JUDGMENT Arijit Pasayat, C.J.
1. At the instance of the Revenue, the following question has been referred under Section 256(1) of the Income-tax Act, 1961 (for short "the Act"), by the Income-tax Appellate Tribunal, Delhi Bench "A" (hereinafter referred to as "the Tribunal"), for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order of assessment and in directing the Income-tax Officer to consider the assessee's claim for set off of toss suffered in the assessment year 1967-68 but which was not determined in pursuance of a return under Section 139 in the proceedings for the assessment year 1974-75, in which the loss suffered was said to be set off against the deemed profit under Section 41(2) ?"
2. The factual position in a nutshell is as follows :
The assessee, a private limited company was incorporated on April 16, 1962. On the basis of the returns filed by it for the assessment years 1963-64 to 1966-67, assessments were completed under Section 143(3) of the Act. Though the assessee claimed to have suffered a loss of Rs. 87,853 in the assessment year 1967-68, no return was filed and no assessment was also made. For the assessment year 1968-69, the assessee filed its return showing income as "nil" on October 15, 1969. An enquiry was conducted by an Inspector of Income-tax who, by report dated September 20, 1971, mentioned that the company had stopped business from January, 1967. Relying on the said report the Income-tax Officer assessed the income of the assessee as "nil". Thereafter no assessments were made. Subsequently the assessee started selling some of its old assets and in the assessment year 1974-75 it sold some assets and earned a profit of Rs. 11,601, as computed by the Income-tax Officer under Section 41(2) of the Act. The assessee took the stand that since it had suffered loss in the assessment year 1967-68, the same should be set-off against the profit under Section 41(2) which accrued in the assessment year 1974-75. The Income-tax Officer did not accept the stand, inter alia, on the ground that the assessee had not filed any return for the earlier assessment years and also there was no assessment made in respect of those years. The matter was carried in appeal by the assessee before the Appellate Assistant Commissioner of Income-tax (in short "the AAC"). The Income-tax Officer's views were endorsed by the Appellate Assistant Commissioner. The assessee preferred appeal before the Tribunal. It was the assessee's stand before the Tribunal that for the purpose of set-off of loss there was no necessity to file any return or to get an assessment completed. Reference was made to Section 41(5) of the Act. The Tribunal held that Section 41 of the Act has to be read with other provisions of the Act, more particularly Section 41. According to it there was no necessity for filing of a return and/or computation of income to get the benefit of set-off. Though the assessee had not filed any return for the assessment year 1967-68 with the result that loss could not be determined in that year, the Income-tax Officer could see the accounts for the assessment year 1967-68 and come to a conclusion whether the claim of the assessee for setting off of the loss was substantiated or justified. It was not a correct position in law to say that no loss could be allowed when the return for any particular period is not filed. Section 80 of the Act did not operate in the case because there are specific Sections which deal with such a matter. Accordingly, the assessee's claim was held to be in order.
3. On being moved for reference, the question as set out above has been referred for the opinion of this court.
4. We have heard Mr. Sanjeev Khanna, learned counsel for the Revenue. There is no appearance on behalf of the assessee in spite of notice.
5. According to learned counsel for the Revenue, Sections 41(2) and 41(5) of the Act even if read together do not lead to a conclusion that even without filing of return or computation of loss, if any for any assessment year, in a subsequent year the Income-tax Officer could examine that aspect, determine the loss, if any, and grant set-off.
6. In order to appreciate the essence of the dispute it is necessary to take note of Sections 41(2) and 41(5) and Section 80 of the Act as they stood at the relevant time. They feed as follows :
"41. (2) Where any building, machinery, plant or furniture which is owned by the assessee and which was or has been used for the purposes of business or profession is sold, discarded, demolished or destroyed and the moneys payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceed the written down valued so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business or profession of the previous year in which the moneys payable for the building, machinery, plant or furniture became due :
Provided that where the building sold, discarded, demolished or destroyed is a building to which Explanation 5 to Section 43 applies, and the moneys payable in respect of such building, together with the amount of scrap value, if any, exceed the actual cost as determined under that Explanation, so much of the excess as does not exceed the difference between the actual cost so determined and the written down value shall be chargeable to income-tax as income of the business or profession of such previous year.
Explanation--Where the moneys payable in respect of the building, machinery, plant or furniture referred to in this Sub-section become due in a previous year in which the business, or profession for the purpose of which the building, machinery, plant or furniture was being used is no longer in existence, the provisions of this Sub-section shall apply as if the business or profession is in existence in that previous year."
"41. (5) Where the business or profession referred to in this Section is no longer in existence and there is income chargeable to tax under subsection (1). Sub-section (2), Sub-section (2A), Sub-section (3) or Sub-section (4) in respect of that business or profession, any loss, not being a loss sustained in speculation business or under the head 'Capital gains', which arose in that business or profession during the previous year in which it ceased to exist and which could not be set-off against any other income of that previous year shall, so far as may be, be set off against the income chargeable to tax under the Sub-section s aforesaid."
"80. 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 Sub-section (2) of Section 73 or Sub-section (1) of Section 74 or Sub-section (3) of Section 74A."
7. It is to be noted that unlike the Indian Income-tax Act, 1922 (hereinafter referred to as the "old Act") there is a specific provision in Section 143 which permits filing of return showing a loss so that the question of set off against profits of a subsequent year can be adjudicated. Section 143 as it stood at the relevant time read as follows:
"143. (3) On the day specified in the notice issued under Sub-section (2), or as soon afterwards as may be, 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 he has gathered,--
(a) in a case where no assessment has been made under Sub-section (1), the Income-tax Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment ;
(b) in a case where an assessment has been made under Sub-section (1), if either such assessment has been objected to by the assessee by an application under Clause (a) of Sub-section (2) or the Income-tax Officer is of opinion that such assessment is incorrect, inadequate or incomplete in any material respect, the Income-tax Officer shall, by an order in writing, make a fresh assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment.
Explanation.--For the purposes of this section,-
(1) an assessment under Sub-section (1) shall be deemed to be incorrect, inadequate or incomplete in a material respect, if-
(a) the amount of the total income as determined under Sub-section (1), is greater or smaller than the amount of the total income oh which the assessee is properly chargeable under this Act to tax ; or
(b) the amount of the tax payable as determined under Sub-section (1) is greater or smaller than the amount of the tax properly payable under this Act by the assessee ; or
(c) the amount of any loss as determined under Sub-section (1) is greater or smaller than the amount of the loss, if any, determinable under this Act on a proper computation ; or
(d) the amount of any depreciation allowance, development rebate or any other allowance or deduction as determined under Sub-section (1) is greater or smaller than the amount of the depreciation allowance, development rebate or, as the case may be, other allowance or deduction properly allowable under this Act ; or
(e) the amount of the refund as determined under Sub-section (1) is greater or smaller than the amount of the refund, if any, due under this Act on a proper computation ; or
(f) the status in which the assessee has been assessed under subsection (1) is different from the status in which the assessee is properly assessable under this Act ;
(2) 'status', in relation to an assessee, means the classification of the assessee as an individual, a Hindu undivided family, or any other category of persons referred to in Clause (31) of Section 2, and where the assessee is a firm, its classification as a registered firm or an unregistered firm."
8. Under Sub-section (3) of Section 143 of the Act there has to be determination of not only the total income but also the loss. This position was also taken note of by the apex court in CIT v. Dalmia Cement (Bharat) Ltd. [1995] 216 ITR 79. It has to be noted that Section 80 starts with a non obstante clause. The said provision specifically states that notwithstanding anything contained in the Chapter, i.e., Chapter VI, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of Section 139 shall be carried forward and set off under subsection (1) of Section 72 or Sub-section (2) of Section 73 or Sub-section (1) of Section 74. Section 72 deals with carry forward and set-off of business losses. Since Section 80 starts with a non obstante Clause and takes within its ambit any other provision as contained in the concerned chapter, i.e, chapter VI, obviously it is fully operational also in respect of the matters covered by Sections 41(2) and 41(5).
9. As observed by the apex court in T. R. Thandur v. Union of India, , a non obstante Clause is used as a legislative device to modify the ambit of the provision or law mentioned in the non obstante Clause or to override it in specified circumstances. A Clause beginning with, notwithstanding anything contained in this Act or in particular provision in the Act or in some particular Act or in any law for the time being in force is appended to a Section in the beginning with a view to give the enacting part thereof in case of conflict, an overriding effect over the provision or Act mentioned in the non obstante clause. It is equivalent to saying that in spite of the provision or the Act, mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstante Clause will not be an impediment for the operation of the enactment (see Orient Paper and Industries Ltd. v. State of Orissa, ; Parayankandiyal Eravath Kanapravan Kalliani Amma v. K. Devi, ).
10. Section 41(5) enacts an exception to the general rule that after a busi ness has ceased to exist, any loss relating thereto cannot be further carried forward and set off against the income of a subsequent year as laid down in Section 72(1)(i) read with the proviso. But that does not introduce & concept of assessing loss for a period for which no return has been filed.
Such a power does not exist. That being the position, the Tribunal was not justified in holding that on a combined reading of Sections 41(2) and 41(5), operation of Section 80 of the Act was ruled out. In view of the clear language used in Section 80, the view of the Tribunal is indefensible. Our answer to the question is in the negative, in favour of the Revenue and against the assessee.