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SUPREME COURT OF INDIA
J.C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.
The Commissioner of Income-tax Calcutta, Appellant
Versus
Bidhu Bhusan Sarkar (Deceased) through his Legal Representative, Respondent.
Civil Appeal No. 401 of 1965, D/3-10-1966.
Advocates appeared
S. V. Gupte, Solicitor-General of India (M/s. N. D. Karkhanis and R. N. Sachthey, Advocates, with him), for Appellant; A. K. Sen, Senior Advocate (M/s. P. K. Mukherjee and S. K. Banerjee, Advocates, with him), for Respondent.
INCOME TAX - Assessment - Notice under S. 34 - Validity - Order of Income-tax Officer directing that the case be filed - Effect - Whether proceedings before him terminated or continued - Transfer of case to another Income-tax Officer - Effect - Whether notice issued by transferred officer valid - Limitation - Whether order of assessment barred by time.
Fact of the Case:
The assessee filed a voluntary return showing a loss of Rs. 330. Before any proceedings could be completed, there was a change in territorial jurisdiction and the assessee's place of business came within the jurisdiction of the Income-tax Office District I (2), Calcutta. The assessee filed another voluntary return for the same assessment year in respect of his income from military contracts before the P. I. T. O., and in this return he declared a loss of Rs. 11,33,940. The A. I. T. O. started departmental proceedings with the object of taking proceedings under S. 34, presumably because he considered the voluntary return declaring a loss of Rs. 330 as invalid. He, therefore, issued a notice under S. 34 on February 23, 1950. The P. I. T. O. issued a notice under S. 23 (2) on 1st August, 1950. Subsequently on 12th February, 1952, he cancelled those proceedings on the view that a voluntary return of loss was not valid, took proceedings under S. 34, and issued a notice under that section on the same day. The assessee filed an appeal against that order of assessment and when the appeal came up, the P. I. T. O. himself drew the attention of the Appellate Assistant Commissioner to the fact that he had no jurisdiction over the assessee as there was already a file of the assessee with the A. I. T. O. He, therefore, requested that the assessment should be set aside as it was void ab initio. The Appellate Assistant Commissioner accepted this request of the P. I. T. O., set aside the assessment on 7th December, 1955, and made a direction that the assessment could be competed according to law by the officer having proper jurisdiction over the case. Thereafter, on the 30th December, 1955, the Commissioner of Income-tax made an order transferring the case of the assessee from the A. I. T. O. to the P. I. T. O. The P. I. T. O. on 11th February, 1956, issued a fresh notice under S. 34 to the assessee, and in pursuance of that notice, made an assessment on 2nd May, 1956.
Finding of the Court:
The High Court held that the notice dated 23rd February, 1950 was valid and proceeding on it were continuing, so that the revenue authorities could not extend the period of limitation by assessing after the expiry of eight years by issuing a second notice on the eve of the expiry of eight years to obtain a period of one additional year from the date of the service of the second notice. The assessment was, therefore, held to be barred by limitation on the ground that it should have been completed by 31st March, 1956.
Issues: 1. Whether the notice u/s. 34 issued by the Principal Income-tax Officer on 11th February , 1956 and the assessment raised in pursuance thereof, valid in law, in view of the fact that the proceedings commenced by the 8th Addl. Income-tax Officer u/s. 34 on the basis of notice dated 23rd February, 1950 were "filed"? 2. Whether on the facts and circumstances of the case, the assessment dated 2nd May, 1956 made by the Principal (main) Income-tax Officer. Dist. I (2) was barred by time?
Ratio Decidendi: 1. The order of the A. I. T. O. directing that the case be filed was an order terminating the proceedings before him and not an order continuing them. 2. The order of transfer made by the Commissioner of Income-tax on 30th December. 1955, was valid even though there were no proceedings pending for assessment of tax and the purpose of the transfer was simply that all future proceedings were to take place before the officer to whom the case of the assessee was transferred. 3. The notice dated 11th February, 1956 issued by the P. I. T. O. was competently issued by him and was also valid, because it was issued before the expiry of eight years from the end of the relevant assessment year 1947-48. 4. The order of assessment dated 2nd May, 1956, was consequently a valid order and was not barred by time.
Final Decision: The appeal is accordingly allowed with costs in this Court as well as in the High Court.
Judgment
BHARGAVA, J. : The assessee in the proceedings out of which this appeal has arisen was Bidhu Bhushan Sarkar, who died and is now represented in these proceedings through his legal representative. The assessee used to be assessed by the Income-tax Officer of District 24 Parganas in Bengal. For the assessment year 1947-48, the assessee filed a voluntary return before the Income-tax Officer on December 22, 1947, showing a net loss of Rs. 330. This return was filed without any notice under S. 22 (2) of the Income-tax Act having been served on him. Before any proceedings could be completed on that return, there was change in territorial jurisdiction and as a result, the assessee s place of business came within the jurisdiction of the Income-tax Office District I (2), Calcutta. In this Income-tax Office, there were a number of Income-tax Officers. The senior-most Income-tax Officer used to be designated as Income-tax Officer, District I (2) and was treated as the principal Income-tax Officer (hereinafter referred to as "the P. I. T. O."). Since there were a number of Additional Income-tax Officers, there was distribution of jurisdiction, and the case of the assessee fell within the jurisdiction of the 8th Additional Income-tax Officer District I
(2) (hereinafter referred to as "the A. I. T. O."), and consequently, came up before him. On January 16, 1949, the A. I. T. O. started departmental proceedings with the object of taking proceedings under S. 34, presumably because he considered the voluntary return declaring a loss of Rs. 330 as invalid. He, therefore, issued a notice under S. 34 on February 23, 1950. In the meantime, on March 31, 1949, the assessee had filed another voluntary return for the same assessment year in respect of his income from military contracts before the P. I. T. O., and in this return he declared a loss of Rs. 11,33,940. The proceedings pending before the A. I. T. O. in pursuance of his notice dated 23rd February, 1950 came up before him on the 4th February, 1952. On that date, he passed the following order which may, for convenience, be reproduced in full, as this case turns mainly upon the interpretation of this order :-
"Mr. Kalipada Bose, constituted attorney, appears and submits that the old return already submitted may be treated to he submitted in response to notice under S. 34 (1) (a). The income should be taken in the assessment of the military contract income for which there is another file. The case is, therefore, filed.
2. The proceedings before the P. I. T. O. on the voluntary return filed by the assessee on the 31st March, 1949, were continuing, and in those proceedings he issued a notice under S. 23 (2) on 1st August, 1950. Subsequently on 12th February, 1952, he cancelled those proceedings on the view that a voluntary return of loss was not valid, took proceedings under S. 34, and issued a notice under that section on the same day. These proceedings under S. 34 culminated in an order of assessment by the P. I. T. O. under S. 34 (4) passed on 31st January, 1953. The assessee filed an appeal against that order of assessment and when the appeal came up, the P. I. T. O. himself drew the attention of the Appellate Assistant Commissioner to the fact that he had no jurisdiction over the assessee as there was already a file of the assessee with the A. I. T. O. He, therefore, requested that the assessment should be set aside as it was void ab initio. The Appellate Assistant Commissioner accepted this request of the P. I. T. O., set aside the assessment on 7th December, 1955, and made a direction that the assessment could be competed according to law by the officer having proper jurisdiction over the case. Thereafter, on the 30th December, 1955, the Commissioner of Income-tax made an order transferring the case of the assessee from the A. I. T. O. to the P. I. T. O. There was an appeal by the assessee against the direction of the Appellate Assistant Commissioner that the assessment should he co
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