ARASAPPA D Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THESE are a batch of four petitions giving rise to common questions of law and can be conveniently disposed of by a common order.

(2.) THE petitioner in all these cases is an ex-partner of a dissolved firm by name Srinivasa Weaving Factory. THE firm was assessed to income-tax under the Indian IT Act, 1922, to be hereinafter referred to as "the Act". THE four petitions relate to the asst. yrs. 1952-53 to 1955-56. Subsequent to the assessment in respect of all those years, ITO was of the opinion that the firm was under- assessed inasmuch as certain income had escaped assessment. Consequently, the ITO, after obtaining the sanction from the CIT, Bangalore, issued to the firm a notice under S. 34 of the Act in respect of the above assessment years. Some time after the issue of the aforesaid notice, further notice under S. 23(2) of the Act came to be issued. Since the assessee did not comply with the requirements of the notice issued under S. 23(2), the ITO completed the assessment as per the provisions of S. 23(4) r/w S. 34 of the Act. THEreafter, the assessee filed an application under S. 27 of the Act before the ITO. That application being dismissed, an appeal was preferred before the AAC concerned. By an order dt. 19th Sept., 1967, the AAC allowed the appeal and cancelled the assessment with a direction that the ITO should make a fresh assessment in accordance with law. Pursuant to the aforesaid order, the ITO issued a notice under ss. 22(4) and 23(2) of the Act to the assessee. Aggrieved by this procedure, the present petitioner, an ex-partner of the dissolved firm, has approached this Court with these petitions.

(3.) ON the first of the above questions Sri S. R. Rajasekharamurthy, the learned counsel appearing on behalf of the Revenue, submits thus : Cls. (ii) and (iii) of the first proviso to S. 34(1) of the Act, in so far as it is relevant for the purpose of the present contention, postulate that no notice under s. 34(1)(a) of the Act shall issue without the prior sanction of the Central Board of Revenue in cases in which income escaping assessment amounts to or is likely to amount to one lakh of rupees or more, and a period of 8 years have elapsed after the expiry of the relevant assessment year. Hence, it follows that if a notice under S. 34(1) is issued within 8 years from the end of the assessment year, no sanction by the Central Board of Revenue would be necessary, notwithstanding the income escaping assessment amounted to one lakh of rupees or more. ON behalf of the Revenue a counter-affidavit has been filed giving the dates on which notices under S. 34(1)(a) were issued, all of them clearly falling within the time limit of 8 years referred to in the proviso. ON the next question propounded by Sri K. Srinivasan, Sri Rajasekharamurthy contends that once the assessment has been cancelled or set aside under S. 27 of the Act, or under S. 146 of the IT Act, 1961, by an appellate authority, the ITO is competent to make a fresh assessment without issuing a notice under S. 34 of the Act or under S. 147 of the IT Act, 1961. According to him, the assessee had never questioned the issue of notice under S. 34(1)(a) of the Act in any of the proceedings which resulted in a fresh assessment to be made under S. 27 of the Act. What the assessee had to satisfy the ITO was that he was prevented by sufficient cause from complying with the terms of the notice issued to him under S. 23(2) of the Act. Hence, any direction to make a fresh assessment under S. 27 of the Act would merely mean that the ITO should proceed to reopen the proceedings from the stage at which a defect or an error, which was made a ground for an order under S. 27, crept in.