TMI Blog1948 (8) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... books of the applicant. Even after the Inspector went to the shop of the applicant no return was forthcoming from the applicant. The Income-tax Officer thereupon issued notices under Section 34 of the Income-tax Act on 25th January, 1945, and in consequence thereof returns were filed. As a result of Section 34 proceedings the Income-tax Officer determined the income of the applicant for the year ending 12th April, 1942, to be ₹ 17,410 an for the year ending 12th April, 1943, to be ₹ 50,731. Notices under Section 28 were also issued by the Income-tax Officer for levying penalty for failure of the appellant to file his statutory returns for the relevant years under Section 22(1), and a penalty of ₹ 1,226-7-0 for the ear ending 12th April, 1942, and ₹ 7,981-3-0 for the year ending 12th April 1943, were levied by he Income-tax Officer. The penalty levied was confirmed by the Appellate Assistant Commissioner on appeal. 3. Before the Bench two objections were raised by the appellant: Firstly, that when the assessment in these cases had been made under Section 34, no penalty could be levied upon the appellant unless there was a default as contemplated by the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent, the Commissioner of Income-tax, in his reply under rule 40, has suggested the following question:― Whether on the assessee's failure without reasonable cause to furnish a return of this total income as required by a notice under Section 22(1), the Income-tax Officer was legally right in levying a penalty under Section 28(1)(a) in the course of proceedings taken by him under Section 34 read with Section 22(2) to assess such income, which had not previously been assessed at all? We however, submit the above question as framed by the respondent to the Honourable High Court for their Lordships' opinion. K. Srinivasan, for the assessee. C. S. Rama Rao Sahib, for the Commissioner. JUDGMENT The judgment of the Court was delivered by RAJAMANNAR, C.J.―The question for decision in this case has been framed by the Tribunal in the following manner:― Whether on the assessee's failure without reasonable cause to furnish a return of his total income as required by a notice under Section 22(1), the Income-tax Officer was legally right in levying a penalty under Section 28(1)(a) in the course of proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied only in respect of defaults and other acts committed in the course of that proceeding only and not in the course of the proceeding which ended with the assessment. He relied upon the ruling of the Allahabad High Court in Mayaram Durga Prasad v. Commissioner of Income-tax, United Provinces*, in support of this contention. In that case (which was decided under the old Act of 1922) the assessee submitted a return for the year in question showing an amount of ₹ 2,650 as his income. This return was accepted and a tax levied on that basis. Subsequently it was discovered that the assessee had made a much larger income and proceedings under Section 34 of the Act were commenced and the assessee was called upon to make a fresh return. This time he made a return showing an income of ₹ 38,327 and the Income-tax Officer accepted the figure. In addition to an assessment made on the income as thus disclosed, the Officer also imposed a penalty on the assessee for concealing particulars of his income and for furnishing inaccurate particulars of his income. The question of law referred to the High Court on these facts was as follows:- When an assessee in answer to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. But apart from this difference in the facts between the present case and the facts in the Allahabad case, we are inclined to the view, that so long as the proceedings under Section 34 relate to the assessment for the same period as the original assessment, the Income-tax Officer will be competent to levy a penalty on any ground open to him under Section 28(1), even though it relates to the prior proceeding. There may be one possible qualification of his power, and that is when the default or the act which is they basis of the imposition of the penalty was within the knowledge of the officer who passed the final order in the prior proceeding and if that officer had failed to exercise his power under Section 28 during the course of the proceeding before him. Possibly in that case he would have no power. But it appears to us that there is nothing in the language of Section 28 which prevents an Income-tax Officer, if he is satisfied in the course of a proceeding under Section 34 relating to a particular period of assessment that a default has occurred under Section 22(1), from levying a penalty. With due respect to the learned Judges of the Allahabad High Court we do not agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to support it. There is not lapse in the sense that after a year there could not be a valid assessment at all by the Income-tax Officer. It has been held by a Bench of the Bombay High Court that if the assessee himself submits a return, though after the end of the year of assessment, the Income-tax Officer can proceed to make a valid order of assessment without an individual notice served upon him under Section 22 and taking action under Section 34. See Harakchand Makanji Co. v. Commissioner of Income-tax, Bombay City*. This shows that there could be no lapse of what was a valid general notice under Section 22(1) which initiated the assessment proceedings. Once assessment proceedings have thus commenced, they can only come to an end by either an order of assessment or an order declaring that no assessment can be made. In this case admittedly there is no such order and when eventually proceedings are taken under Section 34, such proceedings must be deemed to relate to the proceedings which commenced with the public notice under sub-section (1) of Section 22. Finally the learned counsel for the applicant asked us to treat the notice under Section 34 calling upon the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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