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TMI Blog1979 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... upholding the order of the Appellate Assistant Commissioner cancelling the order refusing registration under section 26A of the Indian Income-tax Act, 1922 ? " The respondent-assessee was a partnership firm and during its assessment for the assessment year 1956-57, the accounting period ended on June 21, 1955, the ITO found that the assessee-firm had been dissolved on April 18, 1956, and for the period from June 22, 1955, to April 18, 1956, relevant to the assessment year 1957-58, he wanted to make a premature assessment under s. 25(1) of the Act and hence gave a notice under s. 22(2) on December 20, 1956. In pursuance of that notice the assessee filed a return on March 18,1957, showing an estimated income of Rs. 1,40,000. On 762 the same day, the ITO made a provisional assessment under s. 238 of the Act and determined a sum of Rs. 57,032 as tax payable by the assessee. The assessee did pay that amount. Subsequently, on April 9, 1958, the assessee filed a revised return showing an income of Rs. 1,82,249 mentioning in the return that it was for the year 1957-58, the accounting period ending on April 17, 1956. The ITO completed the assessment on February 28, 1962, determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs as may be required by the notice) his total income and total world income during that year. The proviso gave a discretion to the ITO to extend the date for the delivery of the return in the case of any person or class of persons. Sub-section (2) read as under : " (2) In the case of any person whose total income is, in the Income-tax Officer's opinion, of such an amount as to render such person liable to income-tax, the Income-tax Officer may serve a notice upon him requiring him to furnish within such period not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total income and total world income during the previous year. " It would be seen that the scope of each of these two sections was entirely different. The corresponding provisions are contained in s. 139(1) and (2) of the I.T. Act, 1961, and the question whether a return can be demanded under sub-s. (2) before the expiry of the time allowed to file a return under sub-s. (1) has expired came up for consideration before a Division Bench of this cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on the entire business income, computable under whatever head, of the period between the end of the previous year relevant to that assessment year and the date of such discontinuance,in addition to the assessment, if any, made on the income of the previous year. In CIT v. Srinivasan and Gopalan.[1953] 23 ITR 87 at page 97 the Supreme Court laid down that the words of s. 25(1) " do not empower the Income-tax Officer to make a cumulative assessment in respect of profits earned in two different accounting periods or entitle him to merge the profits of two years into one total sum and apply to them the rate of one of the financial years. All that the section authorises the Income-tax Officer to do is that it gives him an option to make a premature assessment on the profits earned up to the date of discontinuance in the year of discontinuance itself instead of in the usual financial year ". This sub-section imposes a liability of premature assessment on the assessee. It confers no benefit on him and as explained in CIT v. Chugandas and Co. [1965] 55 ITR 17 (SC) at p. 23 : " The reason of the rule contained in section 25(1) is to prevent loss of revenue by the assessee discontin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law given prior to the 26th of January, 1950, is binding on all courts within the territory of India after January 26, 1950, as would appear from a combined reading of arts. 141 and 374(2) of the Constitution, vide Arumugam v. State of Madras, AIR 1951 Mad 115, Kishori Lal Potdar v. Devi Prasad Kejriwal, AIR 1950 Pat 50 [FB] and Laxmibai v. State of Madhya Pradesh, AIR 1951 Nagpur 94 [FB]. From what has been discussed above, it would appear that in the instant case the ITO could give a notice under s. 22(2) read with s. 25(1) of the Act if in his discretion he wanted to make an accelerated assessment for the disputed broken period, that is, from June 22, 1955, to April 18, 1956, relevant for the assessment year 1957-58 and the notice given by him on December 20, 1956, was an absolutely valid and legal notice. Apart from that the jurisdiction of the ITO to assess and the liability of the assessee to pay the tax were not conditional on the validity of the notice. However, on behalf of the assessee our attention was invited to a Division Bench decision of this court rendered in Abdul Fatteh v. State of U.P. [1964] 53 ITR 592. That was a case under the U.P. Agrl. I.T. Act. Under that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference that that was a case under s. 34(1) of the Art where the issue of a notice as prescribed by law is a condition precedent to the commencement of proceedings in exercise of the jurisdiction to assess. In that case, the assessee had omitted to file a return of his income in respect of the calendar year 1945 and the ITO issued a notice to him under s. 34. Even then the assessee did not file any return, but when informed by the ITO that if he did not file a return before a particular date penalty will be leviable, the assessee filed a return. Meanwhile, the ITO realised that the notice given by him might be illegal as he had not obtained the permission or sanction of the Commissioner and issued a fresh notice under s. 34 after receiving the Commissioner's sanction. No fresh return was filed and an assessment was made on the basis of the return filed earlier. The question which arose was whether that return could be regarded as a voluntary return under s. 22(3) on the basis of which a valid assessment could be made. The view taken by the Calcutta High Court was that the return filed by the assessee in response to the notice issued earlier could not be treated as a volunta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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