TMI Blog1970 (4) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... n 16th August, 1961, and the assessment for the assessment year 1961-62 was completed on 19th August, 1961. While making the assessments the Income-tax Officer accepted the declaration of the assessee regarding the source of her income and indeed the assessment for 1953-54 practically incorporated the declaration itself. On 12th July, 1963, the Commissioner of Income-tax issued a combined notice to the assessee proposing to take action under section 33B of the Income-tax Act and fixing the hearing for 2nd August, 1963. No one appeared before the Commissioner, on the date of hearing and on 2nd August, 1963, the Commissioner after considering the various contentions made by the assessee in her letter dated 29th July, 1963, in reply to the Commissioner's notice, passed a consolidated order. The Commissioner in that order pointed out that the Income-tax Officer had made all the assessments without making any enquiry or investigation into the antecedents of the assessee or into the truth or falsehood of the assessee's story and indeed even without considering the question of jurisdiction. The Commissioner cancelled all the assessments and directed the Income-tax Officer " to do fresh as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in refusing to refer this question for answer to the High Court. Mr. Pal, however, abandoned this point after some time and we need not, therefore, concern ourselves with this question. Mr. Pal's main contention in this reference was as follows : The liability of an assessee to be assessed to income-tax arises under sections 3 and 4 and, though there are various sections providing for the machinery to assess and to collect taxes, the assessee can waive the machinery and submit to assessment without recourse to the machinery sections. Mr. Pal contended that section 22 is not the only section under which returns are or can be made and that an assessee may file returns independently of section 22. He further argued that a condition attaching to section 34 does not apply to section 33B. Mr. Pal spoke of three situations. In the first situation, an assessee files his return of income-tax in time and assessment is made on the basis of that return within four years from the end of the relevant assessment year. In such a case, of course, no difficulty arises at all. In the second situation, though the return is filed in time, the Incometax Officer concerned does not bring it to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity does not depend on assessment. Indeed, assessment is only for the purpose of quantifying the liability. Their Lordships of the Federal Court also refer to the judgment of Lord Hanworth M.R. in W. H. Cockerline Co. v. Commissioners of Inland Revenue , where this same principle had been clearly enunciated. Their Lordships cite a passage from the judgment of Lord Justice Sargant in the case of Williams v. Henry Williams, an unreported decision which had been quoted with approval by Lord Hanworth : " I cannot see that the non-assessment prevents the incidence of the liability, though the amount of the deduction is not ascertained until assessment .... The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified and, when quantified, to be enforced against the subject, but the liability is definitely and finally created by the charging section and all the materials for ascertaining it are available immediately. " Their Lordships of the Federal Court observe that these pronouncements have been accepted without reservation as laying down the true principles of taxation under the Income-tax Act in India. We have no doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed. We have, therefore, no reason to doubt that under the scheme of the Incometax Act there is a clear distinction between chargeability and the actual operation of the charge which is dependent upon the machinery sections. But that is no warrant, in our opinion, for holding that we can ignore the express bar in section 34(3) and permit an assessment or reassessment beyond the period specified therein. Mr. Pal then contended that the period mentioned in section 34(3) of the Act is not like a period of limitation and an assessment proceeding is not in the nature of a suit for adjudication of a civil dispute. Therefore, he argued, if an individual assessee submits himself to the jurisdiction of the Income-tax Officer, there is no reason why that officer in exercise of his power and function as a limb of the administrative authorities who are required by the statute to ascertain the taxable income of individuals and to assess tax on the same should not be able to assess and recover taxes, provided, of course, the assessee concerned is liable to taxation. Mr. Pal drew our attention to certain observations of the Supreme Court in S. S. Gadgil v. Lal Co. I and in Ahmedabad Manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in Ahmedabad Manufacturing and Calico Printing Co.'s case , which we have already set out, are preceded by the following statements : " It must be remembered that if the Income-tax Act prescribes a period during which the tax due in any particular assessment year may be assessed, then on the expiry of that period the department cannot make an assessment. Where no period is prescribed the assessment can be completed at any time but once completed it is final. Once a final assessment has been made, it can only be reopened to rectify a mistake apparent from the record (section 35) or to reassess where there has been an escapement of assessment of income for one reason or another (section 34). " It is quite clear to us that whatever may be the nature of the jurisdiction exercised by the income-tax authorities, their power to make assessments lapses completely upon the expiry of the periods prescribed in the Income-tax Act. The observation of the Supreme Court that the sections prescribing the periods " do not create an exemption in favour of the assessee or grant an absolution on the expiry of the period " and that " the liability may again be exigible " must be read wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn must, be filed before the time mentioned in section 34(3). " For the purpose of the instant case we derive two cardinal principles from the Supreme Court decision in Raman Chettiar's case . They are as follows : (i) All returns except those which are filed upon a valid notice under section 34 are to be treated as returns within section 22(3). The distinction that is often made between a return made under section 22(3) in response to a notice under section 22(1) or section 22(2) and a return made in response to a notice under section 34 by describing the former return as voluntary and the latter as not voluntary is rejected by the Supreme Court. (ii) A return under section 22(3) must be filed before the time mentioned in section 34(3). Once we accept these principles I fail to see how we can escape the conclusion that in the instant case the Tribunal was right in holding that the returns filed by the assessee for the assessment years 1953-54 to 1956-51 on 9th August, 1961, were invalid. The Supreme Court has in the case of Commissioner of Income-tax v. Ranchhoddas Karsondas dealt with sub-sections (1), (2) and (3) of section 22 and with section 34 of the said Act. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of four years from the end of the year in which income, profits or gains were first assessable. A proviso, however, allows one year from the date of the service of the notice for the completion of the assessment.... It is, therefore, quite clear that the extra period is available only if a notice under sub-section (1) of section 34 has been issued within the time therein limited. This takes us to section 34(1).... It would appear ... that if the return filed ... was a return of income, there was no failure or omission on the part of the assessee, so as to bring the matter within section 34(1)(a) of the Act, and sub-section (3) of section 34 would then apply to the case limiting the period to four years." As a result of a series of Supreme Court decisions the position is now very clear that sub-section (3) of section 34 in effect withdraws the power of assessment from the Income-tax Officer after a period. It is futile to say that the machinery of assessment is there. As Mr. Mitra suggested, the machinery after the expiry of the period is like a motor without any fuel. At this stage we must briefly refer to the decision of the Madras High Court in the case of S.Santosha N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee after the period of four years from the end of the year in which the income was first assessable is non est in law and does not preclude the Income-tax Officer from initiating proceedings under section 34 of the Income-tax Act and making an assessment order thereon, ignoring the voluntary return. It was specifically held that the principle laid down by the Supreme Court in the case of Ranchhoddas cannot be extended to cases where the voluntary return is submitted after the expiry of four years from the proper assessment year. In Commissioner of Income-tax v. S. Raman Chettiar the Supreme Court had an occasion to consider the same point and also to consider the effect of their own judgment in Ranchhoddas's case as well as the Madras High Court judgment in the case of Santosha Nadar and also the judgment in the case of Bhagwandas Amersey . The Supreme Court held that the condition made in both the Madras and the Bombay cases that the return must be filed before the time mentioned in section 34(3) was satisfied in the case before the Supreme Court. By implication, therefore, the Supreme Court accepted the correctness of the judgment in Santosha Nadar's case . In this conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer, which are very apposite for our purpose in this case. The observations are as follows : " It must be remembered that if the Income-tax Act prescribes a period during which the tax due in any particular assessment year may be assessed, then on the expiry of that period the department cannot make an assessment. Where no period is prescribed the assessment can be completed at any time but once completed it is final. Once a final assessment has been made, it can only be reopened to rectify a mistake apparent from the record (section 35) or to reassess where there has been an escapement of assessment of income for one reason or another (section 34). Both these sections which enable reopening of back assessments provide their own periods of time for action but all these periods of time, whether for the first assessment or for rectification, or for reassessment, merely create a bar when that time passed against the machinery setup by the Income-tax Act for the assessment and levy of the tax. They do not create an exemption in favour of the assessee or grant an absolution on the expiry of the period. The liability is not enforceable but the tax may again become exigi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e included in a notice under sub-section (2) of section 19, and may proceed to assess or reassess such income, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that section. " The Supreme Court held that the words " at any time " in section 19(3) of the Assam Agricultural Income-tax Act, 1939, are not to be limited to the year of assessment. If a return of agricultural income is voluntarily submitted by an assessee under section 19(3) after the expiry of the relevant assessment year, then section 30 of that Act relating to escapement of income will not apply and an assessment on the basis of the return submitted by the assessee can be completed even after the expiry of the three years mentioned in section 30. In such a case no notice either under section 19(2) or under section 30 need be given. This case, in our opinion, cannot help Mr. Pal for the simple reason that the return in this case had actually been filed on 31st May, 1958, which was within the period of three years from the end of the relevant financial year. In the light of the foregoing considerations, we come to the conclusion that the answer to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
