TMI Blog1962 (9) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, would attract tax at a rate higher than that at which they had been assessed. Accordingly, he reopened the assessments of these two assessees for the said years and issued notices to them under section 34 of the Act. In the returns filed by the assessees in response to these notices, they declared their status as non-residents and furnished their incomes as they appeared in the original returns made by them. They objected to the proceedings under section 34 of the Act as illegal. The Income-tax Officer, however, assessed them to tax at the rates applicable to non-residents but on the income that arose or accrued in the taxable territories. Against these assessments, appeals were taken to the Appellate Assistant Commissioner, it being contended that section 34 of the Act did not authorise the assessment at the maximum rate, that the notices were invalid inasmuch as they did not contain the necessary particulars required to be stated therein and further that the provision of the Indian Income-tax Act imposing the liability to tax on a non-resident at the maximum rate was unconstitutional as offending article 14 of the Constitution of India. These contentions were overruled. One ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income and total world income assessable for the assessment years 1948-49 . He also indicated that the notice was issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Madras. It will be noticed that all the clauses (a) to (e) referred to above cover the several aspects dealt with in section 34 of the Act by reason of which the Income-tax Officer is enabled to take proceedings under the provision for reassessing the income and the tax. In the present case, however, the contention of the department was that since the assessee is a non-resident having income outside the taxable territories also, he is liable to be taxed at the maximum rate or at a rate dependent upon his total world income under section 17 of the Act. If the assessee fails to furnish his total world income to enable the tax to be levied on the basis of a rate dependent upon such total world income, the Income-tax Officer is authorised to levy the tax at the maximum rate as provided by section 17 of the Indian Income-tax Act. Since the assessees had failed to disclose their status as non-residents, but had in their original returns indicated that they were residents of Panruti an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calling upon him to comply with the requirements of section 22, sub-section (2), would clearly indicate to the assessee that it was a case of reopening of the assessment. Even otherwise, if the assessee had not submitted his return and the assessment year had elapsed, even a notice issued for the first time by the Income-tax Officer under section 22(2) is one which comes within the scope of section 34, for it would be a case where there had been a failure of the assessee to make a return of his income, and the income, profits or gains chargeable to income-tax had escaped assessment for that year. What all the section, therefore, requires is that the notice should indicate that it is a proceeding under section 34 of the Act, which to the knowledge of the assessee it would be, had there been an earlier assessment for that assessment year. It may also be specifically noticed that the requirements of a notice purporting to be the precursor of the reopening of the assessment is not in any way different from the requirements of a notice required to be issued under section 22(2) of the Act. In this provision, the notices which the Income-tax Officer is called upon to issue is to demand a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e terms of the section, as it stands, confined only to that particular item. It may transpire in the course of the proceedings that excessive relief had been given to the assessee and it would be open to the Income-tax Officer to deal with that aspect of the matter also. The intendment behind the section is that the whole of the assessment is thrown open and even if the Income-tax Officer's notice contained only one particular head for reopening the assessment, he is not incompetent to deal with cases of under-assessment or the like which may be disclosed as a result of such reopening. Mr. Kesava Ayyangar referred to Palaniappa Chettiar v. Commissioner of Income-tax A.I.R. 1930 Mad. 126. We are unable to gather anything from this decision which supports the contention at present raised with regard to the requirements of the notice. That was a case where the Income-tax Officer issued a notice under section 34 of the Act (as it stood then) for the purpose of raising the rate of tax on the grounds that the rate originally fixed was too low. The assessees demanded that the Income-tax Officer should reassess his income, that is to say, determine afresh the correct taxable income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve on the assessee...a notice under sub-section (2) of section 22'. The main notice to be issued is, therefore, a notice under section 22(2) of the Act and section 34 only authorises the issue of such a notice, in spite of there having been a previous assessment or in spite of the time for the issue of a notice in the normal way having expired. It is true that when answering a notice issued under the section, the assessee may take a plea of limitation, and for purposes of such a plea, it may be necessary for him to know whether his case is being treated as one under clause (a) or as one under clause (b). It appears to me, however, that whether the case is treated as coming under one clause or the other, will transpire in the course of the assessment proceedings, and it is neither required of the Income-tax Officer nor is it necessary, that he should specify the clause in the notice itself. Even when a clause is specified, it is conceivably that when making the actual assessment, the Income-tax Officer may come to hold that it comes under the other clause..... It seems to us that these decisions completely answer the above contention. It has been mentioned earlier that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax [1960] 39 I.T.R. 418. The question was very shortly disposed of with the observation: A simple reading of the sub-section leaves no doubt that it places no limit to the number of notices that may be issued, so long as they are within the time limit specified in that section. There can be no restriction as to the number of proceedings that can be taken to reopen the assessment where it is found that any income of the assessee has for one reason or another escaped assessment. Whatever arguments might be available to the assessee to claim that section 34 authorises only the reopening of an assessment and not he reopening of a reassessment stand obviated by the decision of the Supreme Court in Lakshman Shenoy v. Income-tax Officer, Ernakulam [1958] 34 I.T.R. 275 ; [1959] S.C.R. 751, where their Lordships held that the word assessment is capable of bearing only a comprehensive meaning and would include reassessment. It follows that solely for the reason that in respect of the two assessment years there had been a reassessment of the assessee's income by proceedings under section 34 does not bar the exercise of the power under section 34 of the Act in reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. This is clearly a case that falls within the scope of section 34(1)(a). It is argued by Mr. Keshava Ayyangar in this regard that there has been no failure on the part of the assessee to disclose this material fact and that at the best it can only be regarded that in consequence of information which the Income-tax Officer came to possess, the assessment had been made at too low a rate. It is alleged that the assessees might have thought that they fell into all the categories of resident, non-resident or resident but not ordinarily resident. This argument is wholly untenable. The factum of residence is a fact which is exclusively within the knowledge of the assessee and so long as the law differentiates the manner in which persons possessing the character of resident or non-resident are assessed, the precise qualification with regard to the residence is a matter which has to be disclosed by the assessee. There has undoubtedly been a failure on the part of the assessee to disclose the material fact. We must repel the argument that the case is one which comes under sub-clause (b). The result is that the second question is answered in the affirmative and against the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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