TaxTMI 
TaxTMI 
TaxTMI 
1966 (10) TMI 26
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....ncome-tax Officers. The seniormost Income-tax Officer used to be designated as Income-tax Officer, District I(2), and was treated as the Principal Income-tax Officer (hereinafter referred to as " the P.I.T.O."). Since there were a number of Additional Income-tax Officers, there was distribution of jurisdiction, and the case of the assessee fell within the jurisdiction of the 8th Additional Income-tax Officer, District I(2) (hereinafter referred to as " the A.I.T.O."), and, consequently, came up before him. On January 16, 1949, the A.I.T.O. started departmental proceedings with the object of taking proceedings under section 34, presumably because he considered the voluntary return declaring a loss of Rs. 330 as invalid. He, therefore, issued a notice under section 34 on February 23, 1950. In the meantime, on March 31, 1949, the assessee had filed another voluntary return for the same assessment year in respect of his income from military contracts before the P.I.T.O., and in this return he declared a loss of Rs. 11,33,940. The proceedings pending before the A.I.T.O. in pursuance of his notice dated 23rd February, 1950, came up before him on the 4th February, 1952. On that date, he p....
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....P.I.T.O., on 11th February, 1956, issued a fresh notice under section 34 to the assessee, and in pursuance of that notice, made an assessment on 2nd May, 1956. Against this assessment dated 2nd May, 1956, there was an appeal to the Appellate Assistant Commissioner challenging the assessment on various grounds, one of which was that the notice dated 11th February, 1956, was invalid, because the proceedings instituted on the notice under section 34 dated 23rd February, 1950, were still pending, and while those proceedings had not terminated, another fresh notice under section 34 could not be validly issued. A further ground was that if the notice dated 23rd February, 1950, is considered as still effective, when the assessment was made on 2nd May, 1956, that assessment was barred by time. These pleas were accepted by the Appellate Assistant Commissioner, but the Income-tax Appellate Tribunal, on appeal, reversed his decision and decided both the points against the assessee and in favour of the department. On an application under section 66(1), the Tribunal then referred the following two questions for the opinion of the Calcutta High Court : "(1). Were the notice under section 34 ....
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....under section 34 issued by the P.I.T.O. and the assessment based on it were valid in law. The only other question was whether the order of assessment dated 2nd May, 1956, made by the P.I.T.O. was barred by time. Neither of these questions enlarged the scope of the reference before the High Court so as to permit it to examine the validity of the notice dated 23rd February, 1950, and the court, therefore, was right in refusing to go into this question. In this appeal, consequently, we are only concerned with the correctness of the answer returned by the High Court to the two questions referred to it by the Tribunal. The answer given by the High Court to the two questions referred to it is clearly based on the view taken by that court that the order of the A.I.T.O. dated 4th February, 1952, did not terminate or put an end to the proceedings which were going on before him in pursuance of the notice under section 34 dated 23rd February, 1950, and it is the correctness of this view of the High Court, that has to be examined. Learned Solicitor-General, appearing on behalf of the Commissioner, urged before us that in interpreting the effect of the order made by the A.I.T.O. on the 4th ....
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....gs be also submitted to the P.I.T.O. He seems to have considered it unnecessary to do so, because his opinion was that, in the assessment proceedings going on before the P.I.T.O., the income to which the proceedings before him related would also be included, so that there was no need for any proceedings remaining in existence before him. The intention, thus, clearly was to drop the proceedings and not to continue them any further. Of course, he could have expressed his intention more clearly by saying that he was cancelling the proceedings before him, or was terminating them. We think that the learned counsel for the Commissioner has rightly contended that, in the circumstances of this case, the word " filed " should be interpreted as being equivalent to " disposed of ", so that after that order, no proceedings on the basis of notice dated 23rd February, 1950, remained pending before the A.I.T.O. In effect, therefore, what he did was to terminate the proceedings before him without making any order of assessment, on the ground that the order of assessment in respect of the income in question would be made by the P.I.T.O. in the proceedings before him. An order in language not cont....
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....(2) were still going on. Mr. A. K. Sen, on behalf of the assessee, urged before us that once proceedings had been started under section 34 by issue of the notice dated 23rd February, 1950, the proceedings brought into existence could not be dropped, because the scheme of the Income-tax Act is that such proceedings must end in some final order of assessment, even though that order may be to the effect that there is no taxable income and no tax is determined as payable. He relied on a decision of the Bombay High Court in P. T. Anklesaria v. Commissioner of Income-tax in which the Income-tax Officer received a voluntary return, though without any notice under section 22(2), issued a notice under section 23(2), and, again, after obtaining the permission of the Commissioner to issue a notice under section 34, he issued a notice under section 23(2), and failed to issue any notice under section 34. Thereafter, the Income-tax Officer made the following order: " Return has been filed under section 34 claiming a loss of Rs. 74,140 only. Since I find that no income has escaped assessment, proceedings under section 34 are dropped. " In these circumstances, the High Court held that as the....
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..... " We are unable to accept the view of the High Court that an order of transfer could not have been made unless some specific proceeding for assessment of the assessee to tax was actually pending. The Explanation to section 5(7A) makes it clear that the word " case ", in relation to any person whose name is specified in the order of transfer means all proceedings under the Act in respect of any year which may be pending on the date of the transfer, and also includes all proceedings under the Act which may be commenced after the date of the transfer in respect of any year. The word " case " is thus used in a comprehensive sense of including both pending proceedings as well as proceedings to be instituted in future. Consequently, an order of transfer can be validly made even if there be no proceedings pending for assessment of tax and the purpose of the transfer may simply be that all future proceedings are to take place before the officer to whom the case of the assessee is transferred. In the present case, the proceedings on the notice dated 23rd February, 1950, had already been terminated by the A.I.T.O. by his order directing that the case be filed. Consequently, the effect of t....