1973 (2) TMI 33 - HC - Income Tax

Proceedings under section 34(1)(a) of the Act were initiated with a view to levying tax on the income of the assessees derived by way of their share in the firm, Jagdish Prasad Satya Prakash. That income had already been assessed under section 23B(2). From the assessment order it is clear that the assessees had no other source of income nor is it the case of the department that the income provisionally assessed is less than the income actually earned by the assessees. In these circumstances, it cannot be said that any part of the assessees income had escaped assessment. The mere fact the assessees had not filed their returns did not bring into play section 34(1)(a) of the Act. It must be shown that some income of the assessee had escaped assessment. That clearly is not the case of the department - reassessment proceedings cannot be initiated against a person who has been assessed provisionally under s. 23B(2) even though he did not file his returns provided he has no other source of income

Summary

Issues:
Validity of notice under section 34(1)(a), Limitation and service of notice, Validity of assessment made in the name of the minor through his guardian.

Analysis:
The judgment pertains to three cases where minor sons were admitted to the benefits of a partnership firm, and their income was included in the assessment of their father. The Income-tax Appellate Tribunal rejected the appeals of the minors, who challenged the assessment on various grounds. The Tribunal referred questions to the court regarding the validity of the notice under section 34(1)(a), limitation and service of the notice, and the validity of the assessment made in the name of the minor through his guardian by the Income-tax Officer. The court proceeded to examine the first question concerning the validity of the notice under section 34(1)(a).

The court analyzed the provisions of section 34, which allow for the assessment of income that has escaped assessment. It differentiated between clauses (a) and (b) of section 34, emphasizing that the section becomes applicable only if income has escaped assessment either wholly or in part. In this case, the assessees had been provisionally assessed under section 23B(2) for their share in the firm's income. The court held that a provisional assessment is a valid assessment until replaced by a regular assessment. Since the income of the assessees had already been assessed under section 23B(2), it was deemed that no part of their income had escaped assessment, despite not filing their returns.

Consequently, the court answered the first question in the negative, favoring the assessees and against the department. As a result, no answer was provided to the remaining questions. The court also awarded costs to the assessees in each case, assessing it at Rs. 200. The judgment clarifies the application of section 34 in cases where income has been provisionally assessed, highlighting that the mere failure to file returns does not automatically trigger the provisions of section 34(1)(a) if the income has already been assessed through other means.