1966 (1) TMI 11 - HC - Income Tax

Reopening of assessment under section 34(1) - notice u/s 34 of the IT Act, 1922 for the asst. yr. 1952-53 and the consequent inclusion of the deemed dividend income in the assessee s assessment for 1952-53 were not valid

Summary

Issues:
1. Validity of notice under section 34 of the Indian Income-tax Act for the assessment year 1952-53.
2. Inclusion of deemed dividend income in the assessee's assessment for 1952-53.

Analysis:
The case involved a reference under section 66(1) of the Indian Income-tax Act, 1922, regarding the assessment year 1952-53. The original assessment was reopened under section 34(1) to assess a deemed dividend of Rs. 20,146 from a company. The Appellate Assistant Commissioner directed the Income-tax Officer to include the deemed dividend in the previous year relating to the assessment year 1952-53. The assessee contended that the proceeding under section 34(1) for 1952-53 was time-barred, as four years had elapsed. However, this contention was rejected by the Appellate Assistant Commissioner and the Appellate Tribunal.

The Tribunal framed the question for reference to the High Court on whether the notice under section 34 for 1952-53 and the inclusion of deemed dividend income were valid. The High Court noted that the action under section 34(1) in 1960 for 1952-53 was time-barred unless the second proviso to sub-section (3) of section 34 applied. Referring to a Supreme Court decision, the High Court emphasized that jurisdiction and findings of an appellate authority are limited to the assessment year under consideration. The Appellate Assistant Commissioner's direction to reopen the assessment for 1952-53 was held to be beyond jurisdiction, and the assessment made after the expiry of four years was deemed invalid.

In conclusion, the High Court held that the inclusion of deemed dividend in the assessment for 1952-53 was not valid due to being time-barred. The reference was disposed of in favor of the petitioner, but no costs were awarded. The judgment clarified the limitations on jurisdiction and findings of appellate authorities in tax assessments, emphasizing adherence to statutory provisions regarding time limits for assessments under the Income-tax Act.