1961 (12) TMI 112 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice issued under section 34 of the Indian Income-tax Act.
2. Applicability of the second proviso to sub-section (3) of section 34 as amended in 1953.
3. Applicability of sub-section (4) of section 34 as introduced by the amendment in 1959.
4. Jurisdiction of the Appellate Assistant Commissioner in directing the Income-tax Officer to take action for a different assessment year.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under section 34 of the Indian Income-tax Act:
The appellant challenged the validity of the notice issued on 19th January 1960, under section 34 of the Indian Income-tax Act, on the ground that it was barred by limitation. The notice required the appellant to file a return of income for the assessment year 1942-43, following an earlier direction by the Appellate Assistant Commissioner. The Income-tax Officer had issued this notice after obtaining the necessary satisfaction from the Commissioner of Income-tax, Calcutta.

2. Applicability of the second proviso to sub-section (3) of section 34 as amended in 1953:
The respondent argued that the notice was saved from the bar of limitation by the second proviso to sub-section (3) of section 34, as amended in 1953. This proviso states that the time limit for taking action or making an order of assessment or reassessment does not apply when it is to give effect to any finding or direction contained in an order under specified sections. The court noted a divergence of views between the Madras High Court and the Allahabad High Court on whether an Appellate Assistant Commissioner could direct the Income-tax Officer to take steps for assessment of income accruing in a different assessment year. However, the court held that the second proviso of section 34(3) as amended in 1953 did not apply to the facts of the present case, rendering the point irrelevant.

3. Applicability of sub-section (4) of section 34 as introduced by the amendment in 1959:
The court found in favor of the income-tax department, holding that sub-section (4) of section 34, introduced by the 1959 amendment, took the matter outside the bar of limitation. This sub-section allows a notice under clause (a) of sub-section (1) to be issued at any time, even if the period of eight years specified had expired. The appellant argued that sub-section (4) should be read subject to the period of limitation provisions in sub-section (1), but the court disagreed. The court clarified that sub-section (4) was intended to have retrospective operation, covering cases where the right to issue notice had become barred before the 1956 amendment. Therefore, the notice issued on 19th January 1960 was valid and not barred by limitation.

4. Jurisdiction of the Appellate Assistant Commissioner in directing the Income-tax Officer to take action for a different assessment year:
The court examined whether the Appellate Assistant Commissioner had the jurisdiction to direct the Income-tax Officer to assess the sum for a different assessment year. Citing precedents from the Allahabad High Court, the court noted that an appellate authority's powers are limited to the proceeding before it and do not extend to directing actions for different years. The court found that the direction given by the Appellate Assistant Commissioner to assess the sum for the year 1942-43 was outside the scope of his jurisdiction. However, the court did not express a definite opinion on this point, as it was unnecessary for the disposal of the appeal.

Conclusion:
The court dismissed the appeal, holding that the notice issued on 19th January 1960 was valid and not barred by limitation. The judgment emphasized that sub-section (4) of section 34, introduced by the 1959 amendment, allowed the Income-tax Officer to issue notices for years that had become barred before the 1956 amendment. The court also highlighted the limitations of the Appellate Assistant Commissioner's jurisdiction in directing assessments for different years.