1951 (6) TMI 12 - HC - Income Tax

Court validates assessee's return under Section 24(2) but deems 1944-45 assessment invalid. No costs awarded.

The court determined that the return filed by the assessee was valid under Section 24(2) of the Bengal Agricultural Income-tax Act, even though it was not ... - Issues Involved:1. Validity of the return filed by the assessee.2. Requirement of a notice under Section 38(1) of the Bengal Agricultural Income-tax Act.3. Validity of the best judgment assessment.Issue-wise Detailed Analysis:1. Validity of the Return Filed by the Assessee:The primary issue was whether the return filed by the assessee in 1948 could be considered a valid return under the Bengal Agricultural Income-tax Act. The court examined whether the return was filed under Section 24(1), 24(2), or 24(3) of the Act or if it could be considered a valid return within the meaning of the Act.- Section 24(1) and 24(3): The court concluded that the return could not be treated as filed under Section 24(1) or 24(3). The return was filed more than three years after the notice under Section 24(1) and was in response to a notice under Section 24(2). The return showed an income below the assessable limit, which could not be considered a return under Section 24(1).- Section 24(2): The court held that the return was clearly a return under Section 24(2) since it was filed in response to a notice under that section.- General Validity: The court noted that even if the notice under Section 24(2) was invalid, the return itself could still be considered valid within the meaning of the Act, as it conformed to the statutory form of a return.2. Requirement of a Notice under Section 38(1):The court examined whether the assessment for the year 1944-45 could be valid without the service of a notice under Section 38(1).- Commencement of Assessment Proceedings: The court rejected the argument that assessment proceedings commenced with the general notice under Section 24(1). The court stated that assessment proceedings against a particular person start either with the submission of a return under Section 24(1) or with the service of a notice under Section 24(2).- Necessity of Section 38(1) Notice: The court emphasized that if no notice under Section 24(2) was served during the assessment year and no return was filed, assessment proceedings could only be initiated by issuing a notice under Section 38(1). The court concluded that the absence of a notice under Section 38(1) rendered the assessment invalid.3. Validity of the Best Judgment Assessment:The court considered whether the best judgment assessment made under Section 25(5) was valid.- Preconditions for Best Judgment Assessment: The court noted that a best judgment assessment could only be made for non-compliance with notices under Section 24(4) and 25(2), which presuppose a valid return under Section 24(1) or a notice for a return under Section 24(2).- Invalidity Due to Lack of Section 38(1) Notice: Since the assessment was fundamentally invalid due to the lack of a notice under Section 38(1), the question of the validity of the best judgment assessment did not arise.Conclusion:The court answered the reframed questions as follows:- (a) The return was not under Section 24(1) or 24(3) but under Section 24(2). It was not 'no return at all' and was a return within the meaning of the Act.- (b)(i) The assessment was invalid without the service of a notice under Section 38(1).- (b)(ii) The question of the validity of the best judgment assessment did not arise.Additional Notes:- No question regarding the correctness of the amount assessed was raised before the Appellate Assistant Commissioner or the Tribunal.- The court did not order costs due to the technical defect in the proceedings, which allowed the assessee to escape a substantial amount of tax.