1962 (7) TMI 61 - HC - Income Tax

Summary

Issues Involved:
1. Validity of proceedings initiated under section 34(1)(a) of the Indian Income-tax Act for the assessment year 1945-46.
2. Jurisdiction of the Income-tax Officer to ignore a voluntary return filed by the assessee after the statutory period and initiate proceedings under section 34(1)(a).

Detailed Analysis:

1. Validity of Proceedings Initiated under Section 34(1)(a):
The primary question was whether the proceedings initiated under section 34(1)(a) for the assessment year 1945-46 and the subsequent assessment were legally valid. The assessee was initially assessed for the year 1946-47, and later, in 1953, the Income-tax Officer initiated inquiries about a draft of Rs. 66,000 taken by the assessee in 1944. The Income-tax Officer issued a notice under section 34(1)(a) on 29th July 1953 for the assessment year 1945-46, following the assessee's voluntary return filed on 20th May 1953, which showed a loss of Rs. 3,418. The assessee did not initially contest the jurisdiction of the Income-tax Officer under section 34(1)(a) but later appealed, arguing that the proceedings were invalid.

2. Jurisdiction of Income-tax Officer to Ignore Voluntary Return:
The assessee's contention, which was upheld by the Appellate Assistant Commissioner and the Tribunal, was based on the Supreme Court decision in Commissioner of Income-tax v. Ranchhoddas Karsondas. The argument was that since a voluntary return had been filed, the Income-tax Officer had no jurisdiction to initiate proceedings under section 34(1)(a). The Supreme Court had held that a return filed before assessment under section 22(3) could not be ignored, and any notice of reassessment under section 34 ignoring the return was invalid.

However, the High Court distinguished the present case from the Supreme Court decision by noting that the voluntary return in the current case was filed beyond the statutory period of four years from the end of the relevant assessment year. The Court emphasized that under section 34(3), the period for making an assessment order is generally four years, with certain exceptions. Since the voluntary return was filed after this period, it could not be considered valid for assessment purposes, and the Income-tax Officer had no jurisdiction to make an assessment based on it without initiating proceedings under section 34.

The Court also referenced the Madras High Court decision in S. Santosha Nadar v. First Additional Income-tax Officer, which supported the view that a voluntary return filed after the statutory period could not lead to a lawful assessment and had to be treated as non est in law. Consequently, the Income-tax Officer was justified in initiating proceedings under section 34(1)(a) after the statutory period had lapsed.

Conclusion:
The High Court concluded that the voluntary return filed by the assessee on 20th May 1953 was non est in law, and the Income-tax Officer was within his rights to initiate proceedings under section 34(1)(a) for the assessment year 1945-46. The proceedings and the subsequent assessment were therefore valid. The Court answered the referred question in the negative, ruling in favor of the department and awarding costs to be recovered from the assessee.