1971 (4) TMI 11 - HC - Income Tax

Notice under section 22(1) - whether the Income-tax Officer had the power to serve the notice under section 22(2) requiring an assessee to file his return of income even before the expiry of the period mentioned under section 22(1)

Summary

Issues:
Validity of assessment under section 23(4) of the Income-tax Act, 1922, based on notice under section 22(2) served before the expiry of the period specified in notice under section 22(1).

Analysis:
The case involved a private limited company engaged in transport business for the assessment year 1961-62. The Income-tax Officer served a notice under section 22(2) before the expiry of the period specified in the notice under section 22(1) for filing a return, requiring the assessee to file the return by a specific date. The assessee failed to comply, leading to an ex parte assessment under section 23(4) of the Act of 1922. Subsequently, the assessee appealed against the assessment, cancellation of the assessment, and the penalty imposed under section 271(1)(i). The Appellate Assistant Commissioner upheld the assessment but reduced the estimated income. The Tribunal, however, set aside the assessment under section 23(4), the order under section 27, and the penalty under section 271(1)(i).

The Tribunal held that the notice under section 22(2) served before the expiry of the period specified in the notice under section 22(1) was invalid. It reasoned that since there was no valid notice under section 22(2), the best judgment assessment under section 23(4) could not be sustained. Consequently, the orders under section 27 and section 271(1)(i) were also set aside. The Tribunal's decision was based on the interpretation of the provisions of section 22(1) and section 22(2) of the Income-tax Act, 1922.

The High Court analyzed the provisions of section 22(1) and section 22(2) of the Act. Section 22(1) mandates the Income-tax Officer to give notice requiring persons with income exceeding the non-taxable limit to furnish a return within a specified period. On the other hand, section 22(2) empowers the Income-tax Officer to serve a notice calling for a return if the person's income renders them liable to tax. The Court concluded that the Income-tax Officer can serve the notice under section 22(2) at any time during the assessment year, even before the expiry of the period specified in the notice under section 22(1.

The Court held that there is no restriction in the law preventing the Income-tax Officer from serving a notice under section 22(2) before the deadline mentioned in the notice under section 22(1. Denying the Income-tax Officer the discretion to initiate expeditious assessment proceedings would be contrary to the legislative intent. Therefore, the Court found the notice under section 22(2) to be valid, making the assessment under section 23(4) legitimate. Consequently, the orders under section 27 and section 271(1)(i) were also deemed valid. The Court answered the question referred in the negative and awarded costs to the Commissioner of Income-tax.

In conclusion, the High Court upheld the validity of the assessment under section 23(4) based on the notice under section 22(2) served before the expiry of the period specified in the notice under section 22(1), overturning the Tribunal's decision.