1969 (10) TMI 1 - SC - Income Tax

When in respect of any year a return has been voluntarily submitted before assessment, the ITO cannot ignore the return - hence notice of reassessment and consequent assessment under s. 34 ignoring the return are invalid

Summary

Issues:
- Validity of assessments for the years 1950-51, 1951-52, and 1952-53.
- Interpretation of orders passed by the income-tax authorities.
- Application of section 34 of the Income-tax Act, 1922.
- Effect of partition on assessments.

Analysis:
The case involved the assessment of a Hindu undivided family that claimed partition between the father and son. The Income-tax Officer rejected the claim and assessed the family as a whole. However, the Appellate Assistant Commissioner later accepted the partition and canceled the assessments for the relevant years. Subsequently, notices were issued under section 34 for reassessment, leading to a series of appeals. The High Court held the assessments valid, citing the lifting of the limitation bar by the Appellate Assistant Commissioner's order. However, the Supreme Court disagreed, highlighting a fundamental defect in the income-tax authorities' orders. The court emphasized that the original returns submitted by the family were not properly processed before issuing notices under section 34, rendering the reassessment invalid.

The Supreme Court referred to previous judgments to support its decision. It cited the case of Commissioner of Income-tax v. Ranchhoddas Karsondas, stating that when a return is voluntarily submitted before assessment, the Income-tax Officer cannot ignore it. In this case, the court found that the original returns submitted by the family were not legally dealt with before the notices under section 34 were issued. Additionally, the court referenced the case of Estate of the late A. M. K. M. Karuppan Chettiar v. Commissioner of Income-tax, which established that notices under section 34 could not be validly issued unless the original returns were disposed of. Applying this principle, the Supreme Court concluded that the assessments made pursuant to the notices under section 34 were invalid for the relevant years.

In summary, the Supreme Court held that the assessments for the years 1950-51, 1951-52, and 1952-53 were invalid due to the improper processing of the original returns before issuing notices under section 34. The court emphasized the importance of following proper procedures and legal requirements in income tax assessments, ultimately dismissing the appeals and ordering costs to be paid.