Balchand v. Income-Tax Officer, Sagar

Shah, J. The Income-tax Officer, Sagar, asse>sed the appel-lant to pay under s. 23 ( 3) of the Income-tax Act, 1922, tax on his income coniputed for the assessment years 1945-46 and 1946-47. On June 24, 1959, the Income-tax Officer issued a notice of reassessment under s. 34 of the Income-tax Act, 1922, !.tciting that the income of the appellant had escaped assessment and requiring the appellant to submit a return of his total world income assessable for the year ending March 31, 1946. On August 17, 1959, the appellant filed a return for the assessment of his income for the year 1946-4 7. The appellant was informed by the Income-tax Officer that he was called upon to submit a return of bis income for the assessment year 1945-46 and not for the assessment year 1946-4 7. The appellant on March 22, 1960, filed a fresh return for the assessment year 1945-46 admitting that he had "misunderstood the notice" served upon him. In his return he admitted that he had a third share in a firm styled "Sheoprasad Shobharam". On March 14, 1963, the Income-tax Officer issued another notice under s. 148 of the Income-tax Act, 1961, calling upon the appellant to submit a return of his income for the assessment year 1946-4 7 on the ground that income of the appellant had escaped assessment. The appellant then moved the High Court of Madhya Pradesh for an order quashing the notices dated June 24. 1959 and March 14, 1963, and for a writ ·of mandamus or prohibition restraining the Income-tax Officer from continuing the proceedings of !lSsessment under the two notices. The High Court rejected the writ petition. Against the order of the High Court, the appellant has appealed to this Court with special leave.

The appellant contended that by the notice dated June 24, 1959, he .was called upon to file a return for the assessment year l 9~6-4 7 and initiation of proceedings on that notice for reassess-ment of income for the assessment year 1945-46 was incompetent. In the preamble of the notice it is recited : "Whereas I have rea-son to believe that your income assessable to mcome-cax for the assessment year 1946-47, 1945-46 has-(a) escaped assessment .... , I chcrefore propose to assess the said income", but in the body of !he notice it is clearly rcClted that the appellant was called upon co deliver a return of his total world income assess-able for the year ending March 31, 1946. A demand for return of income assessable for the year ending March 31, 1946 could obviously b.:: for the assessnlcnt year 1945-46 and not for 1946-47. By his letter dated March 22, I 960, the appellant admitted that he was called upon to file a return for the assessment year 1945-46 and he had "misunderstood" the notice and had filed a return for the assessment year 1946-4 7. There was apparently some negligence in drawing up the preamble to the notice, but that does not affect the validity of the notice, for the appellant was clearly informed that he had to file a return for the year end-ing March 31, 1946.

TI1e appellant then contended that in any event on August 17. 1959, the appellant had submitted a return for the assessment year 1946-47 and even if no notice for assessment year 1946-47 calling upon him to submit a return for that year was issued, a notice under s. 34 of the Income-tax Act, 1922, or under s. 148 of the Income-tax Act, 1961, was incompetent so long as the return submitted by the appellant in August 1959 for the assessment year 1946-47 was not considered and disposed of. Reliance in sup-port of this contention was placed upon two decisions of this Court : Commissioner of Income-tax v. Ranchhoddas Karson-das(') and Commissioner of Income-tax v. S. Raman Chettiar(').

Under s. 22 (I ) of the Income-tax Act, 1922, the Income-tax Officer was required before the 1st day of May in each year to give notice, by publication in the press and by publication in the prescribed manner. calling upon every person whose total income during the previous year exceeded the maximum amount not chargeable to income-tax to furnish, within such period not being less than sixty days as may be specified in the notice, a return in the prescribed form. Suh-section (2) authorised the Income-tax Officer to serve a notice upon any person whose total income was in the opinion of the Income-tax Officer of such an amount as to render such person liable to income-tax, requirin~ him to furnish within such period, not heing less than thirty days, as may be specified in the notice, a return of his total income during the previous year. Sub-section (3) provided :

"If any person has not furnished a return within the . tim~ allowed by or under sub-section (I) or sub-section ~~- (l) 36 1.T.R. 569. (2) 55 l.T.R 630.

(2) or having furnished a return under either of those sub-~tions, discovers any omission or wrong s~te­ ment therein he may furnish a return or a reVJSed return, as th~ case may be, at any time before the assess-ment is made."

Section 34 of the Act authorised the Income-tax Officer to serve a notice on tht< assessee for assessment or reassessment if- ( a) the Income-tax Officer had reason to believe that by reason of the omission or failure on the part of an ass~ssee to make a return of his income under s. 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been underassessed, or assessed at too low a rate, or have been made the subject of exces-sive relief under the Act, or excessive loss or depreciation allow-ance has been computed, or if (b) in cases not mentioned in cl. (a) the Income-tax Officer had in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax hljd escaped assessment for any year, or had been under-assessed, or assessed at too low a rate, or had been made the subject of excessive relief under the Act or that excessive loss or depreciation allowance had been computed, and co proceed to reassess the income of the assessee.

The appellant was already assessed to income-tax for the years 1945'46 and 1946-47 undejr the Act of 1922. Counsel for the appellant concedes that the appellant did not comply with the notice dated June 24, 1959, and filed first a return for the assess-ment year 1946-4 7 and thereafter a return for the assessment year 1945-46. He, however, submits that even if the return was not demanded, since the return for 1946-4 7 was filed by the appellant thet Income-tax Officer was bound to consider that return accord-ing to law and to pass appropriate orders of assessment thereon and so long as he did not do so, he was incompetent to issue a notice of reassessment either under s. 34 of the 'Income-tax Act of 1922, ors. 148 of the Income-tax Act, 1961. We are unable to accept that contention. The Act does not provide for any machinery for dealing with voluntary returns filed by an assessee after assessment of income for the year of assessment is complet-ed. Such a voluntary return does not. operate as a bar to the Income-tax Dfficer issuing a notice of reassessment.

This Court has held in Ranchhoddas's case(') that 'where no return has been filed by ihe assessee within the period prescribed bys. 22(1) of the Income-tax Act, 1922, the assessee.is entitled in law to submit a voluntary return in answer, to the general notice unJler s. 22 ( 1) before assessment is completed, for a return in

(l) 36 I.T.R. 569.

Ll3Sup.Cl/68'--l4 answer to the general notice can under s. 22 (3) be filed at any 11me before assessment and for filing such a return there is no limit of time, and when such a voluntary return is filed, the In-come-tax Officer cannot ignore that return voluntarily filed and issue a notice of reassessment under s. 34 of the Income-tax Act, 1922. A notice of reassessment before the voluntary return is disposed of is therefore invalid. But the principle of Ranchhod-das's case (1) only applies to cases where no assessment of the income of the assessee has been made. Where the income of the assessee has been assessed to tax, it is not open to the asscssec on coming to learn or appreh~nding that proceedings under s. 34 of the Act will be taken against him to lile a voluntary return and avoid the issue of a notice under s. 34 against him. In S. Raman Chettiar's case(2) also a Hindu undivided family had not filed any return for the assessment year 1944-45. The Income-tax Officer issued a notice under s. 34 of the Indian Income-tax Act, 1922, in April 1948 calling upon the a'iSessec to file a return of income, and the asscssce complied with the notice and filed a return on September 4, 1948. In the course of the proceeding, it wa~ dis-covered that the notice under s. 34 was invalid, because the Com-missioner's sanction was not obtained. The Income-tax Officer '.,. then issued a fresh notice on February 27, 1953, in respect of the assessment year I 944-45 and passed an order of assessment in respect of the income which had not been assessed. Thi.~ Court held that the return submitted on September 4, 1948, by the asses.o;ee in response to the invalid notice under s. 34 was a return within the meaning of s. 22 ( 3) of the Act, and the Income-tax Officer could not ignore it and issue a notice under s. 34 on the ao;sumption that there had been omission or failure by the assessee to make a return of his income under s. 22, and on that account the assessment under s. 34 was invalid. In that case also no return had been filed by the asses.<;ee pur.mant to s. 22 and no order of asses.sment of the income of the assessee for the year 1944-45 was recorded. The principle of Ranchhoddas's case(1) and S. Raman Chettlar's case(') has, in our judgment, no applica-tion to cases where a return has been filed by the asses.see and assessment made and thereafter apprehending proceedings under s. 34 of the Indian Incorru>-tax Act, 1922, the a'>SCSseo files an-other return. Unless a notice of reass=ent is issued by the Income-tax Officer, the assesSee cannot after an order of =s-ment is made submit a return of his income for the year for which he is already assessed and call upon the Income-tax Officer to assess his income. Such a proceeding would be futile. It is true that a notice under s. 34 is also a notice of asse.'iSment, but rely-ing upon s. 22(3) the asscssee 111ay furnish a ~evised return to rectify an omission or wrong statement. or furnish a return p~r-suant to a requisition under s. 34 : he cannot seek to rectify his return on which assessment has already been made.

The return filed on August 17, 1959, therefore, did not de-prive of the Income-tax. Officer of his jurisdiction to start proceed-ings under s. 34 of the Indian Income-tax. Act, 1922, against the assessee. There i< no dispute that after the repeal of the Act of 1922, it was competent to the Income-tax Officer to issue a notice .... under s. 148 of the Income-tax Act, 1961, for assessment of the

income of the assessee if no proceeding for assessment had been commenced prior to April 1, 1962.

The appeal fails and is dismissed with costs.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 640 of 1966.

Appeal by special leave from the judgment and order dated September 2, 1965 of the Madhya Pradesh High Court in Misc. Petition No. 92 of 1964.

N. D. Karkhanis, and A. G. Ratnaparkhi, for the appellant. D. Narsaraju and R. N. Sachthey, for the respondent.