1969 (8) TMI 6 - SC - Income Tax

Best Judgment Assessment - Agricultural ITO can not proceed directly to assess to best of his judgment u/s. 20(4) without serving a notice u/s. 19(2)- If no return is made in response to a public notice under s. 19(1) of the Act and no individual notice is served u/s. 19(2) there would be no pending proceedings and it would be a case of escaped assessment - revenue appeal dismissed

Issues Involved:
1. Validity of assessment orders under the Assam Agricultural Income-tax Act, 1939.
2. Requirement of notice under sections 19(2) and 30 of the Act.
3. Limitation period for issuing notices and making assessments.
4. Interpretation of "escaped assessment" under section 30 of the Act.
5. Distinction between general notice under section 19(1) and individual notice under section 19(2).

Detailed Analysis:

1. Validity of Assessment Orders under the Assam Agricultural Income-tax Act, 1939:
The respondents challenged the assessment orders made under the Assam Agricultural Income-tax Act, 1939, on the grounds that no proper notice was served, and the assessments were barred by limitation. The High Court quashed the assessment orders, agreeing with the respondents that the Agricultural Income-tax Officer did not have the jurisdiction to make the assessments without serving the required notices.

2. Requirement of Notice under Sections 19(2) and 30 of the Act:
The main objection raised by the respondents was the absence of service of notice under section 30 of the Act within the prescribed period. The court held that for an assessment to be valid, individual notices under section 19(2) must be served within the financial year, and if not, proceedings under section 30 must be initiated within three years from the end of the financial year. The High Court concluded that there was no service of notice on the respondents for the assessment years in question either under section 19(2) or section 30 of the Act.

3. Limitation Period for Issuing Notices and Making Assessments:
The court emphasized that the Agricultural Income-tax Officer must issue a notice under section 19(2) within the financial year or initiate proceedings under section 30 within three years of the end of the financial year. The failure to do so would render the assessment orders invalid. The court rejected the appellant's argument that assessment proceedings commence with the publication of a general notice under section 19(1) and that there is no time limitation for making a best judgment assessment under section 20(4).

4. Interpretation of "Escaped Assessment" under Section 30 of the Act:
The court clarified that "escaped assessment" refers to income that has not been assessed because no assessment proceedings were initiated. The court held that if no return is made in response to a public notice under section 19(1) and no individual notice is served under section 19(2), it would be a case of escaped assessment after the expiry of the financial year. The court reiterated that proceedings under section 30 must be initiated within three years of the end of the financial year for escaped assessments.

5. Distinction between General Notice under Section 19(1) and Individual Notice under Section 19(2):
The court distinguished between the general notice under section 19(1) and the individual notice under section 19(2). The court held that the publication of a general notice under section 19(1) does not initiate assessment proceedings. Individual notices under section 19(2) must be served within the financial year to initiate assessment proceedings. The court also noted that section 43(2)(a) of the Act confers a valuable right on the assessee to choose the forum for assessment upon receipt of the first notice under section 19(2), which is not available with the publication of a general notice under section 19(1).

Conclusion:
The Supreme Court upheld the High Court's decision, dismissing the appeals and affirming that the assessment orders were invalid due to the absence of proper notices under sections 19(2) and 30 of the Act and the assessments being barred by limitation. The court reiterated the necessity of following the procedural requirements and time limitations prescribed under the Act for valid assessments.

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