COMMISSIONER OF INCOME TAX Vs. BHAGWANDAS AMERSEY
LAWS(BOM)-1962-7-8
HIGH COURT OF BOMBAY
Decided on July 20,1962

COMMISSIONER OF INCOME TAX Appellant
VERSUS
BHAGWANDAS AMERSEY Respondents


Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. KESHARDEO BUBNA [LAWS(CAL)-1982-7-2] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. INDUSTRIAL TRUST LIMITED [LAWS(RAJ)-1969-1-11] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. P.N. TULI [LAWS(P&H)-2005-1-115] [REFERRED TO]


JUDGEMENT

V.S.DESAI, J. - (1.)THE question, which is referred on this reference under S. 66(1) of the Indian IT Act, is as follows :
"Whether, on the facts and circumstances of the case, the proceedings initiated under S. 34(1)(a) for the asst. year 1945 -46 and the assessment made in pursuance thereto were bad in law ?"

(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 :
"Cash deposits in my account with the Exchange Bank of India. As the business suffered loss it was not returned in the prescribed form."

On the 29th of July, 1953, the ITO issued a notice to the assessee under S. 34(1)(a) for the asst. year 1945 -46. He noted on record while issuing this notice that in response to the notice issued under S. 34 for the year 1944 -45 the assessee had pointed out that as the date on which the draft was taken out fell in the S. Y. 2000 action under S. 34 should be taken for the asst. year 1945 -46; that the assessee had already submitted a voluntary return for the year 1945 -46 showing the accounting year as S. Y. 2000 but returning a loss of Rs. 3,418 and that in the circumstances explained by the assessee relating to the accounting year in which the date on which the draft was taken fell and in view of the fact that the return filed by him for the year 1945 -46 was not valid, action under S. 34 was called for the assessment year 1945 -46. In response to this notice, the assessee submitted a return on the 10th of Aug., 1953, showing a loss of Rs. 3,425 from business. On the 27th of Feb, 1954, the ITO made an order in the earlier assessment proceedings initiated under -s. 34(1)(a) for the assessment year 1944 -45 accepting the assessee's plea that the return for that year was nil since the amount of the draft related to the S. Y. 2000 for which the relevant assessment year was 1945 -46. On the same day, he also completed the assessment proceedings which he had initiated on his notice under S. 34 dated 29th July, 1953. The voluntary return, which the assessee had filed on the 20th of May, 1953, was ignored and not proceeded with by the ITO. In the course of the said proceedings initiated on the notice under S. 34, the assessee did not protest that the notice under the said section or the assumption of jurisdiction under that section was bad in law. From the order of assessment passed by the ITO, the assessee appealed to the AAC and in the said appeal raised the contention that the proceedings initiated under S. 34 were bad in law. On the merits, he disputed the quantum of Rs. 56,000 assessed in the said assessment proceedings. The Appellate Asstt. CIT took the view that the contention of the assessee, that the proceedings under S. 34 were bad in law, was well -founded and supported by the decision of this Court in Ranchhoddas Karsondas vs. CIT (1954) 26 ITR 105. He accordingly allowed the appeal and set aside the order of assessment made by the ITO. The department then appealed to the Tribunal. The Tribunal also took the view that the ratio decidendi of the Supreme Court decision in CIT vs. Ranchhoddas Karsondas (1959) 36 ITR 569 : (1960) 1 SCR 114 affirming the decision of the Bombay High Court in Ranchhodas Karsondas vs. CIT (supra), applied to the present case and the proceedings initiated under S. 34(1)(a) for the asst. year 1945 -46 as well as the order of assessment made in the said proceedings were bad in law. At the instance of the Department, it then drew up a statement of case and referred to this Court the question, which we have already stated.

(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 :
"Where in respect of any year a return has been voluntarily submitted before assessment, the ITO cannot choose to ignore the return and any notice of reassessment and consequent assessment under S. 34 ignoring the return is invalid."



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