open to the Income-tax Officer to impose penalty upon
him after the regular assessment is completed. But it is not open
to him to determine whether there has been any concealment of
particulars of income or to decide whether claims which have
been made are unwarranted. In the view we have expressed, the
Income-tax Officer was not justified in holding that the claim
made by the Company for carrying forward and seeking to debit
against Rs. 7 4 lakhs odd an amount of Rs. 103 lakhs odd was
liable to be rejected.
For the same reasons in making the provisional assessment
for the year 1964-65 the Income-tax Officer was not entitled to
ignore the claim made by the Company that against the income
of Rs. 59,89,757 returned, Rs. 36,01,735 should be permitted
to be debited. The order demanding tax of Rs. 17 ,32 7 68·60 for
the year 1964-65 also was, in our view, erroneous.
'
For the year 1965-66 the Income-tax Officer demanded payment of advance-tax on the provisional assessment for the year
1964-65. It is true that under sub-s. (3) of s. 210 as inserted by
200
SUPREME COURT REPORTS
[1969] 2 S.C.R.
Act 13 of 1963 and later modified by Act 31 of 1964 the Incometax Officer is entitled to make an order for payment of advancetax on the basis of provisional assessment made under s.
141,
and he is not obliged to demand advance-tax only for the amonnt
provisionally assessed by way of regular assessment in respeci of
any previous year. Sub-section (3) of s. 210, however, predicates
a valid provisional assessment on the basis of which advance-tax
may be demanded.
But the provisional assessment for the year
1964-65 made by the Income-tax Officer was invalid, and tax
could not be demanded on that invalid assessment.
No order
for payment of advance-tax for the year 1965-66 could then be
made, relying upon the provisional asseSsment
for
the
year
1964-65.
The appeals will be allowed and the orders passed by the High
Court set aside.
The orders of provisional assessment made by
the Income-tax Officer in respect of the years
1963-64 and
1964-65 will be set aside and the order for payment of advanceA
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tax for the year 1965-66 is also set aside. There will be no order
as to costs in these appeals. The order of penalty in respect of
])
the year 1963-64 is also quashed.
V.P.S.
Appeals allowed.
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