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1983 (1) TMI 48

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..... he petitioner filed two returns of his income for the assessment year 1978-79, the relevant accounting year having ended on March 31, 1978. One return was filed by the petitioner in his status as an individual and other in the status of HUF. In both the returns the petitioner included the share of income of the assessee from the property said to be owned by the co-ownership concern, M/s. Sadhna Enterprises. The income disclosed by the assessee in the returns was Rs. 452 and Rs. 160, i.e., below the taxable limit. It is alleged that the respondent made enquiry into the returns filed by the petitioner. However, on March 23, 1981, the respondent sent a letter (annex. 'C') to the petitioner stating that as the returns are claimed to have been f .....

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..... this notice is being challenged separately. The petitioner has not prayed for any relief in this petition in respect of the said notice (annex. ' E ') and, therefore, the question of the legality of the said notice does not fall for consideration in this petition. Along with the return the respondent filed a copy, R-3, of the proceedings dated March 23, 1981, which contains reasons for issuance of notice under s. 148 of the Act. In annex., R-3, it is stated as follows: " Record of proceedings in the assessee's case clearly indicates that proceedings for assessment were wrongly continued on invalid return. Fresh proceedings are considered necessary for obtaining a valid and legal return with the issue of notice under sec. 148 for the reas .....

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..... its was disclosed by the assessee in the foot-note to the return voluntarily filed by him. On these facts, after considering the difference of opinion between the High Courts of Bombay and Calcutta, the Supreme Court held as follows (p. 576): " We are unable (and we say this with due respect) to accept the view adumbrated in the Calcutta cases. The contrary view is expressed by the Bombay High Court in the earlier case of Harakchand Makanji and Co. v. Commissioner of Income-tax [1948] 16 ITR 119, and in the judgment under appeal. That view was accepted by the Madras High Court in P. S. Rama Iyer v. Commissioner of Income-tax [1957] 32 ITR 458, and also, in our opinion, is the sounder view of the two. In the earlier of the two Bombay cases, .....

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..... the return already filed, there was neither in omission nor a failure on the part of the assessee, nor was there any question of assessment 'escaping'. The notice under section 34(1) was, therefore, invalid and the consequent assessment, equally so." The ratio of the aforesaid Supreme Court decision applies to the present case with full force. In the present case, the returns filed by the assessee disclosing income below taxable limit were good returns and if assessments were framed on the basis of those returns, the assessments could not have been assailed oil the ground that they were based on invalid returns. The respondent seems to have lost sight of the aforesaid decision of the Supreme Court in holding that the returns filed by the .....

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..... cannot be proceeded with for making of regular assessments also deserves to be quashed. According to the Department, the Sadhna Enterprises of which the petitioner is a member is an association of persons and has to be assessed as such. The petitioner contends that the property purchased by the petitioner and others under the name and style of Sadhna Enterprises is co-ownership property and, therefore, income therefrom deserves to be assessed under s. 26 of the Act. The respondent has also issued notices to the petitioner and other members of the Sadhna Enterprises to show cause why they should not be assessed as an association of persons. The respondent shall be free to proceed with the assessment of Sadhna Enterprises in accordance with .....

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