1964 Supreme(SC) 281

SUPREME COURT OF INDIA
30th October, 1964
K. SUBBA RAO, J.C. SHAH AND S.M. SIKRI, JJ.
Commissioner of Income-tax, Delhi Rajasthan and New Delhi, Appellant
Versus
Rao Thakur Narayan Singh, Ajmer, Respondent.
Civil Appeal No. 954 of 1953.
Advocates appeared
Mr. K. N. Rajagopala Sastri, Senior Advocate (M/s. R. H. Dhebar and R. N. Sachthey, Advocates, with him), for Appellant; Mr. A. V. Vishwanatha Sastri, Senior Advocate (M/s. Z. S. Meeratwal, B. P. Singh and Naunit Lal, Advocates, with him), for Respondent.

A final order made in earlier proceedings under S. 34 of the Act would be binding on the Income-tax Officer in subsequent proceedings under the said section.

Headnote:

INCOME TAX - Reassessment - Scope of S. 34(1) - Finality of order of Tribunal - Effect of mistake in order - Whether Income-tax Officer can initiate fresh proceedings under S. 34 - Indian Income-tax Act, 1922, Ss. 34, 35.

Fact of the Case:

The assessee, a holder of an impartible estate, was assessed to income-tax for the year 1942-43. On April 5, 1945, a notice under S. 34 of the Act was issued to him on the ground that two items of his income, namely, syar (forest) income and interest income, were not included in the original assessment. The assessee filed a return disclosing the interest income but raised the plea that his forest income was not taxable. The Income-tax Officer, by his order dated July 12, 1945, made a revised assessment including both the incomes. The assessee appealed to the Income-tax Appellate Tribunal, which held that the Income-tax Officer had no jurisdiction to initiate proceedings under S. 34 of the Act in respect of the forest income on the ground that the Income-tax Officer had knowledge that the assessee had such income when he made the original assessment. The Tribunal, however, by mistake, set aside the entire order of reassessment dated July 12, 1945, made by the Income-tax Officer and restored the original order passed by him. The Income-tax Department did not take any steps to rectify the mistake under S. 35 of the Act or make any attempt to have the question of the illegality referred to the High Court. On January 3, 1950, the Income-tax Officer after obtaining the sanction of the Commissioner initiated proceedings under S. 34 of the Act with respect to the interest income. On January 19, 1950, the Income-tax Officer issued to the assessee a fresh notice under the said section. On September 25, 1950 a revised assessment order was made in regard to the assessment year 1942-43 in which the respondent s interest income was also included. On appeal, the Appellate Assistant Commissioner confirmed the said order. On further appeal, the Income-tax Appellate Tribunal held that since the assessee had failed to disclose his interest income in the return filed by him under S. 22(2) of the Act in connection with the original assessment the said income had escaped assessment and, therefore, the provisions of Section 34(1)(a) of the Act were attracted. On application filed by the assessee, the Tribunal referred the following question to the High Court under S. 66(1) of the Act: "Whether on the facts and in the circumstances of this case the provisions of S. 34(1) were applicable in respect of the assessment year 1942-43 on 19th January, 1950, when the notice under that provision was issued for the purpose of assessing the escaped interest income."

Finding of the Court:

The High Court came to the conclusion that the Tribunal in its order dated April 25, 1949, committed a clear error in setting aside the assessment of tax on the interest income without going into the correctness of the imposition of tax thereon, but that order had become final, it further held that the said order did not invalidate the entire proceedings taken under S. 34 of the Act and, therefore, the Income-tax Officer could not take proceedings afresh under Section 34 of the Act.

Issues: Whether the Income-tax Officer could initiate fresh proceedings under S. 34 of the Act in derogation of the finding given by the Tribunal that the Income-tax Officer did not "discover" that the income had escaped assessment.

Ratio Decidendi: The order of the Tribunal made within its jurisdiction, subject to the provisions of S. 66 of the Act, is final and cannot be reopened by the assessee or the Department. The only two sections that enable the Income-tax Officer to reopen final assessments are Ss. 34 and 35. The finding of the Tribunal is, therefore, binding on the Income-tax Officer and he cannot, in the circumstances of the case, reopen the assessment and initiate proceedings over again.

Final Decision: Appeal dismissed with costs.