1960 (12) TMI 4 - SC - Income Tax

Whether the notice under section 34 was without jurisdiction? Held that - The notice under section 34 was not issued after the expiry of the period prescribed in that behalf. The notice was issued by the Income-tax Officer because he had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all material facts necessary for the assessment for the year 1950-51, income had escaped assessment. Such a notice fell manifestly within section 34(1)(a) and could be issued within eight years from the end of the year of assessment. The impugned notice under section 34 for reassessment of the income of the appellants for the year 1950-51 was, in our judgment, properly issued and the High Court was right in dismissing the petition for a writ to quash the notice. Appeal dismissed.

Summary

Issues:
1. Jurisdiction to issue notice of reassessment under section 34 of the Indian Income-tax Act.
2. Disposal of previous return and subsequent reassessment notice validity.
3. Assessment under Mysore Income-tax Act versus Indian Income-tax Act.
4. Validity of notice issued under section 34 for reassessment.

Detailed Analysis:

1. The first issue revolves around the jurisdiction to issue a notice of reassessment under section 34 of the Indian Income-tax Act. The Income-tax Officer had reason to believe that due to the appellant's failure to disclose all material facts, income had escaped assessment for the year 1950-51. The court held that the Income-tax Officer had the jurisdiction to issue the notice for reassessment based on the appellant's failure to disclose fully and truly all necessary information for assessment.

2. The second issue concerns the disposal of the previous return and the subsequent validity of the reassessment notice. The appellant argued that until the assessment pursuant to the previous return was made, no notice under section 34(1) for reassessment could be issued. However, the court found no substance in this argument. The Income-tax Officer had accepted the previous return stating no assessable income, which allowed him to issue a notice for reassessment upon discovering undisclosed material facts.

3. The third issue addresses the assessment under the Mysore Income-tax Act versus the Indian Income-tax Act. The court clarified that after the Indian Income-tax Act was applied to the State of Mysore, the appellants were liable to be assessed under the Indian Income-tax Act for the relevant period. The court emphasized that the liability to pay tax for the period in question could only be assessed under the Indian Income-tax Act and not the repealed Mysore Income-tax Act.

4. The final issue pertains to the validity of the notice issued under section 34 for reassessment. The court determined that the notice was properly issued within the prescribed period of eight years from the end of the year of assessment. The notice fell within the provisions of section 34(1)(a) as it was based on the Income-tax Officer's reason to believe that income had escaped assessment due to the appellant's failure to disclose material facts. Consequently, the High Court's dismissal of the petition to quash the notice was upheld, and the appeal was dismissed with costs.