1967 (6) TMI 15 - HC - Income Tax

Notice issued u/s 34(1)(a) - limitation - ITO had no jurisdiction to issue a notice, being barred by limitation

Summary

Issues: Validity of notice under section 34(1)(a) for the assessment year 1943-44 and whether it was barred by limitation.

Analysis:
The case involved a dispute regarding the validity of a notice issued under section 34(1)(a) for the assessment year 1943-44 and whether it was barred by limitation. The assessee had undertaken a contract for the construction of an aerodrome during the second world war, which was started in October 1942 and completed in December 1943. The Income-tax Officer initially closed the assessment proceedings for the year 1943-44 with a remark that the income relating to the contract work was assessable in the subsequent year. However, upon appeal, the Appellate Assistant Commissioner directed the apportionment of income for the period in question. Subsequently, a notice under section 34(1)(a) was issued for the assessment year 1943-44, which the assessee contended was barred by limitation.

The Tribunal considered the contention that the notice issued under section 34(1)(a) was time-barred, as it was issued long after the period of eight years, which ended on March 31, 1952. The Tribunal agreed with the departmental representative that the notice fell within the meaning of the second proviso to section 34(3) of the Act. However, it also held that the action under section 34 had become time-barred by March 31, 1952, and that the proviso did not save the limitation. The Tribunal rejected the department's argument that the notice issued after April 1, 1956, was saved by section 4 of Act No. 1 of 1959, citing a decision of the Bombay High Court. The Tribunal concluded that the notice was invalid, rendering the assessment invalid as well.

The High Court concurred with the Tribunal's decision, emphasizing that the direction given by the Appellate Assistant Commissioner pertained to the assessment year 1944-45, and there was no appeal regarding the earlier year 1943-44. Therefore, the direction did not lift the limitation bar for the assessment year 1943-44. The court held that the assessment for the year 1943-44 was time-barred, and the Income-tax Officer had no jurisdiction to issue the notice under section 34(1)(a). Consequently, the court answered the question in the affirmative, in favor of the assessee, with costs awarded.