1971 (1) TMI 21 - HC - Income Tax

Section 66(4)of Indian Income Tax Act, 1922 did not imply that the High Court could ask the Tribunal to state a case on a question which the Tribunal had not referred to the High Court and which, on the contrary, the Tribunal had refused to refer

Issues Involved
1. Validity of the return filed by the minor assessees.
2. Validity of the initiation of action under Section 34(1)(a) or 34(1)(b) of the Income-tax Act, 1922.
3. Justification of the assessment under Section 35 of the Income-tax Act, 1922.

Detailed Analysis

1. Validity of the Return Filed by the Minor Assessees
Contention: The revenue argued that the return filed on behalf of each of the three minor assessees was invalid because it was signed by Dwarkadas, the eldest brother, instead of their mother, Sodradevi, who was their natural guardian under Hindu law.

Tribunal's Decision: The Tribunal held that this contention was a new case set up by the department at the second appeal stage and was not permissible. Despite this, the Tribunal considered the contention and opined that the return was valid.

Court's Analysis: The court noted that the question of the return's validity was not specifically raised in the reference. The Tribunal refused to permit the revenue to argue this point at the second appellate stage. The court emphasized that the revenue did not move the High Court under Section 66(2) to challenge the Tribunal's refusal. Therefore, the court held that it was not open to the revenue to canvass the subject matter of the return's validity as an aspect of the question actually referred.

2. Validity of the Initiation of Action under Section 34(1)(a) or 34(1)(b)
Contention: The revenue contended that if the return filed was invalid, action could be taken under Section 34(1)(a). Alternatively, if Section 34(1)(b) applied, the bar of limitation of 4 years would not be applicable due to the second proviso to Section 34(3).

Tribunal's Decision: The Tribunal held that the income chargeable to tax had escaped assessment due to an erroneous view taken by the Income-tax Officer, not due to any omission by the assessee. Therefore, the assessment could only be reopened under Section 34(1)(b). The Tribunal also held that no finding or direction was given by it in the mother's assessment under Section 66(5), so the time limit of 4 years was not extended. Consequently, the initiation of action under Section 34 was deemed bad and illegal.

Court's Analysis: The court noted that the question referred specifically mentioned Section 34(1)(a). Since the return was treated as valid, there was no omission or failure by the assessee, making Section 34(1)(a) inapplicable. The court reframed the question to include "Section 34(1)" instead of "Section 34(1)(a)" to cover both clauses (a) and (b). The court then answered the question in the negative for both clauses (a) and (b), referencing the judgment in Commissioner of Income-tax v. Sunderlal Daga.

3. Justification of the Assessment under Section 35
Contention: The revenue argued that the inclusion of the income of the three minor assessees could be justified under Section 35.

Tribunal's Decision: The Tribunal held that action was taken only under Section 34, not under Section 35. Since no action was taken under Section 35, it was futile for the Tribunal to consider whether action under Section 34 could be justified under Section 35.

Court's Analysis: The court noted that the Tribunal refused to refer the question regarding Section 35, stating that the share incomes were not included in the assessment under Section 35. Since the Tribunal did not permit the revenue to argue this point and the revenue did not move the High Court under Section 66(2), the court held that it was not open to the revenue to argue the justification of the assessment under Section 35.

Conclusion
The court upheld the Tribunal's decision, answering the reframed question in the negative for both clauses (a) and (b) of Section 34(1). The revenue was ordered to pay the costs of the reference to the assessees.

← Previous Next →