Implied condonation of belated loss return allows carry forward where the tax officer examines the return on merits.

Under section 22(2A) of the Indian Income-tax Act, 1922, a loss return filed after the general notice period could still support carry forward if the Income-tax Officer, instead of rejecting it, proceeded under section 23(2) and examined the return on merits. That conduct was treated as an implied grant of further time to consider the return, and the existing appellate direction to compute and carry forward the loss could not be ignored by departmental authorities. On that basis, the loss was carried forward and set off against later-year income.

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Issues: Whether the assessee, having filed a voluntary return of loss beyond the time specified in the general notice, was entitled to carry forward that loss and set it off against income of a subsequent assessment year.

Analysis: Under section 22(2A) of the Indian Income-tax Act, 1922, entitlement to carry forward loss depended on furnishing the return within the time specified in the general notice or within such further time as the Income-tax Officer might allow. The Income-tax Officer did not reject the belated return outright; instead, he issued notice under section 23(2) and examined the accounts, which indicated that he had treated the delay as condoned by implication and had allowed further time for the return to be considered on merits. The prior appellate order directing computation of loss and the carrying forward of that loss remained unchallenged, and its effect could not be ignored by the departmental authorities.

Conclusion: The assessee was entitled to carry forward the loss for the assessment year 1955-56 and set it off against the income for 1959-60.

Ratio Decidendi: Where the Income-tax Officer, instead of rejecting a belated loss return, proceeds under section 23(2) and examines it on merits, his conduct may amount to an implied grant of further time under section 22(2A), entitling the assessee to carry forward the loss if the assessment order so requires.

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