TMI Blog1940 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... his Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section : Provided that the tax shall be charged at the rate at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be. The question at issue was formulated in the reference as follows : Where the Income-tax Officer has, on such materials and information as are available to him, reason to believe that income from any of the heads of income described under Section 6 of the Indian Income-tax Act-in the present instance, from ' business ' and ' other sources '-which should have been assessed in the year of assessment has escaped assessment, and, as a result of such enquiries and investigations as are possible at that stage, has been satisfied as stated in paragraph 3 of the statement that a prima facie case has been made out against the assessee for assessment under Section 34 of the Act, whether, on a true construction of Section 34 of the Act, it is not open for the Income-tax Officer to initiate proceedings under Section 34, affording at the same time ample opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a period more than three years prior to the year previous to the year of assessment. Section 23 provides for the making of the assessment. Sub-section (1) requires the Income-tax Officer, if he is satisfied that the return made under Section 22 is correct and complete, to assess the total income and to determine the sum payable. Under sub-section (2) if the Income-tax Officer has reason to believe that the return is incorrect or incomplete he must serve on the person who made the return a notice requiring him either to attend at the Income-tax Officer's office or to produce any evidence relied on in support of the return. Sub-section (3) provides that the Income-tax Officer, after hearing such evidence as the person who made the return may produce and such other evidence as the Income-tax Officer may require on specified points, shall by an order in writing assess the total income and determine the sum payable. Sub-section (4) makes provision for an assessment by the Income-tax Officer to the best of his judgment if the assessee fails to make a return or to comply with the terms of the notices issued to him. This whole procedure, it may be recalled, not only applies on first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped assessment. I hereby require you to deliver to me, not later than the 9th March, 1934 or within 30 days of the receipt of this notice, a return in the attached form of your income from all sources which was assessable in the said year ending the 31st March, 1933. On 22nd March, 1934, the respondents filed a new return showing the same loss as was shown in the original return. The Income-tax Officer on 21st May, 1934, issued further notices under Sections 22(4) and 23(2) and thereafter further procedure followed, including applications by the respondents to the High Court for the purpose of preventing the Income-tax Officer from proceeding with a new assessment, on the ground, inter alia, that Section 34 had been put into operation without giving the respondents an opportunity of being heard. It is not, however, necessary to discuss these proceedings, because eventually the convenient and competent course was taken of staying proceedings under Section 34 till the question at issue should be settled on a case stated under Section 66(1) of the Act. Learned Counsel for the respondents submitted an argument that the facts alleged did not bring the case within the scope of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f it were introduced by the words If the Income-tax Officer is satisfied or the words If it is found . But this suggestion is not in itself helpful to the respondents, since the words proposed to be implied do not carry with them by a further implication a direction to hold a quasi-judicial enquiry ; and the real question is whether the section should be read subject to an implied proviso that the Income-tax Officer shall not apply the procedure prescribed by the section except after a decision taken in a quasi-judicial enquiry. The section, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable, ut res valeat potius quam pereat. In the present instance two considerations are in their Lordships' opinion decisive. First, no powers are imposed by the section on the Income-tax Officer to convene the assessee, or to issue notices calling on him to produce documents, though these powers are essential if the Income-tax Officer is to conduct a quasi-judicial enquiry before deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23(2) and (3), and in that enquiry the assessee has a statutory right to appear and to produce evidence. Therefore a construction of Section 34 which requires a quasi-judicial enquiry to be held before the powers under the section can be operated would result in mere duplication of procedure and in two enquiries of the same kind, into the same matter, conducted by the same official, and without any advantage to the parties. A construction so unreasonable and unpractical ought not to be preferred when another construction is open. Accordingly their Lordships are of opinion that the Income-tax Officer is not required by the section to convene the assessee, or to intimate to him the nature of the alleged escapement, or to give him an opportunity of being heard, before he decides to operate the powers conferred by the section. In the opinion of their Lordships the view which the learned Judges of the High Court have taken of the section is too narrow, and the notice sent to the respondents on 8th February, 1934, is in form a competent preliminary to a new assessment. The question in the reference is so framed that an answer to the first branch in the affirmative and to the second ..... X X X X Extracts X X X X X X X X Extracts X X X X
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