TaxTMI 
TaxTMI 
1940 (4) TMI 23
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....ts which may be included in a notice under sub-section (2) of Section 22 and may proceed to assess or re-assess such income, profits or gains, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section : Provided that the tax shall be charged at the rate at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be. " The question at issue was formulated in the reference as follows : " Where the Income-tax Officer has, on such materials and information as are available to him, reason to believe that income from any of the heads of income described under Section 6 of the Indian Income-tax Act-in the present instance, from ' business ' and ' other sources '-which should have been assessed in the year of assessment has escaped assessment, and, as a result of such enquiries and investigations as are possible at that stage, has been satisfied as stated in paragraph 3 of the statement that a prima facie case has been made out against the asses....
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....e on any person upon whom a notice has been served under sub-section (2) a further notice requiring him to produce accounts and documents, subject to the limitation that he shall not require the production of any accounts relating to a period more than three years prior to the year previous to the year of assessment. Section 23 provides for the making of the assessment. Sub-section (1) requires the Income-tax Officer, if he is satisfied that the return made under Section 22 is correct and complete, to assess the total income and to determine the sum payable. Under sub-section (2) if the Income-tax Officer has reason to believe that the return is incorrect or incomplete he must serve on the person who made the return a notice requiring him either to attend at the Income-tax Officer's office or to produce any evidence relied on in support of the return. Sub-section (3) provides that the Income-tax Officer, after hearing such evidence as the person who made the return may produce and such other evidence as the Income-tax Officer may require on specified points, shall by an order in writing assess the total income and determine the sum payable. Sub-section (4) makes provision for a....
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.... to believe that your income from business and other sources which should have been assessed in the financial year ending the 31st March, 1933, has wholly escaped assessment and I therefore propose to assess the said income that has escaped assessment. I hereby require you to deliver to me, not later than the 9th March, 1934 or within 30 days of the receipt of this notice, a return in the attached form of your income from all sources which was assessable in the said year ending the 31st March, 1933. " On 22nd March, 1934, the respondents filed a new return showing the same loss as was shown in the original return. The Income-tax Officer on 21st May, 1934, issued further notices under Sections 22(4) and 23(2) and thereafter further procedure followed, including applications by the respondents to the High Court for the purpose of preventing the Income-tax Officer from proceeding with a new assessment, on the ground, inter alia, that Section 34 had been put into operation without giving the respondents an opportunity of being heard. It is not, however, necessary to discuss these proceedings, because eventually the convenient and competent course was taken of staying proceedings und....
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....s made by the Income-tax Officer in the course of making an assessment and when an enquiry under Section 23 is open. Learned Counsel for the respondents maintained that in a taxing Act the construction more favourable to the assessee should be preferred and he suggested that Section 34 should be read as if it were introduced by the words " If the Income-tax Officer is satisfied " or the words " If it is found ". But this suggestion is not in itself helpful to the respondents, since the words proposed to be implied do not carry with them by a further implication a direction to hold a quasi-judicial enquiry ; and the real question is whether the section should be read subject to an implied proviso that the Income-tax Officer shall not apply the procedure prescribed by the section except after a decision taken in a quasi-judicial enquiry. The section, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable, ut res valeat potius quam pereat. In the present instance two considerations are in....
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....he powers necessary for such an enquiry are not conferred upon him. But there is a second consideration which is no less conclusive. The operative part of Section 34 empowers the Income-tax Officer to proceed de novo under sub-section (2) of Section 22, and that in turn leads, if there should still be a question of the accuracy of the return, to an enquiry under Section 23(2) and (3), and in that enquiry the assessee has a statutory right to appear and to produce evidence. Therefore a construction of Section 34 which requires a quasi-judicial enquiry to be held before the powers under the section can be operated would result in mere duplication of procedure and in two enquiries of the same kind, into the same matter, conducted by the same official, and without any advantage to the parties. A construction so unreasonable and unpractical ought not to be preferred when another construction is open. Accordingly their Lordships are of opinion that the Income-tax Officer is not required by the section to convene the assessee, or to intimate to him the nature of the alleged escapement, or to give him an opportunity of being heard, before he decides to operate the powers conferred by the s....