COMMISSIONER OF INCOME TAX Vs. VARADARAJAN K L

JUDGEMENT

(1.) THE Commissioner of Income-tax required the Appellate Tribunal under Section 66(1) of the Indian Income-tax Act, 1922, to refer the following question of law which is said to arise out of the consolidated order of the Income-tax Appellate Tribunal in I.T.A. Nos. 10928 to 10930 of 1962-63. THE question referred is :

(2.) THE facts are stated in a consolidated statement drawn up for the purpose and they are as follows: THE original assessments of the assessee, who derived income by way of dividends on shares and interest on deposits, were completed under Section 23(3) of the Act on January 31, 1966, December 27, 1956 and February 28, 1958, for the years corresponding to the assessment years 1955-56, 1956-57 and 1957-58. THE residential status adopted in these years by the assessee was "resident and ordinarily resident" person. In the course of the assessment proceedings for 1958-59 (year ending December 31, 1957), the assessee filed a declaration under Section 17(1) claiming to be assessed at rates appropriate to his total world income. This assessment was completed on March 23, 1960, in the status of a " non-resident ". THE Income-tax Officer found that, for the previous years, the total income of the assessee was charged to income-tax at the normal rates and as he failed to make the requisite declaration under Section 17(1) within the time, it was considered that the earlier assessments were made at too low a rate. In view of this, action under Section 34 was taken and the assessments re-opened and completed under Section 23(3) read with Section 34 of the Act. His status was treated as that of a " nonresident.' ' THE assessee's declaration under Section 17(1), which he made in the course of the assessment proceedings for the assessment year 1958-59, was rejected and ignored and his total income was brought to tax at the maximum rates. THE assessee, in the course of such re-opening of the assessments, requested that the income during the three years in question should be taxed at rates appropriate to his world income and that the omission on his part to make the declaration earlier under Section 17(1) was due to inadvertence and ignorance. It was also contended that as the assessments were re-opened and are thus deemed to be pending even for the earlier years, the assessee's declaration made during the assessment proceedings for the year 1958-59 should be considered and the assessment made in accordance with law. THE Income-tax Officer was of the view that as the assessee exercised his option after the prescribed date, the declaration cannot have effect on the assessments before this, even though they were taken up under Section 34(1)(b) of the Act. He was of the view that the declaration filed by him could not enure to his benefit for the earlier years and the second proviso to Section 17 cannot avail the assessee. In the end he completed the assessment and levied the tax on the total income at the maximum rates laid down under Section 17(1) of the Act.

(3.) THE Tribunal was of the view that it- would be a straining of the language if the expression "all assessments thereafter" were to. be understood as assessment years thereafter. Apparently, it based its conclusion that, if the revenue chose to reopen the completed assessments, then those assessments should be deemed to be pending. It should not be forgotten that the jurisdiction under Section 34 is very limited and it is resorted to by the revenue only in exceptional circumstances and in accordance with the statutory prescription therein. It is not a general provision but an exceptional one. To interpret Section 17 in the light of such an exceptional provision in the taxing statute would be to render the text and the plain words of Section 17 ambiguous when it is not. If an assessee intends to avail himself of the advantage to be taxed at the average rate applicable to his total world income instead of the maximum rate, then it is for him to exericise that option in the manner prescribed. As already stated, the declaration should be in point of time anterior to the assessment in question of every year and once the assessment has been completed and the declaration has not been filed prior to such completion, then it cannot be said that the assessee has exercised his option as required of him in law. THE accident of the reopening of the assessment by the revenue under Section 34(1) cannot revive the option which he failed to exercise at the prescribed time.