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TMI Blog1951 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ear in his case. The Income-tax Officer was not satisfied that the return was correct and so on the 9th July, 1948, he served two further notices on the assessee one under Section 24(4) of the Act requiring him to produce his accounts and another under Section 25(2) requiring him to produce any evidence on which he himself might wish to rely. The hearing was fixed for the 20th July, 1948. The assessee did not comply with either of the two notices nor did he appear on the date of hearing. In fact he paid no further attention to the assessment proceedings at all. In those circumstances, the Income-tax Officer made a best judgment assessment under Section 25(5) of the Act on the 20th August, 1948. He determined the income at ₹ 8,687, assessed on it a tax of ₹ 394-14-0 and added a penalty of ₹ 250. It may be stated here that the best judgment assessment was made on the ground of failure to comply with the notices under Sections 24(4) and 25(2) and the penalty was imposed under Section 32(1)(b) which contemplates the same defaults. The assessee appealed against the assessment to the Appellate Assistant Commissioner and the ground urged by him was that no notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the assessment initiated later (1947- 48) without the aid and operation of Section 38(1) of the Act? It appeared to us that the question framed by the Tribunal besides being somewhat ponderous was inadequate because an answer to it one way or the other would leave the validity of the assessment still undecided. The questions framed by the parties were direct in form and as the Tribunal itself has observed put the validity of the assessment in issue by reference to the grounds of defence and attack on which they respectively relied. The Tribunal did not refuse to refer any part of the questions proposed, but framed a question on its own account which it though would cover the view points of the contending parties. It appeared to us that in that attempt the Tribunal had not been very successful. The question it had framed covered only a fraction of the controversy and the contentions of the parties would in no way be disposed of nor the validity of the assessment determined merely by a finding that the assessee's duty under Section 24(1) to file a return of his income was continuing up to the date of the return or that it was not. In view of the unsatisfactory cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablished that the return had come in independently of the notice under Section 24(2) or that in any event a return having come in such return could be a valid basis for the assessment proceeding. A valid return is also necessary for supporting the best judgment assessment made in the case because such assessment was made for non-compliance with notices under Section 24(4) and 25(2) the former of which pre-supposes a return under Section 24 (1) or a notice for a return under Section 24(2) and the latter of which pre-supposes a return under Section 24. The learned Advocate-General contended that the return filed in the case could be taken either as a return under Section 24(1) or as a return under Section 24(3). A return under Section 24(1) is a return filed in response to the public notice and a return under Section 24(3) is a return which a person not having filed a return within the time allowed under Section 24(1) or Section 24(2) files at a subsequent stage. The argument was that the assessment proceeding had commenced with the issue of the general notice under Section 24(1) and had not come to an end, nor had the limitation for making an assessment expired. If the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear is placed under no duty by a notice under Section 24(1) to furnish a return and a person who thinks, rightly or wrongly, that he had no assessable income will furnish none. A return under Section 24(1), whether filed within the time allowed under the section or filed subsequently under the provisions of Section 24(3), will therefore show an assessable income. The return in the present case showed an income of only ₹ 1,242-5-0, whereas the exemption limit for the assessment year 1944-45, we were informed, was ₹ 3,500. A return, which showed no assessable income, could not possibly be treated as a return filed under Section 24(1) or a return called for under that section but filed under Section 24(3), when in fact it was filed in response to a notice under Section 24(2). It is true that there is nothing to prevent a person from filing a return showing an income below the assessable limit, in response to a notice under Section 24(1), but the question we are considering is whether a particular return, not filed in fact under Section 24(1) or Section 24(3), is yet having regard to its contents capable of being treated as a return under the one or the other section. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It may be said that the section only gives a liberty but does not imply a duty but even apart from that section there is nothing in Section 24(1) itself which makes the duty of filing a return conditional on the subsistence of the accounting year as previous in the sense of being immediately antecedent in relation to the year in which the return is filed. In any event, even if the assessee had only a liberty to file a return under Section 24(1) at the time he filed it, the date on which he did so cannot by itself be a circumstance against the return being treated as a return under Section 24(1). But it cannot be so treated for other reasons which I have already stated. The other three alternatives envisaged by the question framed are whether the return was a return under Section 24(2) or in any event a return within the meaning of the Act or no return at all. I do not think that it can be said that it was no return at all, because even if the notice calling for a return be invalid it does not follow that the return that may be filed in response to such a notice will also be invalid. I further think that the return was a return within the meaning of the Act, at least to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de a return under the section. The implication clearly is that in one case the assessment proceedings commence with the service of the notice and in the other case they commence with the submission of the return. The learned Advocate- General referred to the terms of Section 24(3) which provides inter alia that a person who has not furnished a return within the time allowed under Section 24(1) may furnish it at any time before the assessment is made and he contended that the section clearly contemplated the possibility that even in a case where there had been only a notice under Section 24(1) an assessment could be made. The inference suggested was that assessment proceedings commenced with the notice under Section 24(1). But if assessment proceedings commence with the notice under Section 24(1), it should be possible to make an assessment without any return under the section being filed. Such assessment can only be a best judgment assessment but as I have already pointed out a best judgment assessment on account of failure to furnish a return called for by a notice under Section 24(1) is not authorised by Section 25(5). The learned Advocate-General next referred to the terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 24(1) the quantum of the penalty is made dependent on the amount of tax payable which pre-supposes that there must first be an assessment. It therefore appears that so far as Section 24(1) is concerned no assessment proceeding is started by the mere notice under the section and that a proceeding commences only when a return under the section is filed if any such return is filed at all. If no such return is filed an assessment proceeding commences only when a notice under Section 24(2) is served. In so far as it was held in C.V. Govindarajulu Iyer v. Commissioner of Income-tax, Madras [1948] 16 I.T.R. 391; I.L.R. 1949 Mad. 624, and Harakchand Makanji v. Commissioner of Income-tax, Bombay City [1948] 16 I.T.R. 119, with reference to the Indian Income-tax Act, that assessment proceedings commenced with the general notice under Section 22(1), I am with respect unable to agree with the decisions. If the Madras and Bombay view be correct there can be no occasion in any case, where no return has been filed within the assessment year in compliance with the notice under Section 22(1), to issue a notice under Section 34 up to the end of the period of limitation for an assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then was, held that the return could not be taken to be something which it was not and that the assessment made on the basis of a notice under Section 22(2) was invalid. But a notice under Section 34 may be rendered unnecessary by the assessee himself, if he voluntarily files a return after the expiry of the assessment year. In the case of Harakchand Makanji v. Commissioner of Income-tax, Bombay City [1948] 16 I.T.R. 119, also decided by the Bombay High Court, a public notice under Section 22(1) was issued but no notice under Section 22(2) was served and although the assessee filed no return during the assessment year he voluntarily filed one after the expiry of the year and thereupon an assessment was made. Objection being taken to the assessment on the ground that no notice under Section 34 had been served it was held by Chagla, C.J., and Tendolkar, J., that since a return had been made there was no question of income having escaped assessment and consequently no question of a notice under Section 34. It was however added that if before the return had come in the Income-tax Officer himself wished to proceed under Section 22(2) he could not have done so without a notice under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing judgment. It appears to me however from a close examination of the decision of the Federal Court that it does not warrant the proposition sought to be extracted from it. I must add that before us the learned Advocate-General did not base any part of his argument on that decision though his attention was drawn to it but since it is referred to in the order of the Tribunal, I may deal with it in passing. The facts of the case were that the assessees were residents of a partially excluded area in Bihar to which the Income-tax Act applied but to which the Income- tax (Amendment) Acts of 1939 and 1940, the Excess Profits Tax Act and the Finance Act of 1940 had not been extended at the dates of the notices under Sections 22(1) and 22(2). Subsequently before the assessments were made the Acts were extended to the area by the Governor of Bihar with effect from dates prior to the dates of the notices and the Federal Court held that the extension had been validly made. It was then argued that at the dates of the notices the Finance Act of 1940 was not operative in the area in question and since the notices were the foundation of the jurisdiction of the Income-tax Officer, the Governor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Attorney-General v. Aramayo and Others [1925] 9 Tax Cas. 445; [1925] 1 K.B. 86; on appeal [1925] A.C. 634, but I do not think that on the facts of the present case it can be said that there was a waiver. The return was not submitted voluntarily as in the case of Harakchand Makanji [1948] 16 I.T.R. 119, but in compliance with a notice under Section 24(2), as in the case of the Maharaja of Patiala [1943] 11 I.T.R. 202. It was submitted under compulsion in response to a notice which contained various threats. Nor can it be correct in the case of a person like the present assessee to attribute to him knowledge of the right that he was relinquishing. Again by the return that he submitted, the assessee did not offer to be assessed but claimed on the other hand that he was not liable to assessment since he showed an income below the assessable limit. There is also the fact that there was no waiver of anything before the Income-tax Officer issued the notice under Section 24(2) and nothing had been done by the assessee up to and at that point of time which provided jurisdiction to the Income-tax Officer to commence assessment proceedings without issuing a notice under Section 38 which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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