1969 (10) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notice issued under Section 34(1)(a) of the Indian Income-tax Act, 1922.
2. Requirement of fresh notice under Section 34(1) after cancellation of assessment by the Appellate Assistant Commissioner.

Detailed Analysis:

Issue 1: Validity of Notice Issued Under Section 34(1)(a)
The petitioner contended that the sanction of the Central Board of Revenue was necessary for issuing a notice under Section 34(1)(a) of the Act when the income escaping assessment amounted to one lakh rupees or more, and eight years had elapsed since the relevant assessment year. Since no such sanction was obtained, the proceedings were allegedly vitiated for want of a valid notice.

The court clarified that the provisos to Section 34(1)(a) stipulate that no notice shall issue without the prior sanction of the Central Board of Revenue only if the income escaping assessment amounts to or is likely to amount to one lakh rupees or more, and eight years have elapsed after the relevant assessment year. However, if the notice is issued within eight years of the relevant assessment year, no such sanction is required. The court noted that all notices in this case were issued within the eight-year period, thereby negating the need for the Central Board of Revenue's sanction. Consequently, the court held that the notices under Section 34(1)(a) were valid.

Issue 2: Requirement of Fresh Notice Under Section 34(1) Post Cancellation of Assessment
The petitioner argued that after the Appellate Assistant Commissioner canceled the assessment under Section 27 of the Act, any fresh assessment should be initiated by issuing a new notice under Section 34(1). The petitioner relied on the interpretation that "escaping assessment" applies to both cases where no notice was issued and cases where a notice was issued but resulted in no assessment.

The court disagreed with this contention, emphasizing that Section 27 allows an assessee to request a fresh assessment if they were prevented by sufficient cause from complying with the original notice. The court interpreted the term "fresh assessment" in Section 27 to mean reassessment from the stage where the defect or error occurred, not the initiation of proceedings de novo under Section 34(1). The court highlighted that the grounds for cancellation and fresh assessment under Section 27 relate to the stages of notice under Sections 22(4) and 23(2), and not the notice under Section 34(1).

Therefore, the court concluded that the Income-tax Officer could proceed with a fresh assessment without issuing a new notice under Section 34(1), provided the fresh assessment was initiated by issuing notices under Sections 22(4) and 23(2). The court further noted that the term "reassessment" in the second proviso to Section 34(3) should be understood in the context of Section 27, meaning reassessment in accordance with the provisions of Section 27.

Conclusion:
The court dismissed the petitions, holding that:
1. The notices issued under Section 34(1)(a) were valid as they were issued within the eight-year period, thus not requiring the Central Board of Revenue's sanction.
2. Fresh assessment proceedings following the cancellation of the original assessment did not necessitate a new notice under Section 34(1), as the fresh assessment could validly proceed from the stage of notices under Sections 22(4) and 23(2).

The petitions were dismissed with costs, and the advocate's fee was set at Rs. 100.