DALIP SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Income-tax Act. The question referred to us for opinion is :

(2.) FOR appreciation of the point of limitation raised by the question it is necessary to mention the following facts and dates. The assessment year in question is 1948-49. Up to February 16, 1950, the assessee had not been assessed to income-tax. On February 16, 1950, the Income-tax Officer issued a notice to the assessee under section 34. The notice was served on February 23, 1950. The assessment was completed on March 28, 1953, under section 34 read with section 23(3). The point raised by the assessee was that notice having been served on February 23, 1950, the assessment should have been completed within one year of the date of the service of the notice, viz., by February 23, 1951, according to the provisions of section 34(3), first proviso, and the assessment completed on March 28, 1953 was beyond time.

(3.) IT takes time for an assessment to be completed after a notice for initiation of assessment proceedings has been issued. Though a notice is allowed to be issued before the expiry of eight years or four years from the end of the assessment year in question, it may not be possible to complete the assessment before the expiry of eight or four years if it was issued very late. To provide for this contingency the proviso to sub-section (3) was added allowing an assessment to be completed within one year from the date of the service of the notice even if the period of eight years or four years has expired. The proviso comes into application only when a notice is issued in the eighth or fourth year; in such a case one year from the date of the service of the notice is allowed for completing the assessment. IT appears that the legislature thought that when a notice is issued late the assessment should be completed within one year of the service of the notice. IT did not intend that in every case the assessment should be completed within one year from the service of the notice because otherwise the provision in section 34 would have been quite different; it would have been far simpler to lay down in section 34 that the assessment should be completed within one year of the service of the notice. The proviso was plainly an exception to the mandatory rule contained in sub-section (3) that the assessment must be completed within eight years or four years of the end of the assessment year. The only case covered by the exception was the case in which one year from the service of the notice ended after eight or four years. The proviso was intended to cover only this exceptional case. IT is to be noted that the proviso using the verb "quot"may" is an enabling one : it allows the assessment to be completed even though eight years and four years have expired, provided one year has not expired since the receipt of the notice. Having permitted a notice to be issued at any time within eight or four years, it would have looked ridiculous if the legislature had insisted upon the completion of the assessment also within eight or four years. IT had to make the provision regarding completion of the assessment reasonably consistent with the provision that a notice can be issued at any time within eight or four years, and it did so through the proviso. The language of section 34(3) together with its proviso does not lend any support to the contention that the legislature intended that the assessment must be completed in every case within one year of the receipt of the notice; the main section, laying down that it must be completed within eight or four years, is clearly against any such intention. The last clause of the proviso makes it clear that the object behind it was to extend the period of eight years or four years in case the notice was issued in the eighth or the fourth years. In Johilla Coalfields Co. Ltd. v. Commissioner of Income-tax, it was observed that this period of one year is in addition to the period of eight or four years.