1964 (10) TMI 18 - SC - Income Tax

Whether the reassessment under section 34 (of the Indian Income-tax Act, 1922) completed on 30th June, 1953, for the year 1944-45 is valid? Held that - Some confusion has crept into this branch of the income-tax law by the use of the words voluntary return and a non-voluntary return . Section 22(3) does not use this expression and whatever the impelling cause or motive, if a return otherwise valid is filed by an assessee before the receipt of a valid notice under section 34, it is to be treated as a return within section 22(3) for it falls within the language of the sub-section. We agree with the High Court that the question referred to the High Court must be answered in the negative. Appeal dismissed.

Summary

Issues:
1. Validity of reassessment under section 34 of the Indian Income-tax Act, 1922 for the year 1944-45.
2. Interpretation of section 22(3) regarding the validity of a return filed by the assessee.

Analysis:
1. The judgment pertains to an appeal challenging the validity of a reassessment under section 34 of the Indian Income-tax Act, 1922 for the year 1944-45. The Madras High Court had previously ruled against the validity of the reassessment. The case involved a Hindu undivided family (assessee) that had not filed returns for the assessment years 1944-45 and 1945-46 initially. The Income-tax Officer later issued notices under section 34 for both years. Subsequently, a return was filed for 1944-45 showing income below the taxable limit. The Income-tax Officer then issued a notice under section 34 for 1944-45, which led to the reassessment. The Appellate Tribunal and the High Court had differing views on the validity of this reassessment.

2. The crucial issue revolved around the interpretation of section 22(3) of the Act regarding the validity of the return filed by the assessee. Section 22(3) allows an assessee to furnish a return before the assessment is made. The appellant contended that the return filed by the assessee was not voluntary and should be considered invalid as it was made in response to an invalid notice. However, the court held that the return dated September 4, 1948, could be treated as a valid return under section 22(3). The court rejected the argument that every return under section 22(3) must be voluntary, emphasizing that a return in response to a notice under section 34 is deemed to be a return under section 22(3). The court also distinguished previous cases and emphasized that the return in this case was valid under section 22(3).

3. The court referred to precedents such as Commissioner of Income-tax v. Ranchhoddas Karsondas to support the conclusion that a return showing income below the taxable limit is valid and cannot be ignored by the Income-tax Officer. The court also addressed the contention that if the notice under section 34 is invalid, the return made in response to it must also be considered invalid. The court disagreed with this argument and clarified that a valid return filed before the receipt of a valid notice under section 34 should be treated as a return under section 22(3).

4. Ultimately, the court agreed with the High Court's decision that the reassessment under section 34 for the year 1944-45 was not valid. The appeal was dismissed, affirming the High Court's ruling and emphasizing the interpretation of section 22(3) in determining the validity of the return filed by the assessee.