1960 (2) TMI 56 - HC - Income Tax

Invalid notice for assessment year 1945-46 leads to ruling in favor of assessee

The court found that the initiation of proceedings under section 34 for the assessment year 1945-46 was not valid as the Income-tax Officer's actions did ... - Issues:1. Validity of the assessment made on the assessee2. Correctness of adopting the period for the assessment year 1945-46Analysis:The case involved an assessee who had taken a toddy lease for the abkari year 1943-44 and claimed a loss over the contract. The assessee filed returns for the assessment years 1944-45 and 1945-46, showing a loss for both years. The Income-tax Officer initially declared the assessee not assessable for 1944-45 based on the returns and an affidavit filed by the assessee. However, in 1950, the Income-tax Officer issued a notice under section 34 for the assessment year 1945-46, completed the assessment, and it was upheld by the Tribunal.Regarding the validity of the assessment, the court considered whether the initiation of proceedings under section 34 for the assessment year 1945-46 was valid. The court noted that the Income-tax Officer's actions were not in line with the law, as the assessee had filed a return for 1945-46, and the assessment for that year was not completed based on the return filed in 1946. The court referenced the case of Commissioner of Income-tax v. Ranchhoddas Karsondas [1959] 36 ITR 569 to support the assessee's contention that the proceedings under section 34 were not justified.The court held that since the initiation of proceedings under section 34 was not valid, the assessment itself, which was based on the invalid notice, had to be set aside. Therefore, the court answered the first question against the Department and in favor of the assessee. As a result of this decision, the court did not find it necessary to address the second question regarding the adoption of the period for the assessment year 1945-46. The assessee was granted costs as they had succeeded in the reference.