TMI Blog1959 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... by the High Court of Judicature at Bombay has been filed by the Commissioner of Income-tax, Bombay, against Ranchhoddas Karsondas of Bombay (hereinafter referred to as the assessee) under section 66A of the Indian Income-tax Act. The facts leading up to this appeal are as follows : For the assessment year 1945-46, a public notice under section 22(1) of the Income-tax Act (hereinafter called the Act) was issued, requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income-tax to furnish, within such period not being less than sixty days as might be specified in the notice, a return of his income in the prescribed form and verified in the prescribed manner. This notice was published on or about May 1, 1945. The assessee did not make a return of his income. The Income-tax Officer, while examining the books of account of a partnership called the "Assar Syndicate" of which the assessee was a partner, found that in the account year corresponding to the assessment year 1945-1946, there were six cash credits aggregating to Rs. 59,026 in the name of the assessee's wife, Before, however, the Income-tax Officer could tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before the High Court, it was again contended by the assessee that since he had submitted a return under section 22(3) of the Act on January 5, 1950, the assessment, if any, had to be completed before March 31, 1950, as required by section 34(3) of the Act. He also contended that he was entitled under section 22(3) to make a "voluntary" return on the date he did, and with a voluntary return before the Income-tax Officer, there was no scope for the issuance of a notice under section 34. The High Court upheld the contentions of the assessee, and gave its opinion that the Department ought to have issued a notice under section 22(2) within the assessment year, and if no return was made within the time fixed by the notice, the Department should have proceeded under section 23(4) to a "best judgment" assessment. The other alternative for the Department was to issue a notice under section 34 of the Act, if the period for sending a notice under section 22(2) had expired. But it could not issue a notice, under section 34 after a return was already made before it, and the benefit of the extended period of limitation or assessment available under the first proviso to sub-section (3) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 23 to which clause (c) of sub-section (1) of section 28 applies, shall be made after the expiry of four years from the end of the year in which income, profits or gains were first assessable. A proviso, however, allows one year from the date of the service of the notice for the completion of the assessment. It reads, omitting matters not relevant here : "... where a notice under sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if such period exceeds the period of...... four years,........." It is, therefore, quite clear that the extra period is available only if a notice under sub-section (1) of section 34 has been issued within the time therein limited. This takes us to section 34(1). Section 34(1), omitting parts not relevant, reads : "(1) If-- (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22, for any year....,or (b) notwithstanding that there has been no omission or fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections, discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made." It will be seen from this, that, as the Bombay High Court correctly pointed out, there is a time limit provided in sub-sections (1) and (2) and the failure or omission occurs when that period passes, but sub-section (3) allows a locus poenitentiae before the assessment is actually made. There is no dispute that a return could be filed in this case, late though it was. The controversy centres round the fact that the return, when it was filed, disclosed an income which was below the maximum not chargeable to tax, and the question is whether in such an event the Income-tax Officer was precluded from issuing a notice under section 34 of the Act. There has been in the past a well-marked difference of opinion between the Bombay and the Calcutta High Courts, the leading cases in Bombay being Harakchand Makanji Co. v. Commissioner of Income-tax, All India Groundnut Syndicate Ltd. v. Commissioner of Income-tax and the decision under appeal here, while the Calcutta view is to be found in Commissioner of Agricultural Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 24(1) or a return called for under that section but filed under section 24(3), when in fact it was filed in response to a notice under section 24(2)." The opinion here expressed was criticised in the judgment under appeal, and in the next case, R. K. Das Co. v. Commissioner of Income-tax, the Calcutta High Court (Chakravartti, C.J., and Sarkar, J.) explained what was really meant. It is not necessary to refer to the facts of that case. This is what Chakravartti, C.J., observed at page 449 : " 'It should be remembered', I observed, 'that the return in the present case is being sought to be treated as a return under section 24(1), belatedly filed.' And then I went on to say that a return under section 24(1) would only be filed by a person who thought that he had a taxable income and therefore a return showing an income below the taxable limit could not be held, on a construction thereof, to be a return under section 24(1) and consequently the return in the case we were then considering could not be treated as such a return filed under section 24(3). To say that, was not to say that even a return filed in compliance with a notice under section 22(2), if filed belatedly unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn to be on the safe side. He may show his income and the deductions and allowances he claims. But it may be that on a correct processing his income may be found to be above the exempted limit. No doubt, it is futile for a person not liable to tax to rush in with a return, but the return in law is not a mere scrap of paper. It is a return, such as the assessee considers represents his true income. We are unable (and we say this with due respect) to accept the view adumbrated in the Calcutta cases. The contrary view is expressed by the Bombay High Court in the earlier case of Harakchand Makanji Co. v. Commissioner of Income-tax, and in the judgment under appeal. That view was accepted by the Madras High Court in P. S. Rama Iyer v. Commissioner of Income-tax, and also, in our opinion, is the sounder view of the two. In the earlier of the two Bombay cases Chagla, C.J., and Tendolkar, J. held (as stated in the headnote) : "Notice under section 34 is only necessary if at the end of the assessment year no return has been made by the assessee and the authorities wished to proceed under section 22(2), but, where the assessee himself chooses voluntarily to make a return, no questio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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