9911796707
TMI Blog1961 (5) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer, B-Ward, Bikaner, issued a notice to him under section 34 of the Income-tax Act on 14th March, 1959, stating that he had reason to believe that the income of the petitioner for the assessment year 1950-51 had escaped assessment and he proposed to assess the said income and that within thirty-five days of the receipt of the notice the petitioner was required to deliver a return in the form which was attached to the notice. The notice indicates that it was issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, New Delhi. This notice was received by the petitioner on 18th March, 1959. On 18th April, 1959, the assessee wrote to the Income-tax Officer that the notice was not lawful and valid; that it was beyond the jurisdiction of the officer and that it was barred by time and requested the officer to drop the proceedings. Later, the petitioner presented the above application before this court contending that the notice was illegal as it was issued after eight years of the year of account and that in the absence of any reason being mentioned therein as to how and what income had escaped assessment the vague notice could not be the foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal which was accepted on December 31, 1953, and the case was remanded. In the light of the appellate order the Income-tax Officer again concluded the petitioner's assessment. An appeal was again preferred by the petitioner which was accepted by the Assistant Commissioner on December 31, 1959 and now the department has taken an appeal before the Income-tax Tribunal which is still pending. At no stage it was ever alleged that any income of the petitioner during the relevant assessment year had escaped assessment and, therefore the present notice under section 34 has been issued merely to harass the petitioner. On 13th March, 1960 practically at the close of the arguments an application was further submitted on behalf of the Income-tax Officer alleging that subsequent to the presentation of the above petition before this court the petitioner moved an application for transfer of the case from the Income-tax Officer, A-Ward, Bikaner, and on his application the Commissioner of Income-tax by his order dated November 8, 1960, directed that the petitioner's case be transferred to the Income-tax Officer, Wealth tax Circle No. 4, New Delhi. The respondent No. 1 in complianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income profits or gains chargeable to income-tax have escaped assessment for that year or have been under assessed or assessed at too low Page No : 0355 a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under assessed, or assessed at too low a rate or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time and in cases falling under clause (b) at any time within four years of the end of that year serve on the assessee or if the assessee is a company, on the principal officer thereof a notice containing all or any of the requirements w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied for the income of the previous or accounting year and which is compendiously called the assessment year ? The purpose of section 34 of the Income-tax Act is to provide a machinery for assessing that income of an assessee which has escaped assessment. The reason for such an escape may be concealment of income or application of too low a rate or grant of excessive relief or otherwise. The legislature impose several restrictions before this power can be exercised. The period of eight years is one of these limitations. Escape from assessment and consequent taxing of income of given years is only possible if the return has been called for either by general or special notice. Assessment and computation of tax are dependent on the annual Finance Act which prescribes the rates. The question of too low a rate does not arise unless the rate is laid down by the annual Finance Act. It is the financial year or the year of assessment with reference to which escapment of income or applicability of too low rates, therefore obviously relate. An assessee is not called upon to disclose his income during the currency of the previous year technically socalled. No question of its concealment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r collection in due time. It embraces within its scope escape of assessment due to so many reasons. The legislature did not confine the purpose of section 34 merely to the circumstance in which the assessee failed to file his return. To spell out the period of limitation prescribed in this section with reference to the year for which the return of income is presented under section 22, in our opinion, is not giving full effect to the context in which the material expressions occur. Our attention was also invited to Madanlal Mathurdas v. Chunilal, Income-tax Officer [1962] 44 I.T.R. 325; A.I.R. 1960 Guj. 27 and C.W. Spencer v. Income-tax Officer, Madras [1957] 31 I.T.R. 107. Both these cases have taken the view which we have preferred. It was next contended that section 34 being a provision in a fiscal statute even assuming that it was capable of two meanings, in so far as the question of limitation was concerned the one which was favorable to the citizen must be preferred. In our opinion the argument is not sound. Section 34 merely provides a machinery for collecting that part of the exchequer's dues which for some reason has escaped its hands. In Commissioner of Income-tax v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion could be examined in the course of a reassessment proceedings themselves and this court should not investigate into the validity of these notices has also been considered and answered by the aforesaid Supreme Court decision. Both the conditions (i) the Income-tax Officer having reason to believe that there has been under-assessment and (ii) his having reason to believe that such under-assessment has resulted from nondisclosure of material facts, must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiry of four years. The argument that the court ought not to investigate the existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that under assessment has resulted from non-disclosure of material facts, cannot therefore be accepted. In Narayana Chetty v. Income-tax Officer, Nellore [1959] 35 I.T.R. 388; [1959] Suppl. 1 S.C.R. 189; A.I.R. 1959 S.C. 213, it has been laid down that a notice under section 34 is not a mere procedural requirement but affects the validity of the proceedings taken pursuant to this notice. A recent decision of the Assam High Court, Tansukhrai Bodulal v. Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessive relief or excessive allowance by way of loss or depreciation. By this process of elimination it becomes clear that it is a notice which arises out of failure to submit a return. In the reasons recorded by the Income-tax Officer he has pointed out that the assessee was for the first time taxed for the year 1953-54. He was unable to explain his abnormal cash balance. In the officer's opinion this cash balance was fictitious and was designed to accommodate the assessee's profits of later years. The income estimated for the purpose of section 34 was ₹ 1,30,000. Sanction of the Income-tax Commissioner was obtained and notice issued. There is no substance in the contention of the learned counsel for the petitioner when he says that column 7 has been left blank. The words appearing against this column are see reverse . What is set out below apparently relates to column 7. Reading the document thus, the next objection to the validity of the notice namely that the sanction did not precede the issuance of the notice also disappears. The Income-tax Officer recorded his reasons on the 28th of February 1959, and the Commissioner accorded his sanction on March 12, 1959. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been issued and it cannot be described to be invalid or without jurisdiction merely because the specific provision of low has not been mentioned. As the notice in our opinion is not invalid we are not prepared in the exercise of our extraordinary jurisdiction to interfere. While in the circumstances of these two cases we have declined to interfere we cannot help observing that the notices issued to the assessees leave mush to be desired. Statute imposes an imperative duty on an Income-tax Officer to issue a notice before he exercise jurisdiction under section 34 of the Indian Income-tax Act. Issuing of a notice is not a mere formality. The Income-tax Officer's reason to believe is no information to the assessee against whom action is proposed because the reasons remain with the officer and are not communicated to the assessee who is called upon to answer a case. The assessee is left guessing as to the nature of the case he is called upon to meet. The purpose of a notice is to plainly inform its recipient of the grievance which the giver of the notice has against him. This information has to be communicated with clarity and certainty. It is the bounden duty of the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
