1965 (12) TMI 139 - HC - Income Tax

Summary

Issues:
1. Limitation in respect of action taken by the Revenue under S. 34(1)(a) of the Income Tax Act 1922.
2. Validity of the proceedings initiated under section 34(1)(a) of the act against the assessees.
3. Interpretation of Section 4 of Central Act I of 1959 regarding the bar of limitation.

Analysis:

Issue 1:
The case involved a question of limitation concerning action taken by the Revenue under S. 34(1)(a) of the Income Tax Act 1922. The original assessment for the year 1948-49 was made on 30-9-1948, but due to discrepancies in the income declared, a notice under S. 34(1)(a) was issued on 9-2-1957. The validity of this notice was challenged, leading to subsequent legal proceedings and a fresh notice being served on all legal representatives on 9-7-1958. The assessing officer determined a sum of Rs. 40,000 as chargeable to tax.

Issue 2:
The main issue in question was whether the proceedings initiated under section 34(1)(a) of the act against the assessees were valid in law. The legal representatives contended that the notice issued beyond eight years from the assessment year was out of time. The Tribunal, however, held that the notice was in time under the second proviso to sub-section(3) of S. 34. The reference was made to the High Court to determine the validity of the proceedings.

Issue 3:
The interpretation of Section 4 of Central Act I of 1959 was crucial in determining the bar of limitation. The section aimed to save notices issued under S. 34(1)(a) and assessments made in consequence of such notices from being called into question based on the expired time limit before the amendment in 1956. The court analyzed the retrospective effect of this section and concluded that it validated notices issued between 1956 and 1959, including the notice in this case issued on 9-7-1958, from the bar of limitation.

In conclusion, the High Court held that Section 4 of Act I of 1959 saved the notice issued on 9-7-1958 from the bar of limitation, thus upholding the validity of the proceedings initiated under section 34(1)(a) of the Income Tax Act 1922. The question referred to the court was answered against the assessees with costs.