TMI Blog1964 (12) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 1950-51. In pursuance of that notice, the petitioner filed his return of income indicating ₹ 6,482 as his total income in accordance with the original order of assessment. The respondent, however, held that the amount of ₹ 35,502 credited to the account of the petitioner in the books of the said firm as his capital, was income from undisclosed sources, and by his assessment order dated August 22, 1957, he further held that the amount of ₹ 35,502 was concealed income of the petitioner from undisclosed sources and was therefore liable to be taxed in his hands for the assessment year 1950-51. In consequence of this order, the petitioner filed an appeal before the Appellate Assistant Commissioner in which he contended that the said assessment was invalid and, in any event, the amount of ₹ 35,502, alleged to be the concealed income, could not be assessed for the assessment year 1950-51 but could only be assessed, if at all, in the assessment year 1949-50. The Appellate Assistant Commissioner upheld the petitioner's contention and directed the respondent to assess the amount of ₹ 35,502 treating it as income from undisclosed source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso to section 34(3), it would amount to a notice in any other case within the meaning of clause (iii) of the first proviso to section 34(1), and in such a case the sanction which is required is only that of the Commissioner of Income-tax. In view of this decision, the second ground urged in the petition cannot survive. Mr. Kaji in fact conceded that there is no longer any force in that contention. Therefore, the only ground that remains for consideration is the first ground, namely, whether the notice was valid though it was issued after the lapse of eight years after the assessment year in view of the fact that the escaped income admittedly was less than rupees one lakh. The assessment year in respect of which the amount of ₹ 35,502, being income from undisclosed sources, was said to have escaped assessment is the year 1949-50 and the notice having been issued on December 15, 1958, was obviously after the expiry of eight years after the assessment year 1949-50. As section 34 stood at the material time, clause (a) of sub- section (1) thereof, which admittedly applied, provided that if the Income- tax Officer had reason to believe that by reason of the om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellate Assistant Commissioner, the second proviso to sub-section (3) of section 34 would have to be considered. That proviso lays down: Nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27, or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A. The question then is whether the direction given in the aforesaid order by the Appellate Assistant Commissioner is a direction as envisaged by this proviso, and whether it is a direction which saves the impugned notice. Such a question, on facts similar to the facts in the present case, arose before the Supreme Court in Income-tax Officer, Sitapur v. Murlidhar Bhagwan Das [1964] 52 I.T.R. 335 (S.C.). In that case, the respondent-firm was assessed to income- tax under section 23(4) for the assessment year 1949-50 on the ground that the notice issued under sub-sections (2) and (4) of section 22 had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined to the assessment year which was the subject-matter of the appeal or revision. After examining the legislative history of section 34 culminating in the enactment of this proviso, the Supreme Court negatived the contention urged by the department and held that under the Income-tax Act, a year was the unit of assessment and that the decision of an Income-tax Officer given in a particular year did not operate as res judicata in the matter of assessment of the subsequent years. The Supreme Court further held that the jurisdiction of the tribunals in the hierarchy created by the Act was no higher than that of the Income-tax Officer and that it was also confined to the year of assessment. The Supreme Court also held that the jurisdiction of the Appellate Assistant Commissioner under section 31 was strictly confined to the assessment order of a particular year under appeal, that the assessment or reassessment made in consequence of or to give effect to any finding or direction contained in an order under section 31 must necessarily relate to the assessment of the year under appeal and that the second proviso to section 34(3) only lifted the ban of limitation and did not enlarge the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 4 of Act 1 of 1959, inter alia, provides that no notice issued under clause (a) of sub-section (1) of section 34 at any time before the commencement of Act 1 of 1959 shall be called in question in any court, tribunal or other authority, merely on the ground that at the time the notice was issued, the time within which such notice should have been issued under that section as in force before its amendment by clause (a) of section 18 of the Finance Act, 1956 (XVIII of 1956), had expired. But it will be noticed that in sub-section (4), the crucial words are that at the time of the issue of the notice the period of eight years specified in that sub-section (i.e., sub-section (1)) before its amendment by clause (a) of section 18 of the Finance Act, 1956, had expired in respect of the year to which the notice relates. It is clear that sub-section (4) relates to cases to which sub-section (1) of section 34, as it stood prior to April 1, 1956, applied and to which there was a time-limit of eight years, and not to cases to which that sub-section as amended by the 1956 Act, whereby that timelimit was removed, applied. Corresponding words are also to be found in section 4 of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision that the court had to consider for the applicability of section 4 was section 34(1)(a) as it stood as a result of the 1948 amendment, for that was the section in force on the date the notice was issued. It is thus clear that what section 4 of the 1959 Act did was to validate a notice issued under section 34(1)(a) even though it was invalid by reason of its having been issued after the expiry of eight years prescribed for it under the 1948 amendment which was the section as it stood prior to the 1956 amendment. A similar construction has also been given to these two provisions by a Division Bench of the High Court at Bombay in Omkarmal Meghraj v. Commissioner of Income-tax [1960] 38 I.T.R. 369. At pages 388 and 389 of the report, dealing first with section 2 of Act 1 of 1959 which introduced sub- section (4) in section 34, the learned judges observed that the meaning of that section was fairly plain. A notice for assessment or reassessment under section 34(1)(a) after the amendment Act 1 of 1959 might be issued at any time even though the period of eight years prescribed by that sub-section before it was amended by the Finance Act of 1956 had expired. Similarly, by sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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