1963 (5) TMI 70 - HC - Income Tax

Summary

Issues Involved:
1. Legality and validity of notices issued under section 34 of the Income-tax Act of 1922 for assessment years 1951-52 and 1952-53.
2. The applicability of section 22(2A) of the Income-tax Act.
3. The validity of the voluntary returns filed by the petitioner-firm.
4. The necessity of a notice under section 34 when a return has been filed voluntarily.
5. The procedural handling of the returns by the Income-tax Officer.

Issue-wise Detailed Analysis:

1. Legality and Validity of Notices Issued Under Section 34 of the Income-tax Act of 1922:
This petition challenges the legality and validity of notices issued under section 34 of the Income-tax Act of 1922 for the assessment years 1951-52 and 1952-53. The petitioner-firm had filed returns for these years, which were initially rejected by the Income-tax Officer due to late submission. The notices under section 34 were issued on the grounds that the income assessable to income-tax for the assessment year 1951-52 had escaped assessment. The petitioner-firm argued that these notices were invalid as the returns had been submitted voluntarily and within the permissible period under section 22(3) of the Act.

2. Applicability of Section 22(2A) of the Income-tax Act:
The petitioner-firm contended that section 22(2A) of the Act, which pertains to the filing of returns for claiming the benefit of loss carry forward under section 24(2), was not applicable to their case. They argued that their returns were of a registered firm, and the partners had already declared their respective shares in their individual returns. The Income-tax Officer, however, maintained that the returns were filed under section 22(2A) and were therefore not entertained due to late submission.

3. Validity of the Voluntary Returns Filed by the Petitioner-Firm:
The court examined whether the voluntary returns filed by the petitioner-firm were valid under section 22(3) of the Act. The petitioner-firm had submitted these returns voluntarily, declaring a net loss, which the Income-tax Officer had ignored. The court referred to the Supreme Court's decision in Commissioner of Income-tax v. Ranchhoddas Karsondsa, which held that a return filed voluntarily before the assessment is valid and cannot be ignored. The court concluded that the returns filed by the petitioner-firm for the assessment year 1952-53 were valid and should not have been ignored by the Income-tax Officer.

4. Necessity of a Notice Under Section 34 When a Return Has Been Filed Voluntarily:
The court held that when a return is filed voluntarily under section 22(3), there is no necessity for a notice under section 34, as there is no question of assessment escaping. The court relied on the Supreme Court's ruling in Commissioner of Income-tax v. Ranchhoddas Karsondsa, which stated that a notice under section 34 is only necessary if no return has been made by the assessee at the end of the assessment year. Since the petitioner-firm had filed a return voluntarily, the notice under section 34 was deemed invalid.

5. Procedural Handling of the Returns by the Income-tax Officer:
The court scrutinized the procedural handling of the returns by the Income-tax Officer. It was found that no proper order was made regarding the return for the assessment year 1952-53, and the return was simply ignored. The court directed the production of files and additional affidavits to clarify the position. It was established that the Income-tax Officer had not made any decision on the return for the assessment year 1952-53, and the return was ignored without any proper order. Consequently, the notice under section 34 for the assessment year 1952-53 was quashed.

Conclusion:
The court quashed the notice under section 34 of the Income-tax Act for the assessment year 1952-53, as it was found to be invalid due to the voluntary filing of the return by the petitioner-firm. The court did not find it necessary to address the issue of the partnership firm's dissolution, as the decision on the first point was sufficient to resolve the matter. There was no order as to costs.