COMMISSIONER OF INCOME TAX Vs. V P THEATRE

JUDGEMENT

(1.) THE assessee, an individual, was formerly carrying on business in jewellery. On November 23, 1969, when the assessee and his son were alighting from a taxi, they were intercepted by the Officers of the Customs Department and they were found to be in possession of 100 bars of gold, each bar weighing 10 tolas. In the statements made by the assessee and his son at that time, they stated that the gold had been carried from Bangalore as per the directions of one Mahavir. In respect of the seizure of gold from the assessee and his son, proceedings were initiated by the Customs and Gold Control authorities and the Assistant Collector of Customs levied penalty for possession of gold bars with foreign markings in violation of the provisions of the Customs Act, 1962 and the Gold (Control) Act and the seized gold was also confiscated. In the criminal proceedings initiated against the assessee and his son under the Customs Act, 1962, the Foreign Exchange Regulation Act and the Gold (Control) Act, they were found guilty and fined and on a revision, the sentence was enhanced to rigorous imprisonment for six months for the commission of offences under the Customs Act, 1962 and the Gold (Control) Act and the sentences were also directed to run concurrently THE assessee had not been assessed to income-tax previously. Coming to know of the seizure of gold bars, etc., from the assessee, on December 19, 1969, the Income-tax Officer issued notice to the assessee under section 139(2) read with section 175 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), requiring the assessee to file a return of his income within seven days of the date of receipt of that notice. THE notice so issued was served on the assessee on December 24, 1969.

(2.) THE notice mentioned the assessment year as 1970-71 at the top and, in the body, it was stated that the assessee was required to furnish the income of the previous year relevant to the assessment year mentioned therein. On December 24, 1969, the assessee filed an application praying for extension of time for filing the return till January 26, 1970 and, on January 19, 1970, the assessee filed a return disclosing "Nil" income for the period from April 1, 1969, to January 19, 1970. After the filing of the return, though several hearings appear to have taken place, no assessment was made. THE Income-tax Officer seems to have felt on March 30, 1973, that the notice dated December 19, 1969, issued to the assessee under section 139(2) read with section 175 of the Act was not valid and the return filed by the assessee in response to that notice was also invalid and, accordingly, he filed the return without making an assessment, but at the same time, he issued a notice to the assessee under section 147(a) of the Act requiring the assessee to Me a return of his income for the assessment year 1970-71 relating to the full previous year April 1, 1969, to March 31, 1970. In response to this notice, the assessee filed on May 1, 1973, a return disclosing "Nil" income and stating the period of the previous year as the period from January 10, 1970, up to March 31, 1970. In the course of the assessment proceedings, the assessee maintained that the income for the period April 1, 1969, to January 20, 1970, could not be considered as relating to the assessment year 1970-71, as action had been taken earlier by the Income-tax Officer for assessing the income relatable to that period by the issue of a notice under section 139(2) read with section 175 of the Act on December 19, 1969 and a return had been filed in response thereto. A further objection was also raised that, as the assessee had acted only as the carrier of gold and was not the owner thereof, the value of the gold could not be assessed in his hands under section 69A of the Act. THE Income-tax Officer took the view that, as the notice issued on December 19, 1969, mentioned the assessment year as 1970-71, it was not valid and hence the return filed by the assessee in response thereto on December 19, 1969, was equally invalid and that the previous year for the assessment year 1970-71 should be taken as the period from April 1, 1969, to March 31, 1970, and as the assessee had not explained his possession of the gold bars, he should be considered as the owner thereof. THE Income-tax Officer thus completed the assessment on the return and subjected to assessment a sum of Rs. 2, 25, 920, inclusive of the value of the gold bars seized and also the value of gold ornaments and cash found in the premises of the assessee.

(3.) LEARNED counsel for the Revenue submitted that the notice issued on December 19, 1969, under section 139(2) read with section 175 of the Act in respect of the assessment year mentioned therein, viz., 1970-71, was invalid and any return filed pursuant to such a notice was not a valid return and as there was no proceeding pending for the assessment year 1970-71, the Income-tax Officer was in order in having issued a notice on March 30, 1973, under section 147(a) of the Act with reference to the assessment year 1970-71 requiring the assessee to file a return on the ground that income chargeable to tax has escaped assessment. Reference was also made in this connection to several decisions. On the other hand, learned counsel for the assessee contended that, even according to the finding of the Tribunal, the notice issued on December 19, 1969, under section 139(2) read with section 175 of the Act was a valid notice and the assessee had, in response to such a notice, filed a return and such return, whether filed in consequence of a valid or invalid notice, is a good return and, without giving a disposal to that, the Income-tax Officer cannot resort to section 147(a) of the Act with reference to the assessment year 1970-71 and the issue of such a notice had been resorted to only for the purpose of gaining time, as the return ought to have been looked into and orders passed thereon before March 31, 1973, but nothing had been done till March 30, 1973 The assessee had not been previously assessed and it is the interception of the assessee by the officers of the Customs Department on November 23, 1969, that marked the commencement of the proceedings against the assessee by the Revenue. Apparently, the Revenue was under the impression that the assessee might have earned income liable to assessment during the period April 1, 1969, to December 19, 1969, and that necessitated the issue of a notice under section 139(2) read with section 175 of the Act on December 19, 1969.