ESTHURI ASWATHAIAH Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner before us was served with a notice under section 34(1) of the Indian Income-tax Act in respect of the assessment year 1950-51. THE accounting year of the petitioner as shown in his books used to be from the first day of July of a year to the June 30 of the following year. For the accounting year July 1, 1948, to June 30, 1949, he was assessed under the Mysore Income-tax Act for the assessment year 1949-50. On the April 1, 1950, the Indian Income-tax Act came to be applied to Part B States and the Mysore Income-tax Act was repealed. As it will be necessary to be seen hereafter, in certain respects and for certain accounting years, to which I shall have to refer more fully in this judgment, the provisions of the Mysore Income-tax Act were kept in force. For the assessment year 1950-51, the petitioner was served with a notice under section 22(2) of the Indian Income-tax Act calling upon him to file a return. On September 8, 1952. the petitioner filed a return. It is not clear as to what the said return contained. No copy of the return so filed has been produced by the petitioner, but it appears from the affidavit, which has been filed in support of this petition by the petitioner, that his case was that his income for the year ending with June 30, 1949, was assessed under the Mysore Income-tax Act for the assessment year 1949-50 and since his income for the year ending with June 30, 1950, was assessable under the Indian Income-tax Act for the assessment year 1951-52, he had no income assessable for the assessment year 1950-51, as in respect of his sources of income there was no previous year for as in respect of his sources of income there was no previous year for the assessment year 1950-51. It also appears from the said affidavit that the income-tax authorities wrote on the order sheet "No proceedings" for the assessment year 1951-51. THEreafter on February 26, 1957, before the present notice under section 34 was served upon the petitioner, the petitioner voluntarily filed another return under section 22(3). In this return, the petitioner disclosed certain other income which was not disclosed in the return which he had originally filed on September 8, 1952. During the assessment proceedings for the year 1951-52, under the Indian Income-tax Act in respect of the petitioner's income, the books of the petitioner for the period July 1, 1949, to June 30, 1950, were seen and from the said books it appeared that on July 1, 1949, there was a cash balance of Rs. 1,87,000. THE Income-tax Officer, while assessing the income of the petitioner for the assessment year 1951-52, held that Rs. 1,37,000 out of the said total sum of Rs. 1,87,000 was the income from undisclosed sources and Rs. 54,017 was the income from other heads. On that finding the Income-tax Officer proceeded to assess the petitioner for the assessment year 1951-52. Against that assessment there was an appeal to the Appellate Assistant Commissioner. THE Appellate Assistant Commissioner took the view that this income cannot be subject matter of the assessment for the year 1951-52. THE Appellate Assistant Commissioner on that view directed the Income-tax Officer to consider this credit in the assessment of 1950-51, after giving sufficient opportunity to the appellant to explain the nature and the source of it. THEreafter, the present notice under section 34 of the Indian Income-tax Act was served on the petitioner requiring him to deliver within 35 days of the receipt of the notice, a return in the attached form of his total income and total world income assessable for the year ending March 31, 1951. In the said notice, it was stated that whereas the Income-tax Officer had reason to believe that the petitioner's income assessable to income-tax for the year ending March 31, 1951, had escaped assessment, he proposed to assess the said income that had so escaped. This return had to be filed, according to the said notice, by November 20, 1957. THE present petition has been filed challenging the competency of the Income-tax Officer to issue such a notice under section 34 of the Indian Income-tax Act.

(2.) THE learned advocate appearing for the petitioner has urged several grounds in support of this petition. THE first ground urged by him is that no notice under section 34 can be issued in a case where a return under section 22(2) or section 22(3) has been filed unless the assessment has been completed under section 23 of the Income-tax Act. In this case, he contended, a return was called for under section 22(2) of the Income-tax Act and a return under that section had been filed. Besides, it was urged a return under section 22(3) had also been filed and that being the position the assessment had to be completed under section 23 of the Income-tax Act before any notice under section 34 can be issued. In this case, although the said return had been filed for the assessment year 1950-51, the assessment in question has not been made under any of the sub-sections of section 23 of the Income-tax Act. THE being so, no notice under section 34 can be issued. In support of that contention, he relied on a decision of the Bombay High Court in Ranchhoddas Karsondas v. Commissioner of Income-tax. In that case, it was laid down that once a return under section 22(1) or under section 22(3) has been filed, the assessment must be completed before any notice under section 34 can be issued upon as assessee.

(3.) SUB-section (3) of the said section provides that if any person has not furnished a return within the time allowed by or under sub-section (1) or sub-section (2), or having furnished a return under either of those sub-sections 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.