1970 (4) TMI 39 - HC - Income Tax

Voluntary submission of return under section 22(3) - applicability of period of limitation of four years

Issues Involved:
1. Validity of returns filed beyond the statutory period.
2. Jurisdiction and authority of the Income-tax Officer.
3. Applicability of Section 34(3) of the Indian Income-tax Act, 1922.
4. Authority of the Commissioner under Section 33B.
5. Distinction between chargeability and assessment of tax.

Detailed Analysis:

1. Validity of Returns Filed Beyond the Statutory Period:
The primary issue was whether the returns filed by the assessee for the assessment years 1953-54 to 1956-57 on 9th August 1961 were valid. The Tribunal held that these returns were invalid as they were filed beyond the four-year period specified under Section 34(3) of the Income-tax Act. The Tribunal cited the Supreme Court decision in Commissioner of Income-tax v. Raman Chettiar, which established that a return must be filed within the period mentioned in Section 34(3). Consequently, the Tribunal concluded that the returns filed by the assessee for these years were invalid.

2. Jurisdiction and Authority of the Income-tax Officer:
Mr. Pal, representing the Commissioner, argued that the liability to be assessed arises under Sections 3 and 4, and an assessee can submit to assessment without recourse to the machinery sections. He contended that Section 22 is not the only section under which returns can be made, and an assessee may file returns independently of Section 22. He further argued that the condition attaching to Section 34 does not apply to Section 33B. However, the court rejected this argument, emphasizing that the power to make assessments lapses completely upon the expiry of the periods prescribed in the Income-tax Act.

3. Applicability of Section 34(3) of the Indian Income-tax Act, 1922:
The court reiterated that Section 34(3) imposes a statutory fetter on the income-tax authorities to bring to tax escaped income. This fetter is not for the assessee to relax or waive. The court referred to multiple Supreme Court decisions, including Chatturam v. Commissioner of Income-tax and Commissioner of Income-tax v. Ranchhoddas Karsondas, to emphasize that the period mentioned in Section 34(3) is not merely a period of limitation but a statutory bar to assessment or reassessment beyond the specified period.

4. Authority of the Commissioner under Section 33B:
The Commissioner had issued a combined notice to the assessee proposing to take action under Section 33B and subsequently canceled all the assessments, directing the Income-tax Officer to do fresh assessments according to law. The Tribunal upheld the Commissioner's authority to initiate proceedings under Section 33B but modified the order by canceling the assessments altogether for the years 1953-54 to 1956-57 without giving any direction for making fresh assessments. The court supported the Tribunal's decision, affirming that the returns filed beyond the statutory period were invalid.

5. Distinction between Chargeability and Assessment of Tax:
The court acknowledged the well-recognized distinction between the attribute of taxability and the payability and quantification of tax under the Indian Income-tax Act, 1922. While the liability to pay income-tax is founded on Sections 3 and 4, the actual operation of the charge is dependent upon the machinery sections. The court referred to the Supreme Court decision in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax, which clarified that the tax liability arises on the last day of the accounting year, even though the quantum of tax is determined later. However, this distinction does not warrant ignoring the express bar in Section 34(3).

Conclusion:
The court concluded that the returns filed by the assessee for the assessment years 1953-54 to 1956-57 on 9th August 1961 were invalid. The Tribunal was right in holding that no fresh assessments could be made on the basis of the Commissioner's order under Section 33B. The answer to the question referred to the High Court was in the affirmative, with each party bearing its own costs.

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