1961 (9) TMI 66 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessment made on March 29, 1957, is barred by limitation according to the provisions of section 34(3) of the Indian Income-tax Act.
2. Whether the estimate of the income for the assessment year 1952-53 in a sum of Rs. 50,000 is sustainable in law.

Issue 1: Limitation of Assessment

The first issue pertains to whether the assessment made on March 29, 1957, is barred by limitation under section 34(3) of the Indian Income-tax Act due to the notice of demand being served on April 6, 1957. Section 34(3) stipulates that no order of assessment shall be made after the expiry of four years from the end of the year in which the income was first assessable. The assessee argued that the date of service of the notice (April 6, 1957) should be considered for limitation purposes, which would render the assessment barred by limitation. However, the court held that the relevant date is the date on which the assessment order was passed (March 29, 1957), not the date of service of the notice. The court found the language of section 34(3) clear and unambiguous, and thus, the assessment was within the prescribed period. The court rejected the assessee's reliance on the case of Swaminathan v. Lakshmanan, noting that it pertained to a different context under the Indian Registration Act. Therefore, the court answered this question against the assessee, concluding that the assessment was not barred by limitation.

Issue 2: Estimate of Income

The second issue concerns the sustainability of the income estimate of Rs. 50,000 for the assessment year 1952-53. Initially, the Income-tax Officer assessed the income at Rs. 75,000, which was reduced to Rs. 50,000 by the Appellate Assistant Commissioner and confirmed by the Income-tax Appellate Tribunal. The assessment was made under section 23(4) due to the assessee's failure to provide necessary documents and repeated adjournments. The Income-tax Officer based the assessment on available information, including the detention of one partner for black-marketing activities, news reports, and unauthorized purchases. Additionally, a letter from the other partner admitted to suppressed income of about Rs. 60,000, though it did not specify the years covered. The department also considered past assessments and a reported loss for 1950-51, which could indicate suppressed income. The assessee argued that the Tribunal's findings were based on suspicion and irrelevant material, citing Supreme Court decisions emphasizing that findings should not be based on conjectures or improper evidence. The court, however, noted that assessing authorities are not bound by strict rules of evidence and must make a fair estimate to the best of their judgment. The court found no dishonesty or capriciousness in the assessment and upheld the Tribunal's decision. Thus, the court answered this question against the assessee as well, affirming the income estimate of Rs. 50,000.

Conclusion

Both questions were answered against the assessee, with the court upholding the assessment date as within the limitation period and the income estimate as sustainable in law. No order as to costs was made in either case.