TMI Blog1982 (7) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee from pawn-broking business for the assessment years 1964-65 and 1965-66 had escaped assessment. He, therefore, served notices u/s. 148 for these two years on the assessee on 3rd February, 1967. No status was shown in those notices. The notices also did not have any column for that purpose. In response to these notices the assessee filed returns on 17th February, 1967, showing the status of HUF on which the ITO completed the assessments determining the total income at Rs. 34,759 for the assessment year 1964-65 and Rs. 29,507 for the assessment year 1965-66. The assessee filed appeals before the AAC and contended that the assessments were illegal and ab initio void. It was pointed out that whereas the assessments were completed in the status of HUF, the notices u/s. 148 were issued in the name of Sri Keshardeo Bubna without giving any indication of the status of the assessee. It was argued that the notices u/s. 148 which were addressed to the individual, Sri Keshardeo Bubna, could not be made a valid foundation for proceedings to reassess the income of the HUF of which Sri Bubna was the karta. The AAC held that the notices were defective and not valid in the eye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO issued a notice u/s. 34 of the Indian I.T. Act, 1922, on April 3, l948. A return was filed by the assessee pursuant to the notice on September 4, 1948. Prior sanction of the Commissioner for issue of the notice u/s. 34 had not been obtained; the assessee also disclosed his income below the, taxable limit. The proceedings for assessment were dropped by the ITO. In the case of assessment proceedings for the year 1945-46, the Appellate Tribunal held that a sum of Rs. 46,760 was assessable in the assessment year 1944-45. Thereupon, the ITO issued a notice u/s. 34 on February 27, 1953, in respect of the assessment year 1944-45, and passed an assessment order on June 30, 1953. The validity of the notice issued u/s. 34 on February 27, 1957, and the assessment made pursuant thereto on 30th June, 1953, was challenged. It was argued on behalf of the assessee that " in this case assessment could have been made by the ITO till March 31, 1949, under section 23 treating the return as one made under section 22". The Supreme Court in that context observed as follows (p. 634): " Section 22(3) permits an assessee to furnish a return at any time before the assessment is made. By virtue of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be followed. In our opinion, there is no conflict between the two decisions of the Supreme Court that has been cited before us. In the case of CIT v. K. Adinarayana Murthy [1967] 65 ITR 607 (SC), a notice u/s. 34 was issued for the assessment year 1949-50 on March 22, 1957, in the status of an individual. A return had been filed by the assessee pursuant to that notice. The ITO, however, dropped the proceedings pursuant to the first notice, and issued a fresh notice u/s. 34 on February 12, 1958, which was served on the assessee describing the assessee as an HUF. The question that came up before the Supreme Court was whether it was competent for the ITO to issue the second notice dated February 12, 1958, ignoring the return already filed by the assessee in pursuance of the first notice u/s. 34. It was argued before the Supreme Court that the assessee filed his return in the Status of an HUF in response to the first notice and the ITO ought not to have ignored that return. The Supreme Court repelled that argument and observed (p. 610) : " We are unable to accept the argument put forward on behalf of the,, assessee as correct. The Income-tax Officer could not have validly acted on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act is wrongly issued to the, assessee in the status of an ' individual ' and not in the correct status of 'Hindu undivided family' the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction. " It has to be borne in mind that when the notice dated March 22, 1957, was issued, the ITO could not lawfully make an assessment under s. 23 and the assessee could not file a valid return of income for the assessment year 1949-50. The proceedings for assessment had become barred by limitation and the only way an assessment could have been made on that date was by taking recourse to the provisions of s. 34. By issuing a notice u/s. 34 in the status of an individual, the ITO could not have assessed the assessee in the status of an HUF. Even if the assessee filed a return voluntarily is an HUF after limitation had set in, the ITO could not proceed to assess the HUF without invoking the jurisdiction for doing so by issuing a proper notice u/s. 34. Seen in the context of the facts of the two cases, there does not appear to be any conflict between the two judgments of the Supreme Court. The facts of the case before us are similar to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice has been issued u/s. 148 assessment will have to be done under the provisions of the I.T. Act as if the notice was a notice u/s. 139(2) of the I.T. Act. This has been specifically provided by s. 148. Therefore, there is no question of two alternative procedures for assessment being open to the ITO, one in case of a notice u/s. 148 and another in case of regular assessment u/s. 143. It has also been argued that unlike the repealed Act, the Act of 1961 provides for an assessment under s. 147 itself. It has been argued that under the old Act u/s. 34 only a notice could be issued but the assessment had to be done u/s. 23 whereas under the new Act it has been specifically provided that u/s. 147 " the Income-tax Officer may assess or reassess ". The phraseology used in s. 34 is that the ITO " may proceed to assess or reassess ". It has been argued that the significance of the difference between the two phraseologies " proceed to assess and reassess " has been pointed out by the Supreme Court in the case of Indian .Aluminium Cables Ltd. v. Excise and Taxation Officer AIR 1977 SC 540 ; [1977] 39 STC 19 (SC). In our opinion, the scheme of assessment proceedings u/s. 34 of the repealed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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