1956 (1) TMI 22 - HC - Income Tax

Invalid Notice Doesn't Bar Assessment; Time Limit Not Applicable

The High Court held that the return filed on 24th February, 1949, was not voluntary under section 22(3) as it was in response to an invalid notice under ... - Issues Involved:1. Whether the return filed on 24th February, 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 29th June, 1951, or to be made hereafter was or would be barred by limitation.Issue-wise Detailed Analysis:Issue 1: Voluntary Return under Section 22(3)The first issue concerns whether the return filed on 24th February, 1949, can be considered a voluntary return under section 22(3) of the Indian Income-tax Act, 1922. The Tribunal found that the return was not filed voluntarily but in response to a notice issued under section 34. The Tribunal's conclusion was based on the sequence of events: the assessee did not file a return within the time limited by the general notice under section 22(1) or within the assessment year. Instead, the return was filed after a notice under section 34 was served. The Tribunal noted that a partner of the assessee had appeared before the Income-tax Officer on 8th November, 1948, and requested more time to file the return, indicating that the return was influenced by the notice under section 34.The Tribunal also emphasized that if the return was filed in compliance with an invalid notice under section 34, it could not be treated as a voluntary return under section 22(3). The Tribunal relied on the precedent set in Commissioner of Agricultural Income-tax v. Sultan Ali Gharami, which held that a return filed in response to an invalid notice could not be considered a voluntary return.The High Court agreed with the Tribunal's findings, stating that the Tribunal had sufficient evidence to conclude that the return was not voluntary. The Court held that the return filed in compliance with an invalid notice under section 34 could not be treated as a voluntary return under section 22(3). Therefore, the answer to the first question was 'No.'Issue 2: Limitation on AssessmentThe second issue concerns whether the assessment for 1946-47 made on 29th June, 1951, or any subsequent assessment, would be barred by limitation. The Tribunal held that since there had been no regular assessment for 1946-47 before June 1951, the period of limitation applicable was eight years from the expiry of the assessment year, as per section 34(1)(a).The Tribunal rejected the assessee's contention that the return filed in February 1949 should be regarded as a voluntary return on which a valid assessment could have been made within the normal four-year period. The Tribunal noted that the return was filed in response to an invalid notice under section 34, and any assessment based on that return would have been invalid.The High Court upheld the Tribunal's view, stating that if the return was not a voluntary one, the case was one where no return had been filed, and income had escaped assessment. Therefore, section 34(1)(a) applied, and the second notice under section 34 issued in March 1951 was within the allowable period. Consequently, the assessment made on 29th June 1951 was not time-barred. Furthermore, since the Appellate Assistant Commissioner directed a reassessment under section 31(3)(c), the second proviso to section 34(3) would apply, ensuring that any reassessment made hereafter would not be barred by limitation.Thus, the answer to the second question was 'No' for both parts.ConclusionThe High Court concluded that:1. The return filed on 24th February, 1949, cannot be regarded as a voluntary one under section 22(3).2. The assessment for 1946-47 made on 29th June, 1951, or to be made hereafter, was not and would not be barred by limitation.The reference was answered accordingly, with costs awarded to the Commissioner of Income-tax, West Bengal.