1938 (3) TMI 24 - HC - Income Tax

Summary

Issues:
1. Non-compliance with terms of notice under sub-section (4) of Section 22
2. Legality of assessment by Income Tax Officer and Assistant Commissioner under sub-section (4) of Section 23 based on the same material in the account books

Detailed Analysis:

Issue 1: Non-compliance with terms of notice under sub-section (4) of Section 22
The petition sought a mandamus to the Commissioner to refer the case to the Court based on non-compliance with the notice issued under sub-section (4) of Section 22. The assessee, a Hindu undivided family trading in hardware, had submitted a return for 1932-33, which led to subsequent assessment revealing income had escaped assessment. The Income Tax Officer issued a notice under Section 34 and a subsequent notice under sub-section (4) of Section 22 for producing account books. However, partial compliance occurred as certain books were withheld by the assessee. The Income Tax Officer made an assessment under sub-section (4) of Section 23 based on the produced account books, leading to the assessee's contention that the non-produced books were irrelevant. The Court held that the final arbiter of what is required is the Income Tax Officer, and non-compliance with the notice renders the assessee liable for assessment under sub-section (4) of Section 23.

Issue 2: Legality of assessment based on the same material in the account books
The second question raised pertained to the legality of the assessment by the Income Tax Officer and Assistant Commissioner under sub-section (4) of Section 23, utilizing the same material in the account books for the subsequent year. The Court emphasized that the actions in a subsequent year cannot dictate what should have happened in the previous year. It was held that if an order made by the Income Tax Officer is legally sound, it cannot be set aside based on actions in a subsequent year. Therefore, the Court answered both questions in the affirmative, dismissing the petition and directing the assessee to bear the Commissioner's counsel fee.

In conclusion, the Court upheld the Income Tax Officer's assessment based on the produced account books, emphasizing the authority of the Income Tax authorities in determining relevant evidence for assessments. The judgment highlighted the importance of complying with notices issued under tax laws and clarified the limitations on challenging assessments based on subsequent actions.