1973 (9) TMI 39 - HC - Income Tax

Court Invalidates Assessments Due to Lack of Valid Notices Under Section 34, Orders Commissioner to Pay Costs

The court held that the Appellate Assistant Commissioner was competent to entertain objections regarding the invalidity of notices under section 34, ... Income Tax, Notice Of Reassessment Issues Involved:1. Competence of the Appellate Assistant Commissioner to entertain objections regarding the invalidity of notices under section 34.2. Legality of the assessments under section 34.Issue-Wise Detailed Analysis:1. Competence of the Appellate Assistant Commissioner to Entertain Objections Regarding the Invalidity of Notices under Section 34The primary issue is whether the Appellate Assistant Commissioner was competent to entertain the assessee's objection regarding the invalidity of the notices under section 34. The court observed that the validity of notices under section 34 goes to the root of the matter and the jurisdiction of the Income-tax Officer to initiate reassessment proceedings. The court emphasized that the mere technicality that this contention was not urged at an earlier stage is irrelevant because the absence of valid notices means the Income-tax Officer has no jurisdiction to reopen completed assessments.The court referenced the case of *Commissioner of Income-tax v. Estate of late N. Veeraswami Chettiar*, where it was held that a direction by the Appellate Assistant Commissioner cannot confer jurisdiction on the Income-tax Officer if he is not lawfully seized of jurisdiction. The court also cited *N. Naganatha Iyer v. Commissioner of Income-tax*, reiterating that reassessment proceedings initiated without proper jurisdiction are void and illegal.The court concluded that the Appellate Assistant Commissioner was competent to entertain the objection regarding the invalidity of the notices under section 34, as it pertains to the jurisdictional validity of the reassessment proceedings.2. Legality of the Assessments under Section 34The second issue concerns whether the assessments under section 34 were bad in law. The court noted that under section 34(1) of the Indian Income-tax Act, 1922, the Income-tax Officer must serve a notice containing the requirements of section 22(2), which mandates a minimum period of thirty days for the assessee to file a return. The court referred to the Supreme Court's decision in *Banarsi Debi v. Income-tax Officer*, which held that the words 'issued' and 'served' in section 34(1) are interchangeable, meaning the thirty-day period should be counted from the date the notice is served.In this case, the notices were served on April 1, 1954, requiring returns by April 15, 1954, thus not complying with the statutory period of thirty days. The court held that the notices were invalid, and consequently, the reassessment proceedings were void and illegal from the outset.The court rejected the revenue's contention that the validity of the notices could not be challenged after the remand order of September 12, 1959, by the Appellate Assistant Commissioner. The court reiterated that the jurisdiction to initiate reassessment proceedings is derived from section 34 and not from any directions given by the Appellate Assistant Commissioner.Conclusion:Question No. 1: In the affirmative. The Appellate Assistant Commissioner was competent to entertain the assessee's objection regarding the invalidity of the notices under section 34.Question No. 2: In the affirmative. The assessments under section 34 were bad in law.The Commissioner is directed to pay the costs of the assessee in Reference No. 8 of 1971. No order as to costs in Reference No. 15 of 1971, but the questions are answered in the affirmative for both references.