DESAI, C.J. - (1.) THE following two questions have been referred to this court by the Income-tax Appellate Tribunal under section 66(1) of the Income-tax Act in the circumstances given belo : 1. Whether on the facts and circumstances of the case the assessee having voluntarily submitted return under section 22(3) before the completion of the assessments, could be considered to have waived the issue of the notice under section 34? 2. Whether on a true interpretation of the provisions of section 34, clause (a) or clause (b) of sub-section (1) of that section would be attracted in a case where no return under section 22(1) was filed by the assessee in due time?
(2.) IN this reference we are concerned with the assessment year 1948-49 and 1949-50. The assessee is an association of persons. No return was filed by it in response to the general notice issued under section 22(1) in either year of the assessment years. No special notice was issued against it in either year under section 22(2). Before any proceedings could be taken against it by the INcome-tax Officer it itself on September 24, 1953, filed two return, one for the assessment year 1948-49 showing income from business amounting to Rs. 5,440 and the other for the èother assessment year showing income from business amounting to Rs. 6,967. The INcome-tax Officer, evidently treating the eturns as having been made under section 22(3), started assessment proceedings under section 23; since he professed to act under section 23 and not under section 34(1) he issued no notice to the assessee as contemplated by the latter provision. He issued a notice under section 23(2), examined the accounts of the assessee rejected them as not being correct and on April 16, 1955, estimated the income for the first year at Rs. 15,000 and odd and that for the second year at Rs. 13,000 and odd and assessed the assessee on these incomes. The assessee preferred an appeal contending that the assessment orders were barred by time. The Appellate Assistant Commissioner held that the return made for the first year, having been made more than four years from the end of it, was invalid and no assessment under section 23(3) could be made on it and that the other return, having been made before the expiry of four years, was valid but that the assessment order having been made after more than four years was invalid. He, therefore, quashed both the assessment orders. Under instructions from the Commissioner of INcome-tax the INcome-tax Officer preferred appeals from the two orders of the Appellate Assistant Commissioner and the Tribunal allowed both and restored the assessment orders. It was of the opinion that both the assessment orders were made under section 34 and that by filing the returns voluntarily the assessee must be deemed to have waived compliance with the formality of a notice prescribed by section 34(1). Since the period for completing assessment under section 34(1)(a) was eight years, it held that neither of the two assessment orders was barred by time. The department had tried to justify the assessment orders on the alternative ground that section 28(1)(c) applied to the assessment orders and that consequently they could be completed within eight years even if they were held to have been made under section 23(3) and not under section 34(1) but the Tribunal did not decide this contention. A general notice issued under section 22(1) and a special notice issued under section 22(2) both require returns to be submitted in the prescribed form within the prescribed time. Any person who has not furnished a return within the time stated in either of the notices is permitted by section 22(3) to furnish a return at any time before the assessment is made. Section 23 provides for an assessment order if a return is filed under section 22, whether in response to a general or special notice or as permitted by section 22(3) and also for a best judgment when no return is filed under section 22. The law regarding limitation for an assessment order is contained in section 34. We are concerned with the years 1948-53 and, therefore, with the provisions of section 34 as they stood then. The material provisions of section 34 as it stood then were thes : If an assessee failed to make a return of his income under section 22, or if he made a return but failed to disclose fully and truly all material facts necessary for èhis assessment for that year, the Income-tax Officer could within eight years of the end of the assessment year serve on him a notice and could proceed to assess or reassess the income that had escaped assessment.
(3.) THIS was the substance of sub-section (1)(a). If income had escaped assessment in spite of the assessees having given true and full particulars of his income and the Income-tax Officer had information of such escape, he could within four years of the assessment year, serve a notice upon the assessee and assess or reassess him. THIS was the substance of sub-section (1)(b). An assessment order to which section 28(1)(c) applied was to be made within eight years; this was the first limb of sub-section (3). An assessment or reassessment in a case falling within sub-section (1)(a) was to be made within eight years; this was the second limb of sub-section (3). Every other order of assessment or reassessment was to be made within four years; this was the third limb of sub-section (3). The limit of time imposed by sub-section (3) was not to apply to a reassessment made in pursuance of an order under section 31 or section 33; such reassessment could be made at any any time. Section 28(1)(c) provides that if an Income-tax Officer, in the course of any proceedings under the Act, is satisfied that any person has concealed the particulars of his income or deliberately furnished inaccurate particulars of it, he may impose a penalty upon him in addition to assessing him to tax.;