TaxTMI 
TaxTMI 
1973 (11) TMI 5
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....him he had no income which could be subjected to income-tax. Even though the petitioner did not file any return of income as demanded by the notice under section 22(2), no order on best judgment basis was passed by the Income-tax Officer under section 23(4) and no further action appears to have been taken in connection with that notice under section 22(2). On April 1, 1962, the Income-tax Act, 1961, came into force. On March 5, 1966, the Income-tax Officer issued a notice under section 148 of the Income-tax Act, 1961, calling upon the petitioner to file his return as in the notice under section 139(2) of the Act of 1961 and this was on the basis that income of the petitioner for the assessment year 1961-62 had escaped assessment. This notice was served on the petitioner on March 15, 1966. Nothing appears to have been done for nearly two and a half years, but on November 27, 1968, the Income-tax Officer issued a notice under section 142, sub-section (1), of the Act of 1961, calling for certain details from the petitioner regarding the assessment year 1961-62. On this, it was contended on behalf of the petitioner in reply to the said notice that the notice under section 148, dated Ma....
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....-tax Officer initiated reassessment proceedings by the notice dated March 5, 1966, the Income-tax Officer had no jurisdiction to reopen the assessment under section 147(a) of the Act and, therefore, there was no legal duty on the petitioner to comply with the notice issued in excess of jurisdiction, and hence he allowed the appeal and set aside the order of the Income-tax Officer. Against this order of the Appellate Assistant Commissioner ; two appeals were filed by the revenue before the Income-tax Appellate Tribunal and those appeals were pending when the present special civil application was filed in this court on April 28, 1970. Those two, appeals were decided by the Appellate Tribunal by orders dated April 19, 1971. Both the appeals were dismissed by the Appellate Tribunal and the finding of the Appellate Assistant Commissioner that the initiation of proceedings under sections 147 and 148 was bad in law was upheld and the Tribunal held that the assessment must be cancelled. As regards the appeal against the order of the Appellate Assistant Commissioner cancelling the Income-tax Officer's order under section 146, the Tribunal held that the orders of the Appellate Assistant C....
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....of reassessment and consequent assessment under section 34 ignoring the return is invalid. Section 34 of the Act of 1922 was in the same terms as sections 147 and 148 of the Act of 1961 and, therefore, in view of this decision it is obvious that once the proceedings have been initiated either by the assessee filing a voluntary return or by the Income-tax Officer issuing notice under section 22(2), those proceedings cannot be ignored by the Income-tax Officer and any notice for reassessment would be invalid and, consequently, the assessment order in such purported reassessment proceedings would also be invalid. The Supreme Court also there held that a return in answer to the general notice under section 22(1) of the Income-tax Act could, under section 22(3), be filed at any time before assessment and for this there was no limit of time. At page 575 of the report, Hidayatullah J., as he then was, delivering the judgment of the Supreme Court, observed : "It is a little difficult to understand how the existence of a return can be ignored, once it has been filed. A return showing income below the taxable limit can be made even in answer to a notice under section 22(2). The notice und....
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....'voluntary' return on the last day showing income less than the taxable limit, and the department would, in that case, be driven to complete the assessment proceedings within a few hours or lose the right to send a notice under section 34(1). An argument ab inconvenienti is not a decisive argument. The Income-tax Officer could have avoided the result by issuing a notice under section 23(2) and not remaining inactive until the period was about to expire. Further, all laws of limitation lead to some inconvenience and hard cases. The remedy is for the legislature to amend the law suitably. The courts can administer the laws as they find them, and they are seldom required to be astute to defeat the law of limitation. This argument is thus no answer to the clear meaning and implications of the Act. Mr. Kaji pointed out that under the Act of 1922, the period of limitation for passing the assessment order was four years from the end of the assessment year in question and the same is the position under section 153 of the Act of 1961. Therefore, in the instant case the assessment order should have been passed by the Income-tax Officer on or before March 31, 1966. He further contended tha....
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....ent were dropped as infructuous. Later, in proceedings relating to the assessment year 1945-46, the Appellate Tribunal held that a sum of Rs. 46,760 was assessable in 1944-45, and thereupon the Income-tax Officer issued a notice under section 34 on February 27, 1953, in respect of the assessment year 1944-45, and passed an order on June 30, 1953, assessing the assessee to tax on an income of Rs. 51,523. The question before the Supreme Court was, whether the assessment under section 34 made on June 30, 1953, was valid. The Supreme Court held that the return dated September 4, 1948, submitted pursuant to notice under section 34 issued on April 3, 1948, was invalid, still it was a return within section 22(3) and the Income-tax Officer could not ignore or disregard that return and issue a notice under section 34 on the assumption that there had been an omission or failure on the part of the assessee to make a return of his income under section 22. Therefore, the assessment under section 34 completed on June 30, 1953, was invalid. Again, in Estate of Late A. M. K. M. Karuppan Chettiar v. Commissioner of Income-tax, the question came up before the Supreme Court and it held that notice....
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....not an order terminating the proceedings, with the result that there was no disposal of the voluntary returns submitted by the respondent-family for the assessment years 1950-51 to 1952-53. Ignoring those returns the Income-tax Officer could not issue notices of reassessment under section 34 and the reassessment proceedings for the three years were, therefore, invalid. Here also the Supreme Court referred to and applied the principles laid down in the decisions in Commissioner of Income-tax v. Ranchhoddas Karsondas, and Estate of Late A. M. K. M. Karuppan Chettiar. In B. R. Bamasi v. Commissioner of Income-tax, a similar problem arose before the Bombay High Court. The decision of the Division Bench was delivered by Mody, Actg. C.J., and at page 244 it has been pointed out that the assessee in that case had filed a voluntary return on March 28, 1952. Nonetheless, the Income-tax Officer issued a notice to the assessee under section 34(1)(a) on July 9, 1952 and then proceeded to assess the assessee under that section. The assessee raised before the Tribunal a contention that the notice under section 34(1)(a) having been issued in spite of the assessee having filed a return in prope....
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....see or by the action of the Income-tax Officer. The question next arises as to whether the expiry of the period of limitation prescribed by the relevant section of the Act of 1922 or the Act of 1961 would make any difference. Relying on the passage from the decision of the Supreme Court in Commissioner of Income-tax v. Ranchhoddas Karsondas, at page 576, which we have already cited, Mr. Kaji contended that the Income-tax Officer could have avoided the bar of limitation by issuing the notice under section 23(2) and not remaining inactive until the period was about to expire. He also pointed out that an argument ab inconvenienti is not a decisive argument as held by the Supreme Court in that passage and all laws of limitation lead to some inconvenience and hard cases and the Supreme Court had there held that the argument about bar of limitation was no answer to the clear meaning and implications of the Act. In Smt. Suniti Devi Jaipuria v. Income-tax Officer, K. L. Roy J. of the Calcutta High Court, sitting singly, has relied upon this passage from the decision of the Supreme Court in Commissioner of Income-tax v. Ranchhoddas Karsondas, and held that even if the return be filed ....
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....rder of assessment which is an important act in the process of taxation, other acts and steps adopted in the course of taxation are also included in the word ; but it is with this "most critical act in the process of taxation" with which they were concerned in the appeal. Then it was further contended before the Supreme Court on behalf of the assessee that the word "escaped" in "income escaping assessment" according to the Oxford English Dictionary meant "to elude (observations, search, etc.) ; to elude the notice of a person" ; and the contention was that it is only where income has not been returned for assessment that it can be reasonably said that income has escaped assessment. The dictionary meaning of the word did not support this contention according to the Supreme Court. According to the same dictionary, the word "escape" also meant "to get clear away from (pursuit or pursuer) ; to succeed in avoiding (anything painful or unwelcome)" ; so that judging by the dictionary meaning alone it would be difficult to confine the meaning of the word "escape" only to cases where no return has been submitted by the assessee. Even if the assessee has submitted a return of his income, cas....
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....rt, has observed : "The words 'escaping income' in the Indian Income-tax Act, 1922, were interpreted as being applicable to a case where a person received notice under section 22(2) of the Income-tax Act but the process ended in no assessment as to a case where there was no assessment at all because no notice was issued under section 22(2) of the Income-tax Act ; in other words, it includes cases where the process of assessment did not commence because no notice was given under section 22(2) of the Income-tax Act due to inadvertence, oversight, negligence or any other cause as to cases where such notice proved abortive or ineffective. Both are cases of escaped assessment." In this connection the Supreme Court referred to the case of Commissioner of Income-tax v. Pirojbai N. Contractor, and also to its own earlier decision in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax. The words "escaping income", according to the Supreme Court, had been interpreted to comprise a case of no notice being given for the assessment and notice being given and resulting in no assessment and ultimately after reviewing the authorities, the Supreme Court held that in those cases the words ....
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....ring the income to assessment by exercising his powers under section 23. If he cannot, either because the assessment order under section 23 has been made and is, therefore, final, so far as he is concerned or, although no assessment order has been made, he is precluded from making an assessment because of the bar of limitation, income which was liable to assessment must be said to have escaped assessment. We thus find support for our conclusion in this decision of the Allahabad High Court. In view of these conclusions of ours, it is clear that at least as regards the notice issued on March 18, 1970, which was received by the assessee on March 20, 1970, income for the assessment year 1961-62 had escaped assessment even though it had so escaped assessment because after March 31, 1966, the Income-tax Officer was precluded by the bar of limitation from passing any assessment order for that particular year. It is true, as has been emphasized by Mr. Kaji on behalf of the petitioner, that the proceedings had in fact been initiated by the Income-tax Officer concerned by issuing the notice under section 22(2) on March 22, 1962. But, for reasons best known to himself, instead of completin....