TMI Blog1964 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SUBBA RAO J.--This appeal by special leave is directed against the order of a Division Bench of the High Court of Judicature at Allahabad holding that the Income-tax Officer, in the circumstances of the case, went wrong in initiating proceedings under section 34(1) of the Indian Income-tax Act, 1922, hereinafter called the Act, in respect of the assessment year 1942-43. The facts may briefly be stated. The assessee was a holder of an impartible estate in the district of Ajmer. On March 25, 1944, the Income-tax Officer assessed him to income-tax for the year 1942-43. On April 5, 1945, on the ground that two items of the assessee's income, namely, syar (forest) income and interest income, were not included in the original assessment, a notice under section 34 of the Act was issued to him. In response to the said notice, the assessee filed a return wherein he disclosed fully and completely the particulars of his interest income, but raised the plea that his forest income was not taxable. The Income-tax Officer, by his order dated July 12, 1945, made a revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctness of the imposition of tax thereon, but that order had become final ; it further held that the said order did not invalidate the entire proceedings taken under section 34 of the Act and, therefore, the Income-tax Officer could not take proceedings afresh under section 34 of the Act. In the result the High Court answered the question in the negative. Hence, the appeal. Mr. Rajagopala Sastri, learned counsel for the revenue, contended that the interest income had escaped assessment and, therefore, the Income-tax Officer was competent to initiate proceedings under section 34(1)(a) of the Act for assessing the same. Mr. Viswanatha Sastri, learned counsel for the respondent, on the other hand, argued that the assessment made by the Income-tax Officer pursuant to the notice issued under section 34 of the Act was in its entirety set aside by the Tribunal on the ground that there was no " discovery " within the meaning of section 34 of the Act and that that order had become final and, therefore, the Income-tax Officer could not initiate fresh proceedings under that section on the principle of res judicata. To appreciate the contentions of the parties it is necessary to notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer did not come into possession of definite information leading to a " discovery " and, therefore, he could not initiate proceedings under section 34 of the Act. It is true that the Tribunal had committed a mistake in setting aside the reassessment order in respect of the interest income also ; but, so long as that order stands, it comprehends both the incomes. The Income-tax Officer did not take any further proceedings by way of reference to the High Court on any question of law arising out of the order of the Tribunal ; nor did he take any proceedings under section 35 of the Act to have the order corrected on the ground of mistake. With the result the order has become final. The question, therefore, is not whether the order of the Tribunal in so far as it related to the interest income was made by inadvertence or under a mistake, but whether the Income-tax Officer could initiate proceedings over again under section 34 of the Act in derogation of the finding given by the Tribunal that the Income-tax Officer did not " discover " that the income had escaped assessment. The Income-tax Act is a self-contained one. It creates a hierarchy of tribunals with original, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments are sections 34 and 35. If the Appellate Tribunal committed a mistake under section 35 it can be rectified within four year from the date of the order. In the present case it was a clear case of mistake, for the Tribunal set aside the order of reassessment in respect of the interest income, though its validity to that extent was not disputed. But for one reason or other the revenue did not resort to the obvious remedy and allowed the mistake to remain uncorrected. In these circumstances, can section 34 of the Act be resorted to ? Learned counsel for the revenue says that section 34(1)(a), as amended in 1948, confers such a power on the Income-tax Officer. The material part of section 34, before amendment, read : " (1) If in consequence of definite information which has come into his possession the Income-tax Officer discovers that income, profits or gains chargeable to income-tax have escaped assessment in any year. . . " Section 34(1)(a), as amended in 1948, reads : " If the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee . . . to disclose fully and truly all material facts necessary for his assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd even those of the High Court and the Supreme Court with his changing moods. The decisions cited by the learned counsel for the revenue do not countenance such a contention. Chakravartti C.J. in R. K. Das Co. v. Commissioner of Income-tax, speaking for the Division Bench, only decided that the Income-tax Officer could not make a reassessment unless he issued the prescribed notice and issued it in a valid form. As the notice under section 34 of the Act issued therein was held to be bad inasmuch as the Income-tax Officer did not take the sanction of the Commissioner, the learned Chief Justice held that the returns filed pursuant to such notice was also bad. We are not here concerned with that aspect of the case. The judgment of this court in Commissioner of Income-tax v. Maharaja Pratabsingh Bahadur of Gidhaur held that, as the earlier notice issued under section 34(1) of the Act without the sanction of the Commissioner was bad, the entire proceedings for reassessment were illegal. There was an observation at the end of the judgment to the effect that " there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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