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TaxTMI 
TaxTMI 
TaxTMI 
1964 (2) TMI 3
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....the certificate issued by it that the firm and its partner have come to this court in appeal. The Writ Petitions Nos. 335-345 of 1960 have been filed by the same parties in this court under article 32 of the Constitution in respect of the notices served on them on the 19th March, 1956, and the order of excess profits tax levied on them. In those petitions, the same point is urged by the parties, and that is that the notices are invalid, because section 34(1A) is itself ultra vires. The respondents to the appeals are : the Commissioner of Income-tax, U. P., Lucknow, and the Income-tax Officer, Central Circle IV, Delhi. The respondents to the writ petitions are : the Income-tax Officer, Central Circle IV, New Delhi, the Income-tax Officer, " A " Ward, Meerut, the Commissioner of Income-tax, U. P., Lucknow, and the Central Board of Revenue, New Delhi. Civil Appeal No. 589 of 1963 has been brought to this court in similar circumstances by the appellant, M/s. Bhawani Prasad Girdharlal. The appellant had challenged the validity of the notices issued against it on the 16th August, 1955 under section 34(1A) of the Act. The writ petition filed by the appellant has been dismissed by the Al....
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....to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance ; 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. " Let us now read the relevant portion of section 34(1A). This provision lays down, inter alia, that if, in the case of any assessee, the Income-tax Officer has reason to believe : " (i) that income ... has escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946 ; and (ii) that the said income... amounts, or is likely to amount, to one lakh of rupees or more, he may, notwithstanding that the period of eight years or, as the case may be, four years specified in sub-section (1) has expired in respect thereof, 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) of section 22, and may proceed to assess or reassess the income, profits or gains of the ass....
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....f the Taxation on Income (Investigation Commission) Act, 1947, (50 of 1947), was struck down by this court as unconstitutional on May 28, 1954, in Suraj Mall Mohta v. A. V. Visvanatha Sastri. In that case, while examining the validity of section 5(4) of the Investigation Commission Act, this court held that the persons brought within the mischief of the said section belong to the same class of persons who fall within the ambit of section 34 of the Act and are dealt with by section 34(1), and in view of the fact that the procedure prescribed by section 5(4) of the Investigation Commission Act was very much less favourable to the assessees than the one available to them if action was taken against them under section 34(1), the conclusion reached was that the impugned section 5(4) was unconstitutional. It is unnecessary to refer to the several grounds mentioned by Mahajan C. J., who spoke for the court, in striking down the impugned section. After this judgment was pronounced, the legislature intervened and enacted section 34(1A). That, however, was not the end of the matter. When section 34(1A) was introduced in the Act, there remained two statutory provisions dealing with substant....
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....ssessees covered by section 34(1). Though the importance or significance of this consideration cannot be unduly emphasised, it cannot be said that this consideration is altogether irrelevant. We have already read the relevant portion of section 34(1A) and we have seen that it requires that a notice containing all or any of the requirements which may be included in the notice under section 22, sub-section (2), has to be issued. In other words, the notice which is required to be issued is, in terms, in a sense referable to section 22(2), because the legislature has provided that it must contain all or any of the requirements which would be included in such a notice. Then, section 34(1A) provides that after issuing the notice on the assessee in the manner prescribed by it, the Income-tax Officer may proceed to assess or reassess the income, profits or gains of the assessee for the relevant years. In the context, it would, we think, be reasonable to hold that the assessment or reassessment which has to follow the issue of the notice, must be assessment or reassessment in accordance with the relevant provision of the Act, and this is made very clear by the clause that follows, because....
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.... similar powers, because the authority to assess must itself include such powers as incidental to assessment. The best judgment assessment which is authorised by section 23(4) may, it is suggested, be made even in cases falling under section 34(1A) under the inherent authority of the Income-tax Officer. In our opinion, this approach is wholly misconceived. We are satisfied that it could not have been the intention of the legislature when it enacted section 34(1A) that the procedure prescribed by the relevant provisions of the Act beginning with section 22 should not be applicable to proceedings taken under section 34(1A), and that the procedure to be followed in the said proceedings and the powers to be exercised by the Income-tax Officers dealing with them should be what is vaguely described as " the inherent or incidental powers " of such officers. Therefore, we have no hesitation in holding that the challenge made to the validity of section 34(1A) on the ground that the remedy by way of appeals or revisions which is available to the assessees against whom proceedings are taken under section 34(1) is not available to the assessees who are covered by section 34(1A), cannot be sust....
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....tion is taken under section 34(1), or section 34(1A) in respect of that year. Once the notice is served under section 34(1) or section 34(1A), the rest of the procedure is just the same and all the remedies available to the assessees are also just the same. Therefore, we see no substance in the argument that the absence of the restriction as to period of limitation under section 34(1A) introduces any infirmity in the said provision. In the result, we must hold that section 34(1A) is valid and has not contravened article 14 of the Constitution. That is the effect of the majority view taken by the Allahabad High Court in Jai Kishan Srivastava v. Income-tax Officer, Kanpur. There is one minor additional point which has been argued before us by Mr. Setalvad in Civil Appeal No. 589 of 1963, and that point is based upon the requirement prescribed by the proviso to section 34(1A) that the Income-tax Officer shall not issue a notice unless he has recorded his reasons for doing so, and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice. The argument is that the requirement prescribed by the proviso constitutes a condition ....