TaxTMI 
TaxTMI 
TaxTMI 
1972 (8) TMI 17
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....d credited the assessee with Rs. 24,165 as interest for a number of years. When that interest receipt was included in the income of the assessee for that year, the assessee went on appeal, and the Appellate Assistant Commissioner held that the said sum represented interest income for various years and that only Rs. 4,126 should be considered in the assessment for 1955-56. He also held that regarding the earlier years the amounts credited in the books of the debtor as interest due to the assessee should be related to the respective years. On this basis Rs. 4,037 related to 1954-55 and Rs. 4,412 related to 1953-54. Similarly, in the course of the assessment proceedings for the assessment year 1957-58, the Income-tax Officer found that the loss claimed by the assessee from the sugar mill business cannot be allowed as that business had become defunct even prior to the assessment year 1953-54. He was of the view that the loss from the sugar mill business had thus been wrongly allowed to the assessee in the assessment years 1953-54 and 1954-55. The Income-tax Officer, therefore, reopened the original assessment for the two years, 1953-54 and 1954-55, by issuing a notice under section 2....
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....eme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta. Aggrieved against the order of the Appellate Assistant Commissioner the revenue preferred appeals before the Appellate Tribunal. The Tribunal, however, took the view that the decision of the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies Dist. , Calcutta relied upon by the Appellate Assistant Commissioner was not applicable to the facts of the assessee's case and that, on the other hand, the decision of the Andhra Pradesh High Court in Pulavarthi Viswanadham v. Commissioner of Income-tax was applicable, and in that view held that, since the original assessments had been validly reopened under section 34(1)(a) on the ground of non-diclosure of interest received, the Income-tax Officer had acted well within his powers to make the assessments for these two years de novo including therein such items of income, as in his opinion, had wrongly escaped assessment at the time of the original assessments. The Tribunal, therefore, set aside the orders of the Appellate Assistant Commissioner and directed him to dispose of the appeals filed by the assessee on merits. Th....
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....erial facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) ....
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....s the basis for the issue of a notice. under section 34. The Punjab High Court held that it is permissible for the Income-tax Officer to include other items of escaped income in the assessment in addition to the item referred to in the notice under section 34, that it is not necessary that a notice under section 34 should specify the item of income or the source of that income which has escaped assessment and that it is no less a discovery when the actual omission is of some different kind to the supposed omission contemplated in the notice. According to the learned judges in that case the word "such" occurring in the expression "assess or reassess such income, profits, gains, etc.", in section 34, has to be attributed to the last antecedent, namely, the escaped or under-assessed income, profits or gains without in any way further linking it with any particular escapement that was discovered in consequence of any definite information, that the word "such" particularises the immediately preceding antecedent and not everything that has gone before so that it could be confined to that escaped income which the Income-tax Officer had discovered in consequence of definite information. In....
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....come found to have escaped assessment. In K. E. M. Mohammad Ibrahim Maracair v. Commissioner of Income-tax this court held that the fact that the Income-tax Officer has reassessed the assessee's income once under section 34 does not prevent him from taking proceedings again under section 34 if he finds that another item of income has escaped assessment or has been under-assessed. Once the assessing officer has the power to invoke section 34 whenever he finds an item of income had escaped assessment, there is no reason as to why the Income-tax Officer should be disabled from including the items of income which have escaped assessment and which came to light in the reassessment proceedings which have been validly initiated by the issue of a notice under section 34. In V. Jaganmohan Rao v. Commissioner of Income-tax their Lordships of the Supreme Court had expressed : " Section 34 in terms states that once the Income-tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to, pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reas....
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....did not provide any time limit as regards cases falling under clause (a), but it provided a time limit for cases falling under clause (b). The contention of the learned counsel for the, revenue that once the reassessment proceedings have been validly initiated under clause (a), the time limit of four years provided for cases coming under clause (b) will not apply clearly overlooks the statutory distinction between cases falling under clauses (a) and (b). If that contention were to be accepted, the Income-tax Officer can always bring to charge items falling under clause (b) after the period of four years by initiating proceedings in respect of an alleged item of income falling under clause (a) and proceed with the reassessment of items falling under clause (b) in those reassessment proceedings. It is not a condition precedent that the items in respect of which proceedings were initiated under clause (a) should survive for conferring jurisdiction on the Income-tax Officer to assess other items of escaped income falling under clause (a) or under clause (b). Thus, the Income-tax Officer can virtually defeat the object of the provision in section 34 prescribing a period of four years be....
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....ny limitation as to time. This contention involves a fallacy and has no merit. The acceptance of such a contention would mean that what the revenue cannot do directly, it can do indirectly. The Income-tax Officer cannot directly issue a notice for reassessment in cases falling under clause (b) after the four year period. But those cases can be brought in indirectly by issuing a notice purporting to be under clause (a). Mr. Balasubrahmanyan, for the revenue, further contends that it is imperative on the part of the Income-tax Officer to include all items of escaped income falling either under clause (a) or (b) at the stage of the re-assessment proceedings without issuing separate notices, one for items falling under clause (a) and another for items failing under clause (b), that the entire escaped income which is before him at the stage of reassessment proceedings should be dealt with without postponing the reassessment in respect of the items falling under either of the clauses until the conclusion of the pending reassessment proceedings. To make the position clear he gives an instance : Suppose an Income-tax Officer initiates reassessment proceedings in respect of items falling u....
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....ses falling under section 34(1)(b) cannot be considered to be a period of limitation so as to create a vested right in the assessee. Even if this contention were to be accepted, the object of providing a time limit before which the proceedings are to be initiated cannot be overlooked. As pointed out by the Supreme Court in S. S. Gadgil v. Lal Co. at page 238, the period prescribed by section 34 for assessment may not be a period of limitation. However, the section in terms imposes a fetter upon the power of the Income-tax Officer to bring to tax escaped income. It prescribes different periods in different classes of cases for enforcement of the right of the State to recover tax. The learned counsel for the revenue cited various decisions to show how the machinery sections in a taxing statute have to be understood and contended that the interpretation of a machinery section should be such as to fully effectuate the charging section. There cannot be two opinions on this. The machinery section in a taxing statute is intended to make the charging section workable, that is, ut resmagis valeat potius quam pereat. But, even in interpreting a machinery section in a reasonable and workable....
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....sessment occurred in spite of there having been no such omission or failure. The practical consequence of the presence of such omission or failure in one case, and the absence thereof in the other is that, in the first case, the period within which the notice contemplated by the section can be issued is longer. I do not see how that difference makes it necessary or imperative that the notice itself must specify under which of the two clauses of the section it is being issued.... It is true that when answering a notice issued under the section, the assessee may take a plea of limitation and for the purpose of such a plea, it may be necessary for him to know whether his case is being treated as one under clause (a) or as one under clause (b). It appears to me, however, that whether the case is treated as coming under one clause or the other will transpire in the course of the assessment proceedings and it is neither required of the Income-tax Officer, nor is it necessary, that he should specify the clause in the notice itself.... Whether or not there had been an omission or failure to disclose income, the fact that the income had escaped assessment will remain and if the income which....