COMMISSIONER OF INCOME TAX Vs. BHAGWANDAS AMERSEY

JUDGEMENT

(1.) THE question, which is referred on this reference under S. 66(1) of the Indian IT Act, is as follows :

(2.) THE assessee was assessed to tax for the asst. year 1946 -47 on his income from a share in a certain registered firm in which he was a partner. In the year 1953 the ITO at Bhavnagar addressed a letter to the ITO, B -II Ward, Bombay, requesting the latter to make inquiries in respect of a draft favouring self for Rs. 66,000 which the assessee had taken on the 23rd of March, 1944, on the Bank of Baroda Limited, Bombay, and which wash cashed through payee's account with the Exchange Bank of India and Africa Ltd. This letter, appears, inadvertently bore the assessee's address on its cover and was consequently first received by the assessee himself. The assessee on reading the contents found that it was meant for the ITO, B -II Ward, Bombay, and accordingly passed it on to the officer concerned on the 24th March, 1953. Thereafter on the 28th March, 1953, the ITO issued a notice to the assessee under S. 34(1)(a) for the asst. year 1944 - 45 and got it served by affixation on the 31st of March, 1953. On the 10th of July, 1953, the assessee stated before the ITO that in response to the notice received by him he had already submitted a return for the assessment year 1944 -45 for which his previous accounting year was S. Y. 1999. He had, however, no business in the S. Y. 1999. For the S. Y. 2000 he had maintained a note book and for the subsequent Samvat years corresponding to asst. yrs. 1946 -47 onwards, the assessee has been assessed to tax. The draft dated 23rd March, 1944, pertains to the S. Y. 2000 and action under S. 34 may be taken for the asst. year 1945 -46. In the meanwhile on the 20th of May, 1953, the assessee also filed a voluntary return for the asst. year 1945 -46 showing a loss of Rs. 3,418 and in column "G" of the said return he declared :

(3.) NOW from the facts which we have already stated, it will be clear that, in the present case, the end of the relevant assessment year was on the 31st of March, 1946. No assessment proceedings had been commenced against the assessee and no assessment order was made within four years from the end of the assessment year, i.e., till 31st March, 1950. A voluntary return for the said assessment year was filed by the assessee on the 20th of May, 1953, which was more than seven years after the end of the relevant assessment year. This voluntary return was ignored by the ITO and he had issued a notice under S. 34(1)(a) on the 29th of July, 1953. In response to this notice, a return was filed by the assessee on the 10th of Aug., 1953, and the assessment was completed by the ITO on the 27th of Feb., 1954. Now, the contention of the assessee which has prevailed before the AAC and the Tribunal is that since a voluntary return had been submitted by the assessee, the ITO had no jurisdiction to initiate proceedings under S. 34(1)(a) and consequently the initiation of the said proceedings and the order made thereon are illegal and invalid in law. The contention was based on the provisions of S. 22(3) and was sought to be supported by the decision of the Supreme Court in CIT vs. Ranchhoddas Karsondas (supra) affirming a decision of this Court in Ranchhoddas Karsondas vs. CIT (1954) 26 ITR 105. It was argued that S. 22(3) permitted the assessee to furnish a return or a revised return at any time before an assessment was actually made by the ITO; and where such a return was filed by the assessee, assessment had to be made on that return and the ITO, ignoring the said return, could not have recourse to the proceedings under section 34(1)(a) even though, if the said return had not been filed by the assessee, the ITO would have been justified in initiating the proceedings under S. 34. It was argued that since the voluntary return had been filed by the assessee in the present case, the ITO had no jurisdiction to resort to the proceedings under S. 34(1)(a) and make an assessment order in the said proceedings. In support of this submission reliance was placed on the decision of the Supreme Court in CIT vs. Ranchhoddas Karsondas(supra). It was held in that case that a return in answer to the general notice under S. 22(1) of the Indian IT Act can, under S. 22(3), be filed at any time before assessment and for this there is no limit of time. It was further held :