A return made in response to a notice under S. 34 is a valid return under S. 22(3) of the Act.

Judgment

SIKRI, J.:

This is an appeal by special leave directed against the judgment of the Madras High Court answering the question whether the reassessment under S. 34 (of the Indian Income-tax Act, 1922) completed on 30th June, 1953 for the year 1944-45 is valid in the negative. The relevant facts are as follows.

2. The respondent, hereinafter referred to as the assessee, is a Hindu undivided family. For the assessment years 1944-45 and 1945-46, the assessee filed no returns under S. 22 of the Indian Income Tax Act, hereinafter referred to as the Act, nor were any notices issued under S. 22(2) of the Act. On April 3, 1948, the Income-tax Officer issued notices under S. 34 for both the assessment years. At that time it was not necessary to obtain sanction of the Commissioner of Income-tax and none was obtained. The assessee filed a return for the assessment year 1944-45 on September 4, 1948, showing an income of Rs. 4,053 / - which was below the HUF taxable limit of Rs. 7200/-. The assessee also filed a return for the assessment year 1945-46. It appears that the Income-tax Officer dropped proceedings for 1944-45 as infructuous, but for the assessment year 1945-46, he passed an order on October 27, 1950, determining the net taxable income as Rs. 1,20,603/-. The assessee appealed to the Appellate Assistant Commissioner and then appealed to the Appellate Tribunal. On November 19, 1952, the Appellate Tribunal allowed the appeal in part. It held that out of a total profits of Rs. 79,760 /- arising from the sale of certain properties, only Rs. 33,000 /was assessable in the assessment year 1945-46 and Rs. 46,760/- was assessable in the assessment year 1944-45. The Appellate Tribunal observed thus in the order :

"The Income Tax Officer is at liberty to take such action as he may be advised about the assessee s liability for the earlier year 1944-45."

3. On February 27, 1953, after having obtained the sanction of the Commissioner, the Income-tax Officer issued a notice purporting to be under S. 34 of the Act in respect of the assessment year 1944-45. It is the validity of this notice that is now in question. The Income Tax Officer passed an order on June 30, 1953, assessing the total income as Rs. 51, 523/-. The Appellate Assistant Commissioner affirmed the order. He held that the action of the Income Tax Officer in starting proceedings under S. 34(1)(a) was valid. He further held that in view of the finding of the Appellate Tribunal that the Income Tax Officer would be at liberty to take action about the assessee s liability to tax for 1944-45 assessment, the second proviso to subs. (3) of S. 34, as amended by Amendment Act of 1953, was applicable and consequently the time limit specified in S. 34 would not be applicable. The Appellate Tribunal, without going into the question whether S. 34 (1)(a) could be invoked by the Revenue, affirmed the assessment on the ground that the second proviso to S. 34 (3) of the Act, as amended, applied.

4. At the instance of the assessee, the Appellate Tribunal referred the question set out in the beginning of the judgment. The High Court, as already stated, answered the question in the negative. It held that notwithstanding that the return filed by the assessee on September 4, 1948, was the result of an invalid notice, the return itself could not be ignored or disregarded by the Department, and the Department cannot issue a further notice under S. 34(1)(a) of the Act on the assumption that there had been an omission or failure on the part of the assessee to make a return of his income under S. 22. It further held that the ratio of the decision of this Court in Commissioner of Income-tax v. Ranchhoddas Karsondas, 1959-36 ITR 569 governed the present case.

5. Mr. Rajagopala Sastri, the learned counsel for the appellant, submits that the return was not voluntary and as it was made in pursuance of an invalid notice, must also be treated as invalid. He says that no assessment could be made on its basis. He fu