1965 (2) TMI 1 - HC - Income Tax

Prayer, for quashing the noticesissued to the petitioner under section 23(2) - petitioner has also prayed for a writ in the nature of prohibition prohibiting the respondents from taking any steps in pursuance of the aforesaid notices or making any orders for assessment in pursuance thereof.

Issues:
1. Validity of notices issued under section 23(2) of the Indian Income-tax Act, 1922.
2. Time-limit for making an order of assessment under the Income-tax Act.
3. Interpretation of section 34(3) in cases of concealment of income.
4. Applicability of section 297(2)(g) of the Income-tax Act, 1961.
5. Refund of the amount paid in pursuance of the assessment.

Analysis:

1. Validity of Notices under Section 23(2):
The petitioner filed a petition under Article 226 seeking to quash notices issued under section 23(2) of the Income-tax Act. The notices were issued to the petitioner as the legal heir of the deceased mother. The petitioner argued that the statutory limit of 4 years prescribed under section 34(3) had expired, and therefore, no proceedings could be taken in pursuance of the original return. The court noted the issuance of multiple notices and the petitioner's objections. The court ultimately dismissed the petition, stating that the Income-tax Officer was entitled to proceed with making inquiries and issuing notices under section 23(2) and would consider the question of limitation at the time of making the assessment order.

2. Time-limit for Assessment:
The petitioner contended that the assessment year being 1948-49, no assessment could be made after March 1953. The respondent argued that there was no time-limit for assessment in cases of concealment of income or inaccurate particulars. The court held that the Income-tax Officer could make an assessment without any limitation if concealment or inaccuracies were found during assessment. However, if no such delinquency was established, the assessment order made beyond four years would be without jurisdiction.

3. Interpretation of Section 34(3):
The court disagreed with a previous judgment that suggested the Income-tax Officer had the power to extend the period of limitation at will. It emphasized that section 34(3) imposed a condition for jurisdiction based on the applicability of section 28(1)(c) in cases of concealment. The court upheld the legislative decision to allow assessments without a time limit in cases of concealment, stating that courts could not question this legislative wisdom.

4. Applicability of Section 297(2)(g):
The argument regarding section 297(2)(g) of the Income-tax Act, 1961, was raised, suggesting that penalty proceedings under section 28 could not be taken for the assessment year in question. The court disagreed, stating that section 28(1)(c) could apply even if the assessment order had not yet been made, as long as there was concealment or inaccurate particulars.

5. Refund of Amount Paid:
The judgment noted that there was no mention in the petition of whether the petitioner had approached the Income-tax Officer for a refund of the amount paid. The court deemed it inappropriate to issue a writ for the refund without the petitioner first seeking redress from the authorities concerned. Consequently, the petition was dismissed without costs.

In conclusion, the judgment clarified the validity of notices under section 23(2), the time-limit for assessments, the interpretation of section 34(3) in cases of concealment, the applicability of section 297(2)(g), and the refund process for amounts paid in assessment.

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