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HIGH COURT OF ORISSA
MOHAPATRA,MISRA, JJ.
Mannalal Modi
Versus
Commr.of Income-tax B and O
Special Jurisdiction Case No. 1 of 1954
Decided On : 15-07-1955
INCOME TAX - S. 34 - Assessment - Escapement of income - Meaning - Return filed - Assessment not made - Whether income escaped assessment - Held, no.
Fact of the Case:
The assessee filed a return of his income for the assessment year 1944-45 on 19-10-1944. The Income-tax Officer, Special Circle, Cuttack, where the assessee was assessed as a member of a joint Hindu family, informed the territorial Income-tax Officer on 19-1-1949 that the assessee had become separate and was carrying on business as an individual from 9-11-1942. The territorial Income-tax Officer issued a notice under S. 34, Income-tax Act on 21-3-1949 on the assessee asking him to submit a return. The assessee informed the Income-tax Officer that he had filed a return already on 19-10-1944. He was, however, asked to file a fresh return in compliance with the notice under S. 34; but he did not file any such return. The Income-tax Officer made an assessment under S. 23(4) on 9-2-1950. The assessee's petition under S. 27 for reopening the assessment was rejected. On appeal, the Appellate Assistant Commissioner cancelled the order of the Income-tax Officer and directed him to make a fresh assessment. The Income-tax Officer again issued a notice under S. 23(2) dated 14-7-1951, but the assessee again filed a petition objecting to the assessment on the ground that the proceedings had been barred by time. The Income-tax Officer rejected the contention of the assessee and made an assessment under S. 23(3) on a total income of Rs. 15,363/-. The order of the Income-tax Officer was confirmed on appeal by the Appellate Assistant Commissioner. Before the Appellate Tribunal, a contention was raised that the proceedings under S. 34 were without jurisdiction, as the conditions which are pre-requisites for the application of that section had not been fulfilled in that case, and that there was no escapement of income in view of the fact that the assessee had filed a return on 19-10-1944, and the mere fact that there had been no assessment was not sufficient to hold that there was escapement of the income from payment of tax and further that the assessment made after the end of the period laid down under S. 34(3) was invalid.
Finding of the Court:
The Income-tax Officer had no jurisdiction to issue a notice under S. 34 of the Act, as the assessment proceedings had not come to an end and the return was still pending.
Issues: Whether the income chargeable to income-tax had escaped assessment so as to confer jurisdiction on the Income-tax Officer to invoke the aid of S. 34.
Ratio Decidendi: The phrase "income, profits or gains chargeable to income-tax have escaped assessment" in S. 34 of the Income-tax Act means that the income has not been assessed to income-tax, and not merely that no assessment has been made. Where a return has been filed, it is for the department to make an assessment under S. 23. When a return has been made but no assessment has been made, it cannot be said that the income has escaped assessment so as to confer jurisdiction on the Income-tax Officer to invoke the aid of S. 34.
Final Decision: The question is answered in the negative and the assessment under S. 34 is held to be invalid.
Judgement
MISRA, J. :- This is a reference under S. 66(1), Income-tax Act, by the Income-tax Appellate Tribunal, Madras Bench, B stating a question of law which arises out of the Tribunals order in I. T. A. No. 5617 dated 16-10-1952.
2. The assessee Mannalal Modi was a member of the joint Hindu family consisting of Rangalal Modi, Mannalal Modi and others. This joint family was an assessee on the file of the Income-tax Officer, Special Circle, Cuttack. The assessment year with which we are concerned is 1944-45, and the accounting year is the Dewali year ending 29-10-1943, Mannalal filed a return of his income before the territorial Income-tax Officer, Cuttack, on 19-10-1944 as an individual showing an income of Rs. 14,273/- for the Deepavali year (accounting year) ending with 29-10-1943.
It appears on receipt of this return the territorial Income-tax Officer sent it to the Income-tax Officer, Special Circle, as the larger joint family of which Mannalal was a member was being assessed by the Income-tax Officer, Special Circle, and as by that time the partition between the members of the family had not been accepted by the department. Later on, as a result of certain proceedings which came to the High Court, the department accepted the case that there had been a partition between members of the joint family with effect from 9-11-1942.
Thereupon, the Income-tax Officer, Special Circle, by his letter dated 19-1-1949 informed the territorial Income-tax Officer that Mannalal Modi had become separate and, was carrying on business as an individual from 9-11-1942 that is from the beginning of the year previous to the assessment year of 1944-45. On receipt of this letter the territorial Income-tax Officer, Cuttack, issued a notice under S. 34, Income-tax Act on 21-3-1949 on Mannalal Modi asking him to submit a return. The notice was served on the assessee on 23-3-1949. On 2-5-1949, Mannalal informed the Income-tax Officer that he had filed a return already on 19-10-1944.
He was, however, asked to file a fresh return in compliance with the notice under S. 34; but he did not file any such return. The territorial Income-tax Officer was of opinion that the assessee had failed to comply with the notice under S. 22(4), and so he proceeded to make an essessment under S. 23(4) on 9-2-1950. The assessee thereupon moved a petition under S. 27 for reopening the assessment which was rejected by the Income-tax Officer on 29-4-1950.
3. On appeal, the Appellate Assistant Commissioner cancelled the order of the Income-tax Officer and directed him to make a fresh assessment as he was of the opinion that the assessee was under a bona fide mistake in regard to the compliance of the said notices, and the assessee was therefore prevented by sufficient cause from submitting a return. When the matter went back to the Income-tax Officer on remand, the assessee again filed on 11-7-1951 a petition urging that the proceedings were barred by time under S. 34(3) of the Act, as he had already filed a return on 19-10-1944 and the assessment should have been completed by 31-3-1949.
The Income-tax Officer issued a notice under S. 23(2) dated 14-7-1951, but the assessee again, filed a petition on 17-7-1951 objecting to the assessment on the ground that the proceedings had been barred by time. The Income-tax Officer rejected the contention of the assessee and made an assessment under S. 23(3) on a total income of Rs. 15,363/-. The order of the Income-tax Officer was confirmed on appeal by the Appellate Assistant Commissioner by his order dated 6-11-1951.
Before the Appellate Tribunal a contention was raised that the proceedings under S. 34 were without jurisdiction, as the conditions which are pre-requisites for the application of that section had not been fulfilled in that case, and that there was no escapement of income in view of the fact that the assessee had filed a return on 19-10-1944, and the mere fact that there had been no assessment was not sufficient to hold that ther
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