1974 (11) TMI 4 - SC - Income Tax

Whether the declaration filed by the assessee under section 17(1) in respect of the assessment year 1958-59, was operative in relation to the reassessments in respect of the previous year ending on December 31, 1954, December 31, 1955, and December 31, 1956, corresponding to the assessment years 1955-56, 1956-57 and 1957-58 - assessee s declaration under s. 17(1) was operated also in relation to reassessment for the earlier years

Issues Involved:
1. Applicability of the declaration filed under section 17(1) of the Indian Income-tax Act, 1922, to reassessments for previous years.
2. Interpretation of the term "all assessments thereafter" in the context of section 17(1) of the Act.
3. Whether the term "assessment" includes reassessment under section 34 of the Act.

Issue-wise Detailed Analysis:

1. Applicability of the Declaration Filed under Section 17(1) to Reassessments for Previous Years:

The primary issue was whether the declaration filed by the assessee under section 17(1) for the assessment year 1958-59 could be operative in relation to the reassessments for the previous years ending on December 31, 1954, December 31, 1955, and December 31, 1956, corresponding to the assessment years 1955-56, 1956-57, and 1957-58. The assessee, who was studying abroad, derived income from dividends and interest during the relevant period. The original assessments were completed with the status of "resident and ordinarily resident person." However, during the assessment proceedings for 1958-59, the assessee filed a declaration under section 17(1) claiming to be assessed at rates appropriate to the total world income, which was rejected by the Income-tax Officer. The reassessments for the previous years were reopened under section 34 of the Act, treating the assessee as a non-resident and ignoring the declaration filed for 1958-59.

2. Interpretation of the Term "All Assessments Thereafter" in Section 17(1):

The High Court interpreted the term "all assessments thereafter" to mean only original assessments and not reassessments made under section 34 of the Act. It observed that the declaration under section 17(1) could be availed of in respect of assessments for subsequent years and not for reassessments. However, the Supreme Court disagreed with this interpretation, stating that the words "all assessments thereafter" have a wide amplitude and should include all assessments made subsequent to the filing of the declaration, including reassessments. The Court emphasized that there was no cogent reason to restrict the scope of these words to only original assessments.

3. Whether the Term "Assessment" Includes Reassessment under Section 34:

The Supreme Court held that the term "assessment" in the context of section 17(1) must necessarily include reassessment under section 34 of the Act. The Court referred to section 2(8) of the Income-tax Act, 1961, which defines "assessment" to include reassessment, and observed that although such a definition was not present in the Act of 1922, the word "assessment" in section 17(1) should be construed comprehensively to cover reassessments. The Court cited previous judgments, including A. N. Lakshman Shenoy v. Income-tax Officer, Bangalore, to support the view that "assessment" includes reassessment. The Court also noted that excluding reassessments from the scope of section 17(1) would lead to anomalous situations and would not align with the legislative intent.

Conclusion:

The Supreme Court accepted the appeals, set aside the judgment of the High Court, and answered the question in the affirmative, in favor of the assessee-appellant and against the revenue. The Court held that the declaration filed under section 17(1) for the assessment year 1958-59 could be operative for the reassessments of the previous years, and the term "assessment" in section 17(1) includes reassessment under section 34 of the Act. The assessee-appellant was entitled to costs both in the Supreme Court and the High Court. Appeals were allowed.

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