COMMISSIONER OF INCOME TAX Vs. BIDHU BHUSAN SARCAR

JUDGEMENT

(1.) THIS is an application for a certificate under s. 66A(2) of the Indian IT Act r/w Art. 135 of the Constitution in respect of a decision of a Division Bench of this Court dt. 10th Jan., 1962, by which certain questions of law were answered in favour of the assessee in a reference under s. 66(1) of the Indian IT Act.

(2.) BIDHU Bhusan Sarcar, since deceased, used to be assessed in respect of his income in the district of 24-Parganas. On 22nd Dec., 1947, he filed a voluntary return before the ITO, District 24- Parganas, in respect of the asst. yr. 1947-48 declaring a net loss of Rs. 330. Subsequently, on account of the change in the territorial jurisdiction, the assessee's place of business fell within the jurisdiction of the ITO, District I(2), Calcutta, with the result that the file of the assessee was transferred to the ITO, District I(2), and it came within the jurisdiction of the Eighth Addl. ITO, District I(2). On 16th Jan., 1949, the Eighth Addl. ITO, District I(2), took action under s. 34 of the Indian IT Act presumably because he considered that the voluntary return filed on 22nd Dec., 1947, was invalid and could not be acted upon. The notice under s. 34 was issued on 23rd Feb., 1950, but as no return was filed in response to the notice even upto 15th Jan., 1952, the Eighth Addl. ITO, issued a notice under s. 22(4) of the Indian IT Act. It appears that prior to this on 31st March, 1949, the assessee filed another voluntary return for the asst. yr. 1947-48 to the ITO, District I(2), declaring a loss of Rs. 11,33,940. In August, 1950, the ITO, District I(2), acting on this voluntary return dt. 31st March, 1949, issued a notice under s. 23(2) of the Act. On 4th Feb., 1952, the Eighth Addl. ITO, District I(2), passed an order filing the case as there was already another file of the assessee in the same district. On 12th Feb., 1952, the ITO District I(2), cancelled the proceeding in respect of voluntary return dt. the 31st March, 1949, on the view that a voluntary return of loss was not valid and he, thereafter, took action under s. 34 and issued a notice under that section on 12/14th Feb., 1952. This proceeding resulted in an assessment under s. 23(4)/34 on 31st Jan., 1953. Against this order of assessment the assessee filed an appeal before the AAC. In appeal it was pointed out by the ITO that he had no jurisdiction over the assessee as there was already a file with the Eighth Addl. ITO. The AAC by an order dt. the 27th Dec., 1955, set aside the assessment made on 31st Jan., 1953, with a direction that the assessment should be completed according to law by an officer having proper jurisdiction over the case. Against the decision of the AAC, the assessee went up on appeal before the Tribunal. The grievance of the assessee before the Tribunal was that the AAC should have annulled the assessment without giving a direction for making a fresh assessment. The Tribunal, accepted this contention and by its order dt. the 23rd April, 1957, cancelled the assessment. In the meantime, on 30th Dec., 1955, the CIT passed an order under s. 5(7A) of the IT Act transferring the case of the assessee from the Eighth Addl. ITO to the ITO District I(2), and thereafter the ITO District I(2), issued a fresh notice under s. 34 of the IT Act dt. 11th Feb., 1956, and on 2nd May, 1956, he made an assessment under s. 23(4)/34 of the IT Act. The assessee took an appeal against this assessment order to the AAC. The contention raised before him was that the Eighth Addl. ITO had jurisdiction when he issued notice on 23rd Feb., 1950, and unless and until the assessment was completed in pursuance of that notice which was a valid notice it could not be said that any income had escaped assessment. The further contention raised was that the assessment in pursuance of the notice dt. the 23rd Feb., 1950, should have been completed on or before 31st March, 1952, or 31st March, 1956, as the case fell within the purview of s. 34(1)(a) or s. 34(1)(b). Another contention which was pressed before the AAC was that the proceeding which as started pursuant to notice under s. 34 dt. the 23rd Feb. 1950, had not lapsed but remained alive at the time when the CIT by the issue of a special notification had transferred the file of the assessee to the ITO, District I(2). The AAC accepted the contention of the assessee and held that the notice dt. 11th Feb. 1956, was void ab initio and the assessment should have been completed by 31st March, 1956, and it had become barred when the assessment was completed on 2nd May, 1956. As against the order of the AAC, the ITO filed an appeal before the Tribunal and contended that there is no bar under the law against the issue of more than one valid notice under s. 34 and as the assessment dt. the 2nd May, 1956, was actually completed within one year from the date of the issue of the notice dt. Feb., 1956, the assessment was within time. The Tribunal came to the conclusion that the proceeding started by the Eighth Addl. ITO on the basis of the notice dt. 23rd Feb., 1950, having been directed to be "filed" was no longer a live proceeding and could not be continued by the principal ITO and no valid assessment could be made in respect thereof. In this view of the matter the Tribunal allowed the appeal of the IT Department and restored the order of the ITO District I (2). The assessee thereupon made an application of the Tribunal for a reference and the Tribunal referred the following questions of law to the High Court : "1. Were the notice under s. 34 issued by the principal ITO on 11th Feb., 1956, and the assessment raised in pursuance thereof valid in law in view of the fact that the proceedings commenced by the Eighth Addl. ITO under s. 34 on the basis of notice dt. 23rd Feb., 1950, were filed ? 2. Whether, on the facts and circumstances of the case, the assessment dt. the 2nd May, 1956, made by the principle ITO District (I) (2) was barred by time ?"

(3.) IT is well-known that by the insertion of s. 66A(2) by the IT (Amendment) Act, 1926 (Act 24 of 1926), a right of appeal to His Majesty-in-Council from any judgment of the High Court delivered on a reference made under s. 66 in any case which the High Court certified to be a fit one for appeal to His Majesty-in-Council was conferred. Later on after the Federal Court came into existence by virtue of the provisions of the Government of India Act, 1935, certain rights of appeal came to be conferred on the Federal Court by reason of the Federal Court Enlargement of Jurisdiction Act, 1947 (Act 1 of 1948).