TaxTMI 
TaxTMI 
1955 (4) TMI 1
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....4 was issued are as follows. The appellant had previously been assessed to tax on an income of Rs. 1,09,200 for the same year 1939-40 by an order dated the 22nd December, 1939, which was reduced on appeal by Rs. 31,315. That assessment was set aside by the Income-tax Appellate Tribunal on the 28th March, 1942, on the ground that the Indian Finance Act of 1939 was not in force during the assessment year 1939-40 in Chota Nagpur, which was a partially excluded area. On a reference by the Tribunal at the instance of the Income-tax authorities, the High Court of Patna agreed with this view, and pronounced on the 30th September, 1943, its judgment confirming the setting aside of the assessment. Meanwhile, the Governor of Bihar promulgated Bihar Regulation IV of 1942, which was assented to by the Governor-General on the 30th June, 1942. By this Regulation, the Indian Finance Act of 1939 (along with Finance Acts of other years with which we are not concerned) was brought into force in Chota Nagpur retrospectively as from the 30th March, 1939. The relevant portion of the Regulation was in the following terms: " The Indian Finance Act, 1939, shall be deemed to have come into force in the a....
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....ther the Income-tax authorities were right in holding that the cash credit items were secret profits. Both the points were decided against the assessee. On the assessee's application to refer both the points for the decision of the High Court, the Tribunal declined to make a reference as regards the second point but referred the first for the opinion of the Court in the following terms : " Whether in the circumstances of the case, the notice issued on 12th February, 1944, under section 34 of the Indian Income-tax Act was validly issued for the assessment year 1939-40 ? " The question was answered against the assessee by the High Court and hence this appeal before us. The assessee attempted to reopen the second question relating to secret profits before the High Court but the learned judges declined to allow it to be canvassed, since the Tribunal did not refer the question to them. We are, therefore, concerned in this appeal only with the question relating to the validity of the notice issued on the 12th February, 1944, under section 34 of the Act. It is obvious that if this notice is found to be invalid the assessee would get relief for the entire amount including the amount of....
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....s not, as a fact, chargeable to income-tax during the assessment year 1939-40. It is said that in any case there can be no question of the income having escaped assessment because, as a fact, the Income-tax authorities did proceed to assess the income and that what happened is that the proceedings became infructuous by reason of the High Court having pronounced them to be void. It is also contended that there is no question of discovery of any relevant factor information, because the non-assessment of the income of the assessee for the period in question was in spite of all the information relating to the income of the assessee having been previously furnished and being in the possession of the Income-tax Officer as would appear from the order of the Officer dated the 22nd December, 1939. It is convenient to deal with this last objection in the first instance. It may be true that all the information relating to the relevant income of the assessee which is now sought to be taxed was in the possession of the Income-tax Officer in the year 1939 itself when the return was submitted in compliance with the notice under section 22(2) of the Act then issued. But what was required under s....
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....sioner of Income-tax, Madras ; and Raja Benoy Kumar Sahas Roy v. Commissioner of Income-tax, West Bengal) have been cited before us to show how the phrase "definite information" and the word "discovery" used in this section have been interpreted, by the various High Courts. It is unnecessary to deal with these cases at any length. There is here no question as to any new subjective facts such as change of opinion consequent on a correct appreciation of law by the very same, or another, or higher officer that is pressed into service as bringing about "definite information" and "discovery." We are quite clear that the promulgation of the Regulation and the decision of the High Court are objective facts, information regarding which became available to the Income-tax Officer when he passed the order dated the 8th February, 1944, and it is only when these facts came to his knowledge, that the Income-tax Officer can be said to have discovered that chargeable income escaped assessment in the relevant year. The main question that requires consideration in this case is whether, on the facts, it can be said that "income chargeable to income-tax has escaped assessment in the relevant year." ....
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....s of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually. " It is by virtue of this section that the actual levy of the tax and the rates at which the tax has to be computed is determined each year by the annual Finance Acts. Thus, under the scheme of the Income-tax Act, the income of an assessee attracts the quality of taxability with reference to the standing provisions of the Act but the payability and the quantification of the tax depend on the passing and the application of the annual Finance Act. Thus, income is chargeable to tax independent of the passing of the Finance Act but until the Finance Act is passed no tax can be actually levied. A comparison of sections 3 and 6 of the Act shows that the Act recognises the distinction between chargeability and the actual operation of the charge. Section 6 says "save as otherwise provided by this Act, the following heads of income, profits and gains shall be chargeable to income-tax in the manner hereinafter appearing, etc."....
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....e assessment proceedings became infructuous on account of the decision of the Income-tax Appellate Tribunal setting aside the same and the High Court agreeing with it. He contends that, in the circumstances, this is no more than a failure of the assessment proceedings but that it is not an escapement from assessment. He relied upon the Privy Council case in Sir Rajendranath Mukherjee v. Commissioner of Income-tax, Bengal, where their Lordships say that " the expression 'has escaped assessment' cannot be read as equivalent to 'has not been assessed' " and that "such a reading gives too narrow a meaning to the word 'assessment' and too wide a meaning to the word 'escaped' ". Learned counsel for the respondent relies on a number of subsequent cases of the various High Courts Madan Mohan Lal v. Commissioner of Income-tax, Punjab ; Commissioner of Income-tax, Bombay v. Pirojbai N. Contractor ; and Kunwar Bishwanath Singh v. Commissioner of Income-tax, C.P.) which have explained this decision of the Privy Council and pointed out that the particular passage in that judgment which is relied upon had reference to the facts of that case, viz., the proceedings by way of initial assessment bei....