1960 (10) TMI 4 - SC - Income Tax

Whether the proceedings for assessment were commenced within the period of limitation prescribed for serving notice of assessment under section 34(1)(a) of the Act? Held that - The High Court was therefore right in holding that the proceedings for assessment were properly commenced within the period of limitation prescribed by section 34(1)(a) from the close of the year of assessment. The appeal fails and is dismissed

Summary

Issues:
1. Determination of the period of limitation for serving notice of assessment under section 34(1)(a) of the Indian Income-tax Act, 1922.

Analysis:
The case involved a non-resident appellant who had accrued dividend income within British India but had not submitted income returns for the assessment years 1943-44, 1944-45, 1946-47, and 1947-48. The Income-tax Officer served notices under section 34 read with section 22(2) of the Act for assessment of tax for those years. The appellant challenged the validity of the notices, contending that they were served after the period of limitation prescribed by section 34. The key question was whether the proceedings for assessment were commenced within the limitation period under section 34(1)(a) of the Act.

The appellant argued that as a non-resident, he was not obligated to submit returns based on a general notice under section 22(1) and that his inaction did not constitute an omission or failure to submit a return, as required under section 34(1)(a). He contended that the notices for assessment should be governed by clause (b) of section 34 rather than clause (a). However, the court held that the obligation to submit a return under section 22(1) applied to all persons with taxable income, including non-residents. The court emphasized that failure to submit a return after a general notice would constitute an omission under section 34(1)(a).

The court further clarified that section 22(1) does not exempt non-residents from the obligation to submit returns and that section 34(1)(b) applies only when there is no omission or failure to disclose material facts for assessment. The court highlighted that once a notice is given under section 22(1), every person with taxable income must submit a return, and failure to do so would be considered an omission under section 34(1)(a). The court rejected the appellant's argument that non-residents require a special notice under section 22(2) to trigger the obligation to submit a return.

Ultimately, the court upheld that the proceedings for assessment were properly initiated within the limitation period prescribed by section 34(1)(a) from the end of the assessment years. The appeal was dismissed, affirming the High Court's decision that the assessments were validly conducted within the statutory limitation period.

In conclusion, the judgment clarified the application of sections 22 and 34 of the Income-tax Act to non-resident individuals and established that failure to submit a return after a general notice would constitute an omission under section 34(1)(a), allowing for assessment proceedings within the prescribed limitation period.