1968 (8) TMI 21 - SC - Income Tax

Whether a notice had been served under section 19(2) of the Act on the respondents and therefore the reasoning of the High Court was based on an erroneous assumption that no such notice had been served? Held that - It was held that the voluntary return filed by the assessee even though it did not disclose any taxable income was a good return. As such no question arose under section 34(1) of income escaping assessment and the Income-tax Officer was not justified in issuing a notice under section 34(1). The assessment which was therefore made pursuant to the notice under that section was barred by time having been made beyond the period prescribed. The principle which has been settled by this decision is that where a voluntary return has been filed pursuant to a general notice even after the expiry of the period mentioned in that notice the Income-tax Officer must proceed to assess the income by taking up that return. He cannot ignore that return and serve on the assessee a notice under the provisions relating to escaped income which was section 34 in the Income-tax Act. Appeal allowed.

Summary

Issues:
1. Validity of assessments made under the Assam Agricultural Income-tax Act, 1939 for the assessment years 1955-56 and 1957-58.
2. Applicability of section 30 of the Act regarding the time limit for assessment.
3. Interpretation of sections 19, 20, and 30 of the Assam Agricultural Income-tax Act, 1939 in comparison with relevant sections of the Income-tax Act, 1922.

Analysis:

The Supreme Court heard two connected appeals challenging the assessments made under the Assam Agricultural Income-tax Act, 1939 for the years 1955-56 and 1957-58. The High Court of Assam and Nagaland had set aside the assessments based on petitions under article 226 of the Constitution. The primary contention was the lack of notice under section 19(2) and the applicability of section 30 regarding the time limit for assessments. The High Court ruled in favor of the respondents, emphasizing that if agricultural income had escaped assessment in a financial year, it could be assessed within three years as per section 30. Since assessments were made beyond this period, they were deemed invalid.

The appellant argued that notices were served under section 19(2) and that the High Court's reasoning was flawed. However, the Supreme Court found it unnecessary to delve into this factual dispute. It highlighted that the submission of a voluntary return by the assessee, even after the prescribed period, should have prompted the department to assess based on that return. Ignoring the voluntary return and issuing a notice under the provisions for escaped income was deemed incorrect. The Court cited precedents from income tax cases to support this interpretation, emphasizing the importance of considering voluntary returns filed in response to general notices.

The Court also compared sections of the Assam Agricultural Income-tax Act, 1939 with relevant sections of the Income-tax Act, 1922 to establish a consistent interpretation. It rejected the argument that the words "at any time" in section 19(3) should be limited to the year of assessment, emphasizing the plain meaning of the language used. The judgment clarified that the provisions of section 30 would be attracted only if returns were not filed within the specified period, not when voluntary returns were submitted later.

In conclusion, the Supreme Court allowed the appeals, dismissing the writ petitions and awarding costs to the appellants. The judgment emphasized the importance of considering voluntary returns filed in response to general notices and upheld the validity of assessments made based on such returns within the prescribed period.