TMI Blog1962 (7) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued under section 22(1) in either year of the assessment years. No special notice was issued against it in either year under section 22(2). Before any proceedings could be taken against it by the Income-tax Officer it itself on September 24, 1953, filed two returns, one for the assessment year 1948-49 showing income from business amounting to ₹ 5,440 and the other for the other assessment year showing income from business amounting to ₹ 6,967. The Income-tax Officer, evidently treating the returns as having been made under section 22(3), started assessment proceedings under section 23; since he professed to act under section 23 and not under section 34(1) he issued no notice to the assessee as contemplated by the latter provision. He issued a notice under section 23(2), examined the accounts of the assessee, rejected them as not being correct and on April 16, 1955, estimated the income for the first year at ₹ 15,000 and odd and that for the second year at ₹ 13,000 and odd and assessed the assessee on these incomes. The assessee preferred an appeal contending that the assessment orders were barred by time. The Appellate Assistant Commissioner held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that year, the Income-tax Officer could within eight years of the end of the assessment year serve on him a notice and could proceed to assess or reassess the income that had escaped assessment. This was the substance of sub-section (1)(a). If income had escaped assessment in spite of the assessee's having given true and full particulars of his income and the Income-tax Officer had information of such escape, he could within four years of the assessment year, serve a notice upon the assessee and assess or reassess him. This was the substance of sub-section (1)(b). An assessment order to which section 28(1)(c) applied was to be made within eight years; this was the first limb of sub- section (3). An assessment or reassessment in a case falling within sub- section (1)(a) was to be made within eight years; this was the second limb of sub-section (3). Every other order of assessment or reassessment was to be made within four years; this was the third limb of sub-section (3). The limit of time imposed by sub-section (3) was not to apply to a reassessment made in pursuance of an order under section 31 or section 33; such reassessment could be made at any time. Section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above that a return filed after the expiry of eight years of the end of the assessment year is no return contemplated by the law and, therefore, an assessment based upon it cannot be an assessment to which section 28(1)(c) applies; it is really a case to which section 28(1)(a) applies. The case exempted from the time-limit of four years by the first limb of section 34(3) is that of an assessment order passed on a return made within eight years, which conceals the particulars of the income or contains deliberately prepared inaccurate particulars. Since an assessment order on a true and complete return must be made within four years it follows that such a return itself must be made within four years in order to be treated as a return made under section 22. Though an assessment order can be made within eight years, if a return is found to be incorrect or incomplete, it would be absurd to say that an incorrect or incomplete return is allowed to be filed under section 22(3) within eight years. It would be wrong to hold that the legislature fixing a limit of four years for the filing of a correct return allowed an incorrect return to be filed within eight years. Any interpretation wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not exempt from the general time-limit of four years. Section 34(1)(a) applies when an Income-tax Officer has reason to believe that income has escaped assessment, either by reason of the omission or failure on the part of an assessee to make a return under section 22 or to disclose fully and truly all material facts necessary for the assessment; in such a case he can, at any time within eight years, serve on the assessee a notice and may assess him, again within eight years according to the law in force in 1948-53. There is a failure or omission to make a return under section 22, if no return is filed before the expiry of four years; I have shown above that a return filed after the expiry of four years is not one contemplated by section 22 at all. Therefore, if no return is filed within four years an Income-tax Officer can serve upon the assessee a notice under section 34 and proceed to assess him within eight years. Before he serves a notice he must have reason to believe that the income of the assessee has escaped assessment and in order that he has such reason there must first have been an escape of the income from assessment. In other words, section 34(1) can apply only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped assessment. On a return filed within four years and before any assessment order is made an Income-tax Officer must proceed as if it had been filed within the period stated in a notice issued under section 22. In Commissioner of Income-tax v. Ranchhoddas Karsondas [1959] 36 I.T.R. 569; [1960] 1 S.C.R. 114 the Supreme Court held that when a voluntary return has been filed it must be deemed to be a return under section 22 and no proceeding under section 34 can be taken. I shall deal with the assessment order for the assessment year 1949-50 first. The return was filed by the assessee before the expiry of four years and before any assessment order was passed; it was, therefore, a return filed under section 22. On the expiry of the period mentioned in the general notice the Income-tax Officer could proceed under section 34(1)(a) on the ground that the assessee's income had escaped assessment on account of its omission or failure to make a return, but as soon as it filed the return, the income could no longer be said to have escaped assessment so long as the return was pending. Therefore, the Income-tax Officer could not proceed to assess the assessee under section 34(1)(a). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was certainly no omission or failure on the assessee's part to make a return; there was no case of escape of assessment and even if there were any, the Income-tax Officer did not become aware of it in consequence of any information received by him. This provision comes into application only when an assessment order has been passed once resulting in escape of income from assessment. It applies when a true and full disclosed return of the particulars of the income is made. I have shown above that so long as a return is pending there cannot arise any escape of income from assessment. Consequently, when a return has been filed, so long as an assessment order has not been passed on it, it cannot be said that income has escaped assessment. There must be in existence escape of income from assessment before an Income-tax Officer proceeds under section 34. Coming to the other assessment order for the year 1948-49, the return, having been filed more than four years from the end of the assessment year, was no return contemplated by section 22 and the Income-tax Officer could proceed under section 34(1) in spite of it. He could issue notice within eight years and assess the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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