1962 (4) TMI 110 - HC - Income Tax

Court upholds tax department actions for multiple years, quashes order for one year

K.S. Ratnaswami Versus Additional Income-Tax Officer, Thanjavur and another

K.S. Ratnaswami Versus Additional Income-Tax Officer, Thanjavur and another - [1963] 48 ITR 568 Issues Involved:1. Validity of returns filed beyond the four-year period.2. Legitimacy of proceedings under Section 34 of the Income-tax Act.3. Validity of assessments and penalties imposed under Section 46(1) of the Income-tax Act.4. Applicability of the proviso to Section 45 of the Income-tax Act.5. Validity of the assessment for the year 1954-55.Issue-wise Detailed Analysis:1. Validity of Returns Filed Beyond the Four-Year Period:The petitioner, a citizen of Ceylon, filed returns for the assessment years 1950-51 and 1951-52 on 12th March 1959, beyond the four-year period from the close of the relevant assessment years. Under Section 34(3) of the Act, no assessment shall be made after the expiry of four years from the end of the year in which the income was first assessable. The court held that a return filed beyond this period is not valid under Section 22(3) of the Act. Therefore, the department was entitled to ignore such returns and take proceedings under Section 34 of the Act.2. Legitimacy of Proceedings Under Section 34 of the Income-tax Act:The petitioner argued that the department could not resort to Section 34 proceedings as he had filed voluntary returns. However, the court found that since these returns were filed beyond the four-year period, they were not valid, and the department was justified in resorting to Section 34. The court referenced the Supreme Court decision in Commissioner of Income-tax v. Ranchchoddas Karsondas, which held that a return filed within the four-year period is valid and the department cannot proceed under Section 34 if such a return is before it.3. Validity of Assessments and Penalties Imposed Under Section 46(1) of the Income-tax Act:For the years 1956-57 and 1957-58, the assessments were based on returns filed within the four-year period, and no action under Section 34 was taken. The petitioner challenged the penalties imposed under Section 46(1) for non-compliance with the notices of demand. The court upheld the penalties, stating that the assessments were validly made, and the notices of demand were properly issued under Section 29 of the Act. The court found no failure to exercise jurisdiction by the Income-tax Officer in imposing penalties under Section 46(1).4. Applicability of the Proviso to Section 45 of the Income-tax Act:The petitioner contended that the income assessed arose outside the taxable territories and that the Income-tax Officer did not apply the relevant proviso of Section 45 before treating him as in default. The court noted that the petitioner had built a cinema theatre costing over a lakh of rupees and had claimed in other proceedings that this amount represented his remittances into the taxable territories. The court held that it was for the petitioner to establish that the capital invested in the cinema was from local borrowings and not remittances. The court found no failure to exercise jurisdiction by the Income-tax Officer in this regard.5. Validity of the Assessment for the Year 1954-55:The court found that the return filed by the petitioner on 12th March 1959 for the assessment year 1954-55 was within the four-year period from the end of the assessment year, making it a valid return under Section 22(3) of the Act. As a result, the department was not entitled to resort to Section 34 proceedings for this year. The court quashed the assessment for the year 1954-55 and the consequential order under Section 46(1).Conclusion:The court dismissed the writ petitions challenging the assessments and penalties for the years 1950-51, 1951-52, 1952-53, 1953-54, 1956-57, and 1957-58, upholding the department's actions under Section 34 and Section 46(1). However, the court allowed the writ petitions for the year 1954-55, quashing the assessment and the consequential penalty order under Section 46(1). The petitioner was ordered to pay the costs of the department in W.P. No. 977 of 1961, with counsel's fee set at Rs. 250.