1962 (1) TMI 69 - HC - Income Tax

Invalid Notice under Section 34 Deemed Time-Barred; Assessee Awarded Costs

Bidhu Bhusan Sarcar (Deceased) Versus Commissioner of Income-Tax, Calcutta

The High Court held that the notice under section 34 issued on February 11, 1956, was invalid due to pending proceedings from the notice dated February ... - Issues Involved:1. Validity of the notice under section 34 issued by the principal Income-tax Officer on February 11, 1956.2. Whether the assessment dated May 2, 1956, made by the principal Income-tax Officer, District I(2), was barred by time.Detailed Analysis:1. Validity of the Notice under Section 34 Issued on February 11, 1956:The assessee filed voluntary returns for the assessment year 1947-48 declaring losses. The Income-tax Officer, District I(2), issued a notice under section 34 on February 11, 1956, after the case was transferred from the 8th Additional Income-tax Officer. The core issue was whether this notice was valid given that previous proceedings initiated by the 8th Additional Income-tax Officer under section 34 based on a notice dated February 23, 1950, were 'filed.'The assessee argued that voluntary returns are valid and the Income-tax Officer cannot ignore them. Therefore, the notice under section 34 dated February 23, 1950, was invalid, making the subsequent notice dated February 11, 1956, also invalid. The department conceded that the 1950 notice was invalid based on the Supreme Court decision in Commissioner of Income-tax v. Ranchhoddas Karsondas, which held that voluntary returns showing income below assessable limits were valid.The Tribunal held that the proceedings initiated by the 8th Additional Income-tax Officer were not alive to be continued by the principal Income-tax Officer, thus validating the notice issued on February 11, 1956. However, the High Court found that the proceedings initiated by the 1950 notice remained pending and alive, and thus, the notice dated February 11, 1956, was invalid.2. Whether the Assessment Dated May 2, 1956, Was Barred by Time:The assessment dated May 2, 1956, was challenged on the grounds of being time-barred. The assessee contended that if the proceedings initiated by the 1950 notice were valid, the assessment should have been completed by March 31, 1956, as per section 34(1)(a). The department argued that more than one notice under section 34 could be issued and the assessment made within one year from the date of the last notice.The High Court held that the proceedings initiated by the 1950 notice were valid and pending, requiring the assessment to be completed by March 31, 1956. The issuance of a second notice on February 11, 1956, to extend the limitation period was not permissible. The assessment made on May 2, 1956, was therefore barred by limitation.Conclusion:The High Court concluded that the notice under section 34 dated February 11, 1956, was invalid as the proceedings initiated by the notice dated February 23, 1950, were still pending. Consequently, the assessment dated May 2, 1956, was barred by limitation as it should have been completed by March 31, 1956. The assessee was entitled to costs, and a certificate for two counsel was granted.