S.K Jha, J.:— These four references under section 256(1) of the Income-tax Act, 1961, relate to the assessment of the Bihar State Electricity Board, Patna (hereinafter referred to as “the assessee”), in respect of assessment years 1959-60, 1960-61, 1961-62 and 1962-63. Two common questions of law have been referred for the opinion of this court by the Income-tax Appellate Tribunal, Patna Bench, in these terms:

“(1) Whether, on the facts and in the circumstances of the petitioner's case, the Tribunal was legally correct in dismissing the petitioner's appeal and in holding that the order of the Income-tax Officer was not appealable to the Appellate Assistant Commissioner under section 30 of the Indian Income-tax Act, 1922, or section 246 of the Income-tax Act, 1961?

(2) Whether the loss returned by the assessee for all these four years require to be determined or carried forward under section 24(2) of the Indian Income-tax Act, 1922, or under section 72 of the Income-tax Act, 1961?”

2. The short facts relevant for the disposal of the points at issue may be stated thus. On the 8th of October, 1965, the assessee filed returns of income for all the four years in question. These returns were followed by revised returns which were filed by the assessee on the 6th of March, 1967, before the Income-tax Officer. In both these sets of returns for all these years the assessee had declared heavy losses said to have been suffered by it. The Income-tax Officer did not issue any notice under section 22(2) of the Indian Income-tax Act, 1922 (hereinafter referred to as “the Act”), in respect of the first three years nor any such notice under section 139(2) of the 1961 Act in respect of the year 1962-63. On the 10th of January, 1967, the Income-tax Officer asked for an explanation from the assessee for the late filing of the return. The explanation was duly furnished and reasons given by the assessee on the 20th of January, 1967. The assessee, at no point of time, applied for extension of time for filing the returns nor did the Income-tax Officer permit the assessee to file the returns beyond the period prescribed under section 22(1) of the Act or section 139(1) of the 1961 Act. On the 21st of March, 1967, the Income-tax Officer communicated his decision to the assessee in the form of a letter in these terms:

“With reference to your voluntary loss returns for the assessment years 1959-60 to 1961-62, I am to inform you that the returns have been filed beyond the time prescribed under section 22(2A) of the Indian Income-tax Act, 1922, section 139(3) of the Income-tax Act, 1961, and, accordingly, no action is being taken thereon. The losses for these years would not be carried forward for being set off against the income of subsequent years.

3. The voluntary loss return for the assessment year 1962-63 has also been filed beyond the time prescribed by section 139(3) of the Income-tax Act, 1961. Accordingly, no action is being taken on this return also. The loss for this year would not be carried forward and set off against the income of subsequent years.”

4. A copy of this communication has been marked annexure “A” to the statement of the case. It will be seen from the aforesaid communication that the Income-tax Officer communicated his decision to take no action on these returns and that the losses for these years would not be carried forward for being set off against the income of the assessee in subsequent years. The assessee, treating this communication as an order under section 24(2) of the Act in respect of the first three years and under section 72(1) of the 1961 Act with respect to the last year, preferred appeals before the Appellate Assistant Commissioner under section 30 of the Act with regard to the first three years and under section 246(c) of the 1961 Act with regard to the last year. The Appellate Assistant Commissioner held that the appeals were not maintainable and they did not fall within the ambit of either section 30 of the Act or section 246(c) of the 1961 Act. On further appeals being pursued by the assessee before the Income-tax Appellate Tribunal, the only point which arose for consideration before the Tribunal was as to whether the communication of the income-tax Officer contained in annexure “A” aforesaid amounted in law to an appealable order within the meaning of either section 30 of the Act or section 246(c) of the 1961 Act. The Tribunal held that the communication intimating that the loss cannot be carried forward had been made by the Income-tax Officer apparently in view of the provisions contained in section 139(3) of the 1961 Act. The communication could not, therefore, be construed as one in respect of which an appeal was provided for in section 246 of the 1961 Act. The Tribunal, for a further reason that the Income-tax Officer had not applied his mind judicially to the returns and had merely not entertained the returns filed by the assessee, held that such an order could not be held to be appealable either under the Act or under the 1961 Act. At the instance of the assessee these references have been made by the Tribunal.

5. Mr. V.D Narayan, learned counsel for the assessee, urged that the Income-tax Officer's communication of his decision that “the losses for these years would not be carried forward for being set off against the income of subsequent years” must in law be held to be computation of loss at nil under section 24(2) of the Act. In other words, it was contended, the Income-tax Officer had held that there was no loss in the years in question which could entitle the assessee to have such a loss set off or carried forward to the subsequent year. Such an order or communication of the decision must inevitably be under section 24(2) and it was further contended that it is not correct in law to say that the letter (annexure “A”) was merely a notice or a communication in view of the provisions of either section 139(3) of the 1961 Act or section 22(2A) of the Act. Learned standing counsel for the department, on the other hand, contended, relying vehemently on a Bench decision of the Delhi High Court in R.B Jodha Mal Kuthiala v. Commissioner Of Income-Tax, Delhi [1967] 66 ITR 319 Delhi., that where the voluntary returns of losses have not been entertained by the Income-tax Officer, it did not amount to judicial application of his mind to the return and cannot, in any event, be treated as a computation of any loss within the meaning of either section 24(2) of the Act or section 72(1) of the 1961 Act. Such an order thus, according to learned standing counsel, could not fall within the appellate provisions of either section 30 of the Act or section 246(c) of the 1961 Act. It was contended that the right of appeal was not an inherent right in an assessee, it was always a creature of statute, and, unless the provisions entitling a person to prefer an appeal against any particular order was expressly given by the statute, there could not, by implication, be held to be an order which could fall within the appellate provision. It then falls for our determination as to which of the two views canvassed at the Bar is legally sustainable.

6. Before referring to the various cases cited by learned counsel for the assessee, I may at once indicate the scope and purport of section 24(2) of the Act in juxtaposition to section 22(2A). Section 24 confers a substantive right on the assessee to have his losses set off or carried forward and, when we come to section 22(2A), it prescribes, at the highest, a sort of a period of limitation for filing of returns on which relief can be granted. Section 22(2A) is, therefore, a part of an adjectival law dealing with the substantive right conferred on the assessee under section 24. On principle, a return with claim for loss presented beyond the time prescribed or allowed under section 22(1) of the Act or section 139(1) of the 1961 Act being rejected and an order under section 24 computing the loss at nil so as to bar it from being carried forward to the subsequent year, in my view, stand at par. As observed in the majority judgment of the Supreme Court in the case of Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd., at page 529:

“The Income-tax Officer could not have ignored the return and had to determine those losses. Section 24(2) confers the benefit of losses being set off and carried forward and there is no provision in section 22 under which losses have to be determined for the purpose of section 24(2).”

7. The rejection of the return thus disentitling an assessee to carrying forward of the loss to a subsequent year and the computation of such a loss at all under section 24(2) of the Act cannot, in my view, be distinguishable on any principle of law, for all that the assessing officer in both the cases does is to deprive the assessee of the benefit of set-off or carrying forward of the loss, which has been conferred under section 24(2) of the Act. In my opinion, therefore, when the Income-tax Officer has given out his mind and communicated the same to the assessee in the terms that “the losses for these years would not be carried forward for being set off” he must be deemed to have computed the loss at “nil”, thus depriving the assessee of the benefit of section 24(2) of the Act or section 72(1) of the 1961 Act. I think I am fortified in my view by some of the decisions which were cited at the Bar. In the case of Esthuri Aswathiah v. Income Tax Officer, Mysore State [1961] 41 ITR 539 SC., the Supreme Court was considering the question as to what was the meaning of the words “no proceeding” on the facts and in the circumstances of that case. That case related to the assessment year 1951-52, and on the 8th September, 1952, the assessee submitted a return, disclosing no assessable income. The Income-tax Officer passed an order merely saying “no proceeding”. In the course of the assessment proceeding for the subsequent year 1951-52, at the appellate stage, the Appellate Assistant Commissioner held that a sum of Rs. 1,37,000 should be treated as the income of the assessee for the year 1950-51. A notice of reassessment accordingly was issued under section 34 of the Act. It was contended on behalf of the assessee in that case that the term “no proceeding” indicated that the assessment proceedings were still pending since the assessing officer had not judicially applied his mind to the return filed. The Supreme Court while repelling this contention held at page 543:

“The appellants had in their return dated September 8, 1952, submitted that they had no assessable income for the year in question and on this return, the Income-tax Officer had passed the order ‘no proceeding’. Such an order in the circumstances of the case meant that the Income-tax Officer accepted the return and assessed the income as ‘nil’.”

8. Relying on the principle decided by the Supreme Court in the case of Esthuri, a Bench decision of the Madras High Court in M. CT. Muthuraman v. Commissioner of Income-tax, construed the term “not assessed” in the same manner. In the Madras case, assessment proceedings of the assessee for the assessment years 1953-54 and 1954-55 were terminated with the order “N.A” (not assessed). The argument advanced on behalf of the assessee was similar to that advanced before the Supreme Court in the case of Esthuri and the Madras High Court, while dealing with that point, observed as follows:

“We are of opinion that the proceedings for 1953-54 and 1954-55 were lawfully terminated by the Income-tax Officer. It is true that section 23 does not in express terms provide for closing the assessment proceedings with an order that no assessment would be levied. Though the assessee had offered an item of income for assessment as his, the Income-tax Officer came to the conclusion that it was the Hindu undivided family that was liable to be assessed on that income and not the assessee. It was a conclusion, whether it was right or wrong, that he had jurisdiction to reach; and once he reached that conclusion, he could not tax the assessee”.

9. Adopting, with respect, the same line of reasoning I reiterate that, after setting out the reason as to why the Income-tax Officer in the instant cases was not taking any action on the returns, he has further communicated an order that the losses for these years would not be carried forward which, in the circumstances of the case, must amount to saying that the assessee had no losses during these years, which could entitle him to a set-off or carrying forward of the same in the subsequent years. To the same effect is another Bench decision of the Madras High Court in V.S Sivalingam Chettiar v. Commissioner of Income-tax; so also in the case of Commissioner of Income-tax v. Onkarmal Meghraj, the Supreme Court construed the words “no assessment” as having determined the assessable income of the assessee in question at nil.

10. It would thus be seen that the cases mentioned above do go to support the view that I have taken that annexure “A” in the present case is a communication to the assessee of the decision of the assessing officer that there was no loss which could be set off or carried forward by the assessee. It was thus a computation of loss at nil for the purpose of section 24(2) of the Act or section 72(1) of the 1961 Act. In this view of the matter, it cannot be said that the order was not expressly appealable either under section 30 of the Act or section 246(c) of the 1961 Act.

11. As a matter of fact, the case of Kulu Valley Transport Company3, decided by the Supreme Court indirectly lends support to the view that I have taken above. In that case, though the point had not actually arisen nor was it canvassed at any stage, the fact was that the Income-tax Officer had passed an order in these terms:

“This is a loss case and the return has been filed after the statutory time. The company is therefore not entitled to the benefit of carryforward of loss in the subsequent assessments. The case is, therefore, filed.”

12. This was treated to be an appealable order against which an appeal was duly filed before the Appellate Assistant Commissioner and a further appeal carried to the Income-tax Appellate Tribunal. The question was duly referred to the High Court under section 66(1) of the Act and the point was decided by the High Court in favour of the assessee, and the same was upheld by the Supreme Court. Thus, the subject-matter of appeal in the case of Kulu Valley Transport Company was an order which was very much similar in nature to the order or communication contained in annexure “A” with which we are concerned in the instant cases. Indeed, in that case the department never took the stand that such an order was not appealable.

13. Learned standing counsel for the department relied rather vehemently on the decision in Jodha Mal's case [1967] 66 ITR 319 Delhi.. The facts of that case were to some extent distinguishable. The order passed by the Income-tax Officer was in these terms: “the return filed by the assessee is invalid and is accordingly filed”.

14. It may have been on the language used by the Income-tax Officer in that case that the learned judges deciding Jodha Mal's case may have felt persuaded to hold that the Income-tax Officer never applied his judicial mind to the merits of the case and that it was merely a disinclination to entertain the return. Be that as it may, the decision of the Delhi High Court in Jodha Mal's case, on principle, I say so with great respect to the learned judges, does not seem to be correct. As the ratio of that case is, on principle, against the decision of the Supreme Court in the three cases of Esthuri, Onkarmal Meghraj and Kulu Valley Transport Company mentioned above, I would very respectfully take a view different from that taken by the Delhi High Court.

15. The first question referred to us, therefore, must be answered in the negative and I would hold that, on the facts and in the circumstances of the petitioner's case, the Tribunal was not legally correct in dismissing the petitioner's appeal and in holding that the order of the Income-tax Officer was not appealable to the Appellate Assistant Commisssioner under section 30 of the Indian Income-tax Act, 1922, or section 246 of the Income-tax Act, 1961. So far as the second question referred to us is concerned, it cannot be said to be a question of law arising out of the Tribunal's order. This point was never raised before the Tribunal nor was it the subject-matter of consideration by it. And it is well settled that a question of law not raised before the Tribunal and not dealt with by it in its order cannot be said to arise out of the order even if, on the facts of the case stated in the order, the question fairly arises and this question could possibly have arisen. In that view of the matter, I do not think it is necessary to give any opinion with regard to the second question and I would accordingly decline to answer question No. 2 as referred to this court.

16. Question No. 1 referred is accordingly answered in favour of the assessee and against the department. In the circumstances of this case, there would be no order as to costs in these references.

Untwalia, C.J:— I agree.