TaxTMI 
TaxTMI 
1959 (5) TMI 18
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.... not make a return of his income. The Income-tax Officer, while examining the books of account of a partnership called the "Assar Syndicate" of which the assessee was a partner, found that in the account year corresponding to the assessment year 1945-1946, there were six cash credits aggregating to Rs. 59,026 in the name of the assessee's wife, Before, however, the Income-tax Officer could take any action, the assessee submitted a "voluntary" return on January 5, 1950, of his income for the accounting year 1944-1945 (assessment year 1945-1946) showing a total net income of Rs. 1,935. He added a footnote to the return to the following effect : "My wife has sold her old ornaments and deposited the sum of Rs. 59,026 in the firm of Assar Syndicate in which I am a partner." The Income-tax Officer did not act on this return, but on February 27, 1950, he issued a notice purporting to be under section 34 of the Act calling upon the assessee to submit his return. This notice was served on the assessee on March 3, 1950, and in answer thereto, the assessee submitted a similar return on March 74, 1950, showing the same income and adding the same footnote. The Income-tax Officer then issued....
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....essment. The other alternative for the Department was to issue a notice under section 34 of the Act, if the period for sending a notice under section 22(2) had expired. But it could not issue a notice, under section 34 after a return was already made before it, and the benefit of the extended period of limitation or assessment available under the first proviso to sub-section (3) of section 34 of one year from the service of the notice under sub-section (1) of that section was not available in this case. The High Court granted a certificate of fitness, and hence this appeal. The arguments which were urged before the High Court were all raised in this court by the parties. The case of the Department was supplemented by an argument that, inasmuch as the assessee had suppressed his income or given incorrect particulars thereof, the period during which action under section 34 could be taken was the extended one of 8 years. In the arguments before us, our attention was drawn to a cleavage of opinion between the Bombay High Court on the one hand and the Calcutta High Court on the other. While the Bombay High Court seems to be of the view that a "voluntary" return showing a non-taxable....
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....within the time therein limited. This takes us to section 34(1). Section 34(1), omitting parts not relevant, reads : "(1) If-- (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22, for any year....,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,... 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,... a notice... and may proceed to assess or reassess such income..." It would appear from this that if the return filed on January 5, 1950, was a return of income, there was no failure or omission on the part of the assessee, so as to bring the matter within section 34(1)(a) of the Act, and sub-section (3) of section 34 would then apply to the case limiting the period to four y....
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....re has been in the past a well-marked difference of opinion between the Bombay and the Calcutta High Courts, the leading cases in Bombay being Harakchand Makanji & Co. v. Commissioner of Income-tax, All India Groundnut Syndicate Ltd. v. Commissioner of Income-tax and the decision under appeal here, while the Calcutta view is to be found in Commissioner of Agricultural Income-tax v. Sultan Ali Gharami, R. K. Das & Co. v. Commissioner of Income-tax and Commissioner of Income-tax v. Govindalal Dutta. To these may be added P. S. Rama Iyer v. Commissioner of Income-tax, in which the Madras High Court has accepted the Bombay view. No useful purpose will be served in discussing these cases in detail. In some of them, the point need not have been taken up for decision, though it was. We shall refer very briefly to the two rival views and the grounds on which they are rested, and in doing so, we begin with the Calcutta decisions. In Sultan Ali Gharami's case, a notice under section 24(1) of the Bengal Agricultural Income-tax Act (corresponding to section 22(1) of the Act) was issued. No return was filed. Three years later, a notice under section 24(2) of that Act (corresponding to section....
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.... an income below the taxable limit could not be held, on a construction thereof, to be a return under section 24(1) and consequently the return in the case we were then considering could not be treated as such a return filed under section 24(3). To say that, was not to say that even a return filed in compliance with a notice under section 22(2), if filed belatedly under section 22(3), could not be a return showing an income below the taxable limit." This left the matter somewhat ambiguous as to what was really meant, and in Commissioner of Income-tax v. Govindalal Dutta, Chakravartti, C.J., and Guha, J., again explained the true import of the law laid down. They referred to section 22(1) of the Act as it stood prior to the amendment of 1953, and observed that under that section a person was required to file a return only if his total income during the preceding year exceeded the maximum amount which was not chargeable to tax. The return contemplated was thus only a return of income and not a return of loss and not even a return of income, but a return of taxable income. Not only had a person no duty but he had even no right to file a return voluntarily, if he had suffered a loss,....
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....n the earlier of the two Bombay cases Chagla, C.J., and Tendolkar, J. held (as stated in the headnote) : "Notice under section 34 is only necessary if at the end of the assessment year no return has been made by the assessee and the authorities wished to proceed under section 22(2), but, where the assessee himself chooses voluntarily to make a return, no question can arise under section 34 of assessment escaping and therefore there is no necessity to serve any notice under section 34." This represents the law applicable to the facts as they are to be found in this case. In the assessment year no return of income was filed, nor was any notice served under section 22(2). There was, however, the general notice under section 22(1). A return in answer to that notice could be filed under section 22(3) before assessment, and for this there is no limit of time. It was filed on January 5, 1950. There was nothing to prevent the Income-tax Officer from taking up the return and proceeding to assess the income of the assessee. It was open to him, if there was sufficient justification for it, to hold that the amount noted in the footnote was really the assessee's income, in which case an ass....