A valid assessment order under Section 34 of the Income Tax Act requires a valid notice served within the time limit prescribed under Section 34(1).

Headnote:
INCOME TAX - Section 34(1) and proviso to Section 34(3) - Notice served beyond the time limit - Assessment order made within one year from the date of service of notice - Validity.
Fact of the Case:

The assessee filed his income tax return for the assessment year 1943-44, and the assessment was completed on July 17, 1944. Later, it was discovered that the assessee had not shown a certain income. The Income-tax Officer issued a notice on March 20, 1952, served on April 16, 1952, and the assessment was completed on March 28, 1953. The assessee challenged the assessment on the ground that the notice was not valid.
Finding of the Court:

The court held that the notice served beyond the time limit prescribed under Section 34(1) was invalid, and any assessment made pursuant to that notice was also invalid. The proviso to Section 34(3), which allows for an additional one year for assessment from the date of service of notice, was not applicable because the initial notice itself was invalid.
Issues: Whether the assessment order made within one year from the date of service of notice, but the notice itself was served beyond the time limit prescribed under Section 34(1), is valid.
Ratio Decidendi: The court interpreted Section 34(1) and the proviso to Section 34(3) and held that the validity of the assessment order depends on the validity of the notice served under Section 34(1). If the notice is invalid, any subsequent proceedings, including the assessment order, are also invalid. The proviso to Section 34(3) only applies when the notice is validly served within the time limit prescribed under Section 34(1).
Final Decision: The court answered the question submitted to it in the negative, holding that the assessment order was invalid.

Judgment -Chagla, C.J.

1. A very short question in regard to the construction of Section 34, Sub-section (1) and the proviso to Section 34, Sub-section (3) arises on this reference. The assesses made his return of his income for the assessment year 1943-44 and the assessment was completed on the 17th of July 1944. It was then discovered that the assessee had not shown a certain income. Under the circumstances the Income-tax Officer issued a notice on the 20th of March 1952 and this notice was served on the 16th of April 1952. This assessment was completed on the 28th of March 1953. The assessment was challenged on the ground that the notice pursuant to which this assessment was made was not valid, and the Tribunal held that the challenge was Justified and held that the assessment could not be sustained.

2. Now Section 34 (1) deals with the notice and It provides that in cases falling under Clause (a), with which we are concerned in this case, he may serve a notice within eight years of the end of that year, which in this case would be the 31st of March 1944. The notice, as I have already pointed, out, was actually served on the 16th of April 1952, and, therefore, if we were not to look at any other provision of the Act, it is clear that the notice was nob served within eight years as required by Section 34. We have already held that a notice under Section 34 is a condition precedent to the assessment to be made under this section, and as the notice was not served as required by Section 34, any assessment made pursuant to that notice must be invalid. But what is relied upon by the Commissioner is the proviso to Sub-section (3) of Section 34. Now Sub-section (3) of Section 34 provides that no assessment under Section 34 shall be made after the expiry of eight years from the end of the year in which the income, profits or gains were first assessable. As the year in which the income, profits or gains were first assessable ended on the 31st of March 1944, the order of assessment would have to be made under this sub-section by the 31st of March 1952. But there is a proviso to this sub-section and that proviso lays down that, where a notice under Sub-section (1) has been issued within the time therein limited, the assessment or re-assessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if such period exceeds the period of eight years or four years, as the case may be. Therefore, if the conditions laid down in the proviso are satisfied, a further period of one year is given to the taxing authorities to make the assessment and the assessment may be made one year from the date of the service of the notice even though such period may go beyond the period of eight years laid down in Sub-section (3) itself. In other words, if the proviso is applicable, the notice having been served on the 16th of April 1952, the assessment could have been made on or before the 16th of April 1953; and the contention of the Department is that this proviso applies and inasmuch as the assessment was completed on the 28th of March 1953, the assessment is valid. Now the clear fallacy underlying the contention of the Department is that we do not come to the stage of considering the assessment order until the notice under Section 34 is validly served. If the notice is served beyond the time limited by Section 34, then the notice is bad and any proceedings taken pursuant to that notice are also bad. What is relied upon in the proviso is the language used in the first part of it, namely, "where a notice under Sub-section (1) has been issued within the time therein limited", and what is urged is that we must read in Section 34, instead of the language used by the Legislature, namely, that the notice must be "served", the language used by the Legislature in the proviso to Sub-section (3), namely, that the notice has been "issued". In other words, the attempt is to equate the expression "

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