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HIGH COURT OF CALCUTTA
CHAKRABARTI, SARMA SARKAR
R. K. DAS AND CO. - Appellant
Versus
COMMISSIONER OF INCOME-TAX, WEST BENGAL - Respondent
Income-Tax Ref. 30 Of 1954
Decided On : JANUARY 06, 1956
INCOME TAX - Assessment - Return - Voluntary return - Return filed in compliance with invalid notice under Section 34 - Whether can be treated as voluntary return under Section 22 (3) - Limitation - Assessment made after expiry of four years from the end of the assessment year - Whether barred by limitation.
Fact of the Case:
The assessee, a firm, failed to file a return for the assessment year 1946-47 within the time limit prescribed under Section 22(1) of the Income-tax Act, 1922. The Income-tax Officer issued a notice under Section 34 on 23-8-1948, but the assessee did not file a return in response. A provisional assessment was made on the basis of a return filed on 24-2-1949. Subsequently, a fresh notice under Section 34 was issued on 30-3-1951, and the assessee filed a return on 16-4-1951. The Income-tax Officer completed the assessment on 29-6-1951. The assessee appealed to the Assistant Commissioner, who set aside the assessment and directed a fresh assessment. The Appellate Tribunal dismissed the assessee's appeal, holding that the return filed on 24-2-1949 was not a voluntary return and that the assessment made on 29-6-1951 was not barred by limitation.
Finding of the Court:
The Court held that the Tribunal was justified in holding that the return filed on 24-2-1949 was not a voluntary return, as it was filed in compliance with the invalid notice under Section 34. The Court also held that the assessment made on 29-6-1951 was not barred by limitation, as the case fell under Clause (a) of Section 34(1) and the second notice under Section 34 was given within the period allowed by law.
Issues: 1. Whether the return filed on 24-2-1949 can be regarded as a voluntary one under Section 22 (3) on the basis of which an assessment could have been validly made? 2. Whether the assessment for 1946-47, made on 29-6-1951 or to be made hereafter was or would be barred by limitation?
Ratio Decidendi: 1. A return filed in compliance with an invalid notice under Section 34 cannot be treated as a voluntary return under Section 22(3). 2. Where no return has been filed or income has escaped assessment, the Income-tax Officer can issue a notice under Section 34(1)(a) within eight years from the end of the assessment year, and an assessment made pursuant to such notice will not be barred by limitation.
Final Decision: The Court answered both questions in the negative, holding that the return filed on 24-2-1949 was not a voluntary return and that the assessment made on 29-6-1951 was not barred by limitation.
( 1 ) THE assessee at whose instance this Reference under Section 66 (1) of the Income-tax Act has been made is a firm. In maintaining its accounts, it observes the calendar year. Admittedly during the year 1945, the assessee earned a taxable income, but it did not file any return in response to the general notice issued under Section 22 (1) of the Act, nor did the Income-tax Officer issue any notice to the assessee under Section 22 (2 ). By the time he discovered the omission, the assessment year which was the year 1946-47 had already expired. At that stage, therefore, he could issue a notice only under Section 34 of the Act and he did so on 23-8-1948. As Section 34 stood at that time no sanction of the Commissioner for the issue of a notice under the section was required and consequently none was obtained.
( 2 ) IT appears that the assessee did not file a return in compliance with the notice. Instead a partner appeared before the Income-tax Officer on 8-11-1948, and asked for time till the end of January. 1949, on the ground that the books of the business for the relevant year had not yet been closed. The Income-tax Officer was not prepared to allow the time prayed for and informed the partner that the return would have to be filed by the 23rd of November following and that if it was not filed on or before that date not only would there be a summary assessment under Section 23 (4) of the Act, but a penalty under Section 28 would also be imposed. Even what happened on 8-11-1948, did not elicit a return from the assessee on the 23rd of November and a return was not filed till 24-2-1949. The return showed an income of Rs. 69,738/ -. The Income-tax Officer proceeded to make a provisional assessment on the return under Section 23b of the Act and made such an assessment on 28-2-1949. We are informed that thereafter proceedings for realisation of the tax under the provisional assessment were commenced.
( 3 ) IN the meantime, Section 34 of the Income-tax Act had been amended by Act 48 of 1948. Section 8 of the amending Act replaced the whole of the old Section 34 by a new section and directed by Section 1 (2) that the amendment "shall be deemed to have come into force, on the 30th day of March, 1948. " One of the new provisions incorporated in the new Section 34 was that a notice under the section was not to be issued unless the Income-tax Officer had recorded his reasons for doing so and unless the Commissioner was satisfied on such reasons recorded that it was a fit case for the issue of such a notice. As this provision was to be deemed to have been the law on and since 30-3-1948, it was necessarily the law on the 23rd of August of that year when the notice under Section 34 in the present case had been issued. Quite naturally, therefore, the Income-tax Officer thought that since the new section, speaking as on 30-3-1948, and at all subsequent times, unless it was again amended, required that before a notice thereunder could be issued, the Commissioner's sanction was to be obtained, the notice already issued on 23-8-1948, had ceased to be valid and could no longer be proceeded upon for the purposes of making an assessment. In that view, he applied for and obtained the sanction of the Commissioner and issued a fresh notice under Section 34 on 30-3-1951.
( 4 ) THE notice under Section 34 was followed up by the usual notice under Section 22 (4) of the Act which was issued on 9-4-1951. On 16-4-1951, the asses-see sent a letter to the Income-tax Officer, asking for a clarification of the notice. That letter has not been referred to either in the Statement of the Case or in the appellate order, but we have referred to it for ourselves and do not find that the assessee was saying anything very particular or intelligible. Be that as it may, on 7-5-1951, which we are informed was not a date fixed for the hearing of the case, the assessee addressed a letter to the Income-tax Officer by which it informed him that the r
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