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Validity of assessment order under Section 34 and the interpretation of Section 22(3) regarding voluntary return. Analysis: The judgment by the Bombay High Court, delivered by Chagla (CJ), addresses the challenge to an assessment order made under Section 34 of the Income-tax Act. The case involved a public notice issued under Section 22(1) for the assessment year 1945-46. The assessee voluntarily made a return on January 5, 1950, after the time limit for the public notice had passed. The Income-tax Officer issued a notice under Section 34 on February 27, 1950, assessing the sum of Rs. 59,026 as the assessee's income. The primary contention was whether the Department could resort to Section 34 after a voluntary return was made under Section 22(3). The court emphasized that Section 34 could only be invoked if no return was made or if income had escaped assessment after a return. Once a return was made, the Department had to assess based on that return, as per Section 23. The court rejected the Department's argument that the return made by the assessee was not valid under Section 22(3) because the income disclosed was not assessable. It held that the obligation to make a return arises upon receiving a notice, regardless of the assessee's view on assessability. The Department's failure to act promptly did not justify invoking Section 34 after a voluntary return had been made. The judgment cited a previous decision emphasizing that no notice under Section 34 is required when an assessee voluntarily files a return. Furthermore, the court found the assessment order invalid due to being made beyond the period of limitation prescribed by Section 34(3). The order was issued on February 26, 1951, four years after the last date for the income to be assessed. The court concluded by answering the questions in the negative, declaring the notice under Section 34 invalid, and directing the Commissioner to bear the costs. The judgment highlighted the importance of adhering to procedural requirements and statutory limitations in tax assessments to uphold the integrity of the tax regime.
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