1967 (6) TMI 6 - HC - Income Tax

Assessment year not correctly prescribed in the notice for reassessment - notice of reassessment is not valid

Summary

Issues Involved: Validity of notice under section 34 of the Indian Income-tax Act, 1922, and whether the irregularity in the notice vitiated the proceedings.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 34:

The core issue in this case revolves around the validity of the notice served under section 34 of the Indian Income-tax Act, 1922. The notice was issued for the assessment year 1948-49, but the notice under section 22(2) and section 38, which accompanied it, referred to the assessment year 1949-50. This discrepancy led to the assessee's contention that the notice was invalid and time-barred.

2. Material Irregularity in the Notice:

The court examined whether the discrepancy constituted a material irregularity that could invalidate the notice. The assessee argued that the notice did not specify clearly under which sub-section of section 34 it was issued, and the incorrect assessment year mentioned rendered it invalid. The Appellate Assistant Commissioner initially held the notice invalid, but the Income-tax Appellate Tribunal reversed this decision, leading to the reference to the High Court.

3. Precedents and Jurisdictional Compliance:

The court referred to several precedents, including the Gujarat High Court's decision in Naralchand Malukchand Dagli v. Commissioner of Income-tax, which emphasized that a notice under section 34 must specify the assessment year with clarity. The Bombay High Court's decision in Commissioner of Income-tax v. Ramsukh Motilal was also considered, which held that failure to comply with the requirements of section 34, such as providing adequate time for the assessee to respond, was not merely a procedural defect but a jurisdictional prerequisite.

4. Waiver of Defect by Assessee:

The court also discussed whether the defect in the notice could be waived by the assessee. The Bombay High Court had previously held that jurisdictional defects could not be waived by the assessee, a view that was in conflict with the Patna and Calcutta High Courts' decisions. The Patna High Court in Commissioner of Income-tax v. Banarsilal Rajgarhia had held that a clerical mistake in the notice did not invalidate it if the assessee understood the notice correctly and there was no violation of jurisdictional prerequisites.

5. Conclusion and Decision:

The High Court concluded that the notice under section 34 was invalid due to the discrepancy in the assessment years mentioned. It held that the defect was not merely procedural but a failure to meet a condition precedent for jurisdiction. The court affirmed the view that such a defect could not be waived by the assessee, even if the assessee submitted a return for the assessment year 1949-50. Consequently, the proceedings initiated under the invalid notice were vitiated.

Judgment:

The High Court answered the reference in the affirmative, stating that the notice under section 34, dated February 28, 1958, was invalid, and this invalidity vitiated the proceedings taken in pursuance of the said notice. The Commissioner was ordered to pay the costs of the assessee.