1950 (3) TMI 30 - HC - Income Tax

Summary

Issues Involved:
1. Non-compliance with the terms of the notice under Section 22(2) due to the absence of profit and loss account and balance-sheet.
2. Validity of assessment under Section 23(4) when the Income-tax Officer issued a notice under Section 22(4) without issuing a notice under Section 23(2).

Detailed Analysis:

Issue 1: Non-compliance with Notice under Section 22(2)
The first issue concerns whether the return filed by the assessee was invalid due to the absence of profit and loss account and balance-sheet, justifying an assessment under Section 23(4). The court noted that the return was filed without the required documents, which the Income-tax Officer pointed out but did not rectify. The Tribunal held that the return was invalid, justifying an assessment under Section 23(4). However, the court disagreed, stating that a return missing some documents is not necessarily invalid. The court emphasized that the return is distinct from the profit and loss accounts and that minor omissions should be rectified through notices under Section 23(2) rather than treating the return as invalid. Therefore, the court concluded that the Income-tax Officer was not justified in making the assessment under Section 23(4) without issuing a notice under Section 23(2), answering the first question in the negative.

Issue 2: Validity of Assessment under Section 23(4) without Notice under Section 23(2)
The second issue pertains to whether an assessment under Section 23(4) is justified when the Income-tax Officer issued a notice under Section 22(4) without issuing a notice under Section 23(2). The court clarified that Section 22(4) allows the Income-tax Officer to require the production of accounts or documents, either before or after the return is submitted, and is not contingent on the issuance of a notice under Section 23(2). The court cited several cases supporting the view that non-compliance with a notice under Section 22(4) independently justifies an assessment under Section 23(4). The court concluded that the Income-tax Officer's action was valid, answering the second question in the affirmative.

Additional Point Raised by the Assessee
The assessee also requested the court to consider a third question regarding whether the non-issue of notice under Section 23(2) constituted "sufficient cause" for non-compliance with the notice under Section 22(4). The court declined to address this issue, stating that it was not referred by the Tribunal and that the assessee did not follow the proper procedure under Section 66(2) to have it considered. The court adhered to the principle that it could only address questions duly referred to it by the Tribunal.

Conclusion:
The court provided a comprehensive analysis of the issues, concluding that:
1. The return filed by the assessee, despite missing documents, was not invalid, and the assessment under Section 23(4) without issuing a notice under Section 23(2) was unjustified.
2. The assessment under Section 23(4) was valid due to non-compliance with the notice under Section 22(4), irrespective of the issuance of a notice under Section 23(2).