CHHAGANLAL Vs. INCOME TAX OFFICER BIKANER

JUDGEMENT

(1.) THESE three petitions under Art. 226 of the Constitution of India have been submitted by three different assessees in regard to notices served on them under s. 34 of the Indian Income-tax Act by the Income-tax Officer, Bikaner. The petitioners have prayed for the issuance of a writ of certiorari or prohibition for quashing the notices in question and for prohibiting the Income-tax Officers concerned from taking proceedings thereunder. Since these petitions raise a common question of law, about the interpretation of sec. 34 of the Act, we propose to dispose them of by one judgment.

(2.) WE may state the material facts relating to each of the writ petitions. In the case of Chhaganlal the Income-tax Officer, 'b' Ward, Bikaner, issued a notice to him under S. 34 of the Income-tax Act on 14th March, 1959 stating that he had reason to believe that the income of the petitioner for the assessment year 1950-51 had escaped assessment and he proposed to assess the said income and that within 35 days of the receipt of the notice the petitioner was required to deliver a return in the form which was attached to the notice. The notice indicates that it was issued after obtaining the necessary sanction of the Commissioner of Income-tax, New Delhi. This notice was received by the petitioner on 18th March 1959. On 18th April, 1959 the assessee wrote to the Income-tax Officer that the notice was not lawful and valid; that it was beyond the jurisdiction of the Officer and that it was barred by time and requested the Officer to drop the proceedings. Later, the petitioner presented the above application before this Court contending that the notice was illegal as it was issued after eight years of the year of account and that in the absence of any reasons being mentioned therein as to how and what income had escaped assessment, the vague notice could not be the foundation of the officer's jurisdiction to take proceedings under sec. 34 of the Act. A reply has been filed by the Income-tax Officer in which he states that the notice in ques-tion was one under sec. 34 (1) (a) and not under sec. 34 (1) (b) of the Act, since the prior satisfaction of the Commissioner had been obtained. He further submits that the petitioner's application is premature since he could obtain the relevant relief, if at all, from the office of the Department and that the period of limitation starts from the end of the assessment year and not from the end of the accounting year as alleged by assessee.

(3.) THE petitioners Chhagan Lal and Smt. Kamla Bai have assailed the validity of the notices served on them. THE Income-tax Officer has to serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-sec. (2) of sec. 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance. THE statute further provides that the provisions of this Act shall, so far as may be, apply to this notice as they apply to a notice under sec. 22 (2 ). A question, therefore, arises as to the nature of the provisions regarding notice under sec. 34 of the Indian Income-tax Act. THE law on this point appears to be well-settled. In a recent Supreme Court case, Calcutta Discount Co. Ltd. , Vs. Income tax Officer, Companies District I, Calcutta, and another (5) it has been held that: - "to confer jurisdiction under this section to issue notice in respect of assessment beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. THE first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been underassessed. THE second is that he must have also reason to believe that such "under-assessment" has occurred by reason of either (1) omission or failure on the part of an assessee to make a return of his income under sec. 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or re-assessment beyond the period of four years, but within the period of eight years, from the end of the year in question. " THE plea of the department that the question could be examined in the course of reassessment proceedings themselves and this Court should not investigate into the validity of these notices has also been considered and answered by the aforesaid Supreme Court decision. "both the conditions, (i) the Income-tax of Officer having reason to believe that there has been under-assessment and (ii) his having reason to believe that such under-assessment has resulted from non-disclosure of material facts, must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiry 4 years. THE argument that court ought not to investigate the existence of one of these conditions, viz. , that the Income-tax Officer has reason to believe that under assessment has resulted for non-disclosure of material facts, cannot therefore be accepted. "