Invalid reassessment notice cannot convert a return into a voluntary return; escaped income reassessment remained within limitation.

A return filed after service of a section 34 notice was not a voluntary return under section 22(3) of the Indian Income-tax Act, 1922, because it was not made in response to the general notice and could not derive validity from an invalid reassessment notice. A return made in those circumstances could not support a regular assessment as a voluntary return. Once no valid voluntary return existed, the matter fell within escaped-assessment proceedings under section 34(1)(a), and the later notice issued with sanction was within time. The assessment made on 29 June 1951, and any consequential reassessment, was therefore not barred by limitation.

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Issues: (i) Whether the return filed on 24 February 1949 could be regarded as a voluntary return under section 22(3) of the Indian Income-tax Act, 1922, on the basis of which a valid assessment could be made. (ii) Whether the assessment for 1946-47 made on 29 June 1951, or to be made thereafter, was or would be barred by limitation.

Issue (i): Whether the return filed on 24 February 1949 could be regarded as a voluntary return under section 22(3) of the Indian Income-tax Act, 1922, on the basis of which a valid assessment could be made.

Analysis: The return was filed only after service of a notice under section 34 and after the assessee had appeared before the Income-tax Officer seeking further time. On those facts, the return was not voluntarily filed in response to the general notice under section 22(1). A return filed in compliance with an invalid notice under section 34 could not, in law, be treated as a voluntary return for purposes of a regular assessment. Where the notice giving rise to the return was itself invalid, the assessee could not treat the return as good for its own benefit while rejecting its legal effect for the taxing authority.

Conclusion: The return could not be regarded as a voluntary return under section 22(3), and no valid assessment could be founded on it as such.

Issue (ii): Whether the assessment for 1946-47 made on 29 June 1951, or to be made thereafter, was or would be barred by limitation.

Analysis: Once the return was held not to be voluntary, the case stood as one where no valid return had been filed and income had escaped assessment. In that situation, section 34(1)(a) applied. The second notice under section 34, having been issued after the Commissioner's sanction, was within the period allowed by law. The assessment made on 29 June 1951 was therefore not time-barred, and the direction for reassessment also escaped the bar of limitation by reason of section 34(3) and the appellate order setting aside the earlier assessment.

Conclusion: The assessment was not barred by limitation, and any reassessment to be made thereafter was also not time-barred.

Final Conclusion: The reference was answered against the assessee. The court held that the return was not a voluntary return and that the assessment and consequential reassessment were within limitation.

Ratio Decidendi: A return filed in compliance with an invalid notice under section 34 cannot be treated as a voluntary return under section 22(3); where no valid voluntary return exists and income has escaped assessment, reassessment under section 34(1)(a) within the statutory period is not barred by limitation.

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