Reassessment and loss computation: undetermined losses must be considered for escaped income, but carry forward requires separate statutory determination.

In reassessment proceedings, an undetermined loss for the relevant year must be computed when determining escaped income, even if the original return ended in a nil assessment. The court distinguished this from carry forward: any unabsorbed loss can be carried forward only if it is separately determined in accordance with the Act. The reassessment could not ignore the earlier loss as irrelevant to the escaped income computation, but the taxpayer was not entitled to carry forward that loss to subsequent years on the facts stated.

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Issues: Whether, in reassessment proceedings, the losses originally claimed by the assessee had to be computed for determining escaped income, and whether any unabsorbed portion of such loss could be carried forward to subsequent years.

Analysis: The assessee's original returns had been treated as resulting in no demand, but the losses had not been finally computed for the purpose of carry forward. On reopening, the escaped income had to be assessed in the context of the whole assessment history, and the earlier undetermined loss could not be ignored merely because the original proceedings had been concluded as nil assessments. However, the statutory scheme for carry forward depended on a proper determination of loss in accordance with the Act, and the court distinguished between recomputation for reassessment of escaped income and carry forward of any remaining loss.

Conclusion: The losses claimed by the assessee were required to be computed for the purpose of determining the escaped income. The reference was answered in the negative and in favour of the assessee, but no carry forward of any unabsorbed loss to subsequent years was permitted.

Final Conclusion: Reassessment could not proceed on the footing that the earlier uncomputed loss was irrelevant, though the benefit was confined to computation for the reassessment year and did not extend to carry forward.

Ratio Decidendi: Where reassessment is validly initiated, an undetermined loss relevant to the year in question must be computed for assessment of escaped income, but carry forward depends on a separate statutory determination and cannot be claimed unless so determined in accordance with the Act.

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