1968 (4) TMI 20 - HC - Income Tax

Issuing of notice u/s 34(1) - ITO has knowledge of income which has not been disclosed by the assessee in his return while completing and passing assessment order u/s 23 order of the Income-tax Officer dropping the proceedings did not, in the circumstances, prevent him from issuing fresh notice under section 34(1)(a)

Summary

Issues:
1. Validity of the notice issued under section 34(1)(a) of the Income-tax Act in relation to certain bank deposits.
2. Whether the Income-tax Officer was precluded from issuing the notice after completing the assessment.
3. Bar of limitation regarding the notice issued under section 34(1)(a) of the Act.

Analysis:

1. The first issue revolved around the validity of the notice issued under section 34(1)(a) of the Income-tax Act concerning certain bank deposits. The appellants contended that the notice issued in 1961 was improper after the Income-tax Officer had dropped proceedings in 1955. However, the court held that the Income-tax Officer was not precluded from initiating fresh proceedings as the earlier order was to avoid duplication and did not consider the matter on its merits. The court referred to the provisions of section 34 of the Act, emphasizing that action under this section is taken when there is a reason to believe that income has escaped assessment due to the assessee's failure to disclose material facts.

2. The second issue dealt with whether the Income-tax Officer was precluded from taking action under section 34(1)(a) of the Act after completing the assessment. The appellants argued that since the assessment was completed without considering certain bank deposits, the Officer could not take further action. However, the court found no provision in the Act preventing the Officer from issuing a notice if income had not been disclosed by the assessee. The court cited a Supreme Court decision and concluded that the completion of the assessment did not preclude the Officer from addressing the undisclosed income later.

3. The final issue focused on the bar of limitation regarding the notice issued in 1961. The court clarified that despite the expiry of the eight-year period, the Officer could still take action under section 34(1)(a) if certain conditions were met, including under-assessed amount exceeding one lakh rupees and obtaining the Central Board of Revenue's sanction. As these conditions were satisfied in the present case, the plea of limitation was deemed meritless.

In conclusion, the court upheld the decision of the learned single judge, dismissing the appeal and affirming the correctness of the judgment. The court found no merit in the contentions raised by the appellants, thereby resolving all issues in favor of the Income-tax Officer.