NATHALAL DHANJIBHAI Vs. MAJUMDAR K P ITO

JUDGEMENT

(1.) THIS special civil application challenges the validity of the notice issued on December 16, 1958, in respect of the assessment year 1949 -50 under section 34(1) of the Income -tax Act of 1922.

(2.) THE petitioner was assessed as an individual on the total income of Rs. 6,482 for the assessment year 1950 -51, the relative accounting year being Samvat year 2005. His major source of income during that year was his share in a partnership called the Nipani Tobacco Stores. During the relevant accounting period, i.e., Samvat year 2005, the petitioner had brought in capital of Rs. 35,502 into that partnership. On January 23, 1957, the Income -tax Officer served a notice upon the petitioner under section 34(1) asking the petitioner to submit his return of income for the assessment year 1950 -51. In pursuance of that notice, the petitioner filed his return of income indicating Rs. 6,482 as his total income in accordance with the original order of assessment. The respondent, however, held that the amount of Rs. 35,502 credited to the account of the petitioner in the books of the said firm as his capital, was income from undisclosed sources, and by his assessment order dated August 22, 1957, he further held that the amount of Rs. 35,502 was concealed income of the petitioner from undisclosed sources and was therefore liable to the taxed in his hands for the assessment year 1950 -51. In consequence of this order, the petitioner filed an appeal before the Appellate Assistant Commissioner in which he contended that the said assessment was invalid and, in any event, the amount of Rs. 35,502, alleged to be the concealed income, could not be assessed for the assessment year 1950 -51 but could only be assessed, if at all, in the assessment year 1949 -50. The Appellate Assistant Commissioner upheld the petitioner's contention and directed the respondent to assess the amount of Rs. 35,502 treating it as income from undisclosed sources for the assessment year 1949 -50. In pursuance of this direction, the respondent served on December 16, 1958, another notice under section 34(1) upon the petitioner, calling upon him to file the return of his income for the assessment year 1949 -50. The notice was issued with the permission of the Commissioner of Income -tax. In the correspondence that took place between the petitioner and the respondent, the petitioner contended that the proposed assessment was time -barred and, therefore, no action could be taken against him in respect of the assessment year 1949 -50. It is the validity of the notice dated December 16, 1958, that has been challenged in this petition.

(3.) WE will first dispose of the second ground as it can be done briefly. For that ground, the petitioner relied upon the decision of the Bombay High Court in Hiralal Amritlal Shah v. K. C. Thomas, where the High Court had held a similar notice to be bad on the ground that the sanction of the Central Board of Revenue had not been obtained as required by the first proviso to section 34(1). But on appeal to the Supreme Court at the instance of the department, that decision has since been reversed and as laid down by the Supreme Court in Thomas v. Vasant Hiralal Shah, the sanction of the Central Board of Revenue is necessary only where the notice in question is issued under clause (ii) of the first proviso to section 34(1). Such a notice can be issued only when the escaped income amounts to one lakh of rupees and over. But if a notice is issued by virtue of some other provision, such as the second proviso to section 34(3), it would amount to a notice 'in any other case' within the meaning of clause (iii) of the first proviso to section 34(1), and in such a case the sanction which is required is only that of the Commissioner of Income -tax. In view of this decision, the second ground urged in the petition cannot survive. Mr. Kaji in fact conceded that there is no longer any force in that contention. Therefore, the only ground that remains for consideration is the first ground, namely, whether the notice was valid though it was issued after the lapse of eight years after the assessment year in view of the fact that the escaped income admittedly was less than rupees one lakh.