1967 (7) TMI 1 - SC - Income Tax

Reassessment notice - ITO can proceed to assess or reassess such escaped income after four years from the close of the assessment year - appeal of revenue is allowed - order passed by the High Court is set aside

Summary

Issues:
1. Interpretation of section 34 of the Mysore Income-tax Act for reassessment.
2. Competency of the Appellate Assistant Commissioner to set aside and give directions for reassessment.

Analysis:
The judgment concerns a case where a Hindu undivided family was assessed for tax under the Mysore Income-tax Act for the assessment year 1949-50. The Income-tax Officer initiated a proceeding under section 34 of the Act for reassessment and served a notice in 1951. Subsequently, the total income was determined at a higher amount in 1954. An appeal was made to the Appellate Assistant Commissioner who set aside the order and directed a fresh assessment. The High Court was approached for reference on two questions, one regarding the time limit for reassessment under section 34 and the other on the authority of the Appellate Assistant Commissioner to give directions for reassessment.

Upon hearing the reference, the High Court did not consider the first question and answered the second question affirmatively. The respondents then sought a writ of prohibition from the High Court to stop the reassessment, claiming it was time-barred. The High Court agreed with the respondents, citing similarities between section 34 of the Income-tax Act and rule 34 of the Sales Tax Act. The Commissioner of Income-tax appealed to the Supreme Court.

The Supreme Court analyzed the provisions of section 34 of the Mysore Income-tax Act, emphasizing that a reassessment proceeding can be initiated if income has escaped assessment and a notice is served within four years of the assessment year. In this case, the notice was served within the prescribed period, and the Appellate Assistant Commissioner's order did not invalidate the notice. Therefore, the Supreme Court held that the reassessment proceeding was not time-barred.

Additionally, the Court noted that the respondents had already obtained a reference on the time limit question, which was not pursued before the High Court. The Court ruled that this question could not be raised again through a writ petition under the Constitution. Consequently, the appeal was allowed, the High Court's order was set aside, and the respondents were directed to bear the costs of the Commissioner in both courts.

In conclusion, the judgment clarifies the interpretation of section 34 of the Mysore Income-tax Act regarding reassessment time limits and the authority of the Appellate Assistant Commissioner to direct reassessment. It underscores the importance of serving a notice within the stipulated period for initiating a reassessment proceeding and highlights the limitations on re-agitating issues already addressed in a reference.