- (1.) This matter came before us on a case stated by the Commissioner of Income Tax, Bengal, under Section 66 (2) of the Income Tax Act (Act XI of 1922). The assessments out of which the questions at issue arise are assessments of the years 1928-29 and 1929-30 said to have been made under Section 34 of the Act on the 19th February, 1932. It is necessary to relate at some length the history of the matter in order that it may be clear how the points which have to determine have arisen. Down to the year 1927-28 assessment was made on a firm named Messrs.. Martin & Company, and upon the present applicants, Messrs. Burn & Company as separate assessees but in that year when it came to the notice of the Income Tax Officer that Messrs. Martin & Company, had apparently acquired by purchase the firm of Messrs. Burn & Company the Income Tax Officer proceeded to make an assessment on Messrs. Martin & Company, on the total income of both these firms jointly. Messrs. Martin & Company, made an objection to this joint assessment and as a result of that objection the matter eventually came before this Court on an application under Section 66 (2) when it was held that the firm of Messrs. Burn & Company had been purchased not with any funds belonging to the firm of Messrs. Martin & Company but with other funds which were the private property of the individual persons who happened to be the partners of Messrs. Martin & Company and further that the acquisitive of the firm of Messrs. Burn & Company by these individuals was a separate venture which should have no connection with Messrs. Martin & Company for the purpose of assessment to income-tax. The order of this Court was dated the 16th May, 1930, and in accordance with that order the assessment on Messrs. Martin & Company as a registered firm was modified and the profits of Messrs. Burn & Company which had been added to the income of Messrs. Martin & Company in that year by the Income Tax Officer for assessment purposes were deducted. In view of the fact that Messrs. Burn & Company had filed a return of income in pursuance to a notice issued under Section 22 (2) in respect of their own income for the previous year, that is, the year 1927-28, the Income Tax Officer on receipt of the High Courts order proceeded to make an assessment under Section 23 (1) on Messrs. Burn & Company on the basis of that return. Messrs. Burn & Company challenged the validity of that assessment made under Section 23 (1) and asked for a Reference under Section 66 (2) of the Act to the High Court and a Reference was duly made by the Commissioner of Income Tax. In that Reference certain questions of law were formulated and all of them were decided against Messrs. Burn & Company as assessees on the 18th February, 1932. While the matter of the legality of the assessment made in the year 1927-28 on Messrs. Martin & Company based on the joint income of both the firms was still pending before this Court the assessments of the years 1928-29 and 1929-30 were completed. They were made just as the 1927-28 assessment had been made on Messrs. Martin & Company on the joint income from the two firms. The assessees again took exception to this procedure and it was then agreed between them and the Income Tax Authorities that the decision of the High Court as regards the 1927-28 assessment should govern the assessment for the years 1928-29 and 1929-30. Accordingly when the High Court held that the 1927-28 assessment was irregular and that Messrs. Martin & Company could not be assessed jointly on the income of themselves and Messrs. Burn & Company the 1928-29 and 1929-30 assessments on Messrs. Martin & Company were once more modified. In the meantime, however, Messrs. Burn & Company, the present applicants, had filed their separate income in respect of the years 1928-29 and 1929-30. The Income Tax Officer therefore after the judgment of the High Court previously mentioned, proceeded to make an assessment under Section 23 (1) on the basis of those returns. To this Messrs. Burn & Company objected and the matter ultimately came before the Commissioner of Income Tax on another application under Section 66 (2) and the Commissioner of Income Tax thereupon came to the conclusion that those assessments were indeed irregular in view of the fact that the returns which had been filed by Messrs. Burn & Company had been filed suo motu and not in compliance with any notice issued under Section 22 (2). The Commissioner of Income Tax, upon that cancelled those assessments by an order dated the 30th March, 1931, and further directed that the Income Tax Officer should take steps to make assessments under Section 34 of the Income Tax Act. on the income with should have been assessed in the years 1928-29 and 1929-30. On the 31st March notices under Section 34 were duly served on Messrs. Burn & Company and assessments were duly made. Appeals against those assessments were preferred and finally the Commissioner of Income Tax was asked in an application under Section 66 (2) to refer certain questions of law arising out of those assessments to this Court and these are the questions we are now concerned. The Commissioner of Income Tax in his statement of the case has set out certain dates in connection with the assessments of the two years out of which these questions arise and it may perhaps be desirable that we should here reproduce them. The material dates and events are as follows :- 17th January, 1929. - Assessment for the year 1928-29 made on Messrs. Martin & Company on income including the income of Messrs. Burn & Company. 16th May, 1930. - Order of the High Court cancelling the assessment for the year 1927-28 made on Messrs. Martin & Company on the joint income from the two firms. 4th June, 1930. - Order of the Commissioner directing the assessment of the year 1927-28 to be revised in conformity with the order of the High Court and asking also that the assessments for the years 1928-29 and 1929-30 should be revised in accordance with the agreement between the Commissioner and the assessees, viz., that the decision of the High Court in the matter of the 1927-28 assessment would govern those assessments also. 24th October, 1930. - Revised assessment on Messrs. Martin & Company for the years 1927-28, 1928-29 and 1929-30 excluding the income of Messrs. Burn & Company. 8th November, 1930. - Assessment on Messrs. Burn & Company in respect of the income of that firm only for the years 1927-28, 1928-29 and 1929-30. 30th March, 1931. - Cancellation of the assessment for 1928-29 and 1929-30 on Messrs. Burn & Company by the Commissioner under Section 33 of the Act on an application for a Reference to the High Court on the ground that the proceedings for assessment had not been legally initiated. 31st March, 1931. - Issue of notice under Section 34 on Messrs. Burn & Company in respect of the income which should have been assessed in the years 1928-29 and 1929-30. 19th February, 1932. - Completion of these proceedings under Section 34 by the Income Tax Officer and assessment.
(2.) The Commissioner of Income Tax states that arising out of the 1928-29 assessment six questions of law were formulated by the assessees under Section 66 (2). The first question runs as follows :- Did the terms of the notice in this case, dated 31st, March, 1931, purporting to be served under Section 34 of the Indian Income Tax Act, 1922, constitute a valid notice under the said section
(3.) That question has been referred by the Commissioner to this Court. As regards the other questions put forward by the assessees they seem to resolve themselves into these two questions :- (1) In the circumstances of this case when did the income which should ordinarily have been assessed in 1928-29 escape assessment (2) Was the notice served on the assessees in this case under Section 34 a notice served within the period of limitation allowed by that section These two questions relating to the 1928-29 assessment were also referred by the Commissioner to this Court. Now, as regards the 1929-30 assessment the questions formulated were these : Did the terms of the notice in this case, dated the 31st March, 1931, purporting to be served under Section 34 of the Indian Income Tax Act, 1922, constitute a valid notice under the said section The Commissioner points out in his statement of the case that this was an assessment which should have been ordinarily have been made in the year 1929-30 and he says that even in accordance with the contention advanced by the assessees with regard to the correct interpretation of Section 34 of the Act the notice under Section 34 was in fact served in due time, for it was served before the end of the year following the year 1929-30. It is not necessary that we should say very much with regard to the questions put forward in connection with the assessment of the year 1929-30, because Mr. Pugh who appeared on behalf of the applicants quite early in his argument admitted that the notice dated 31st March, 1931, in respect of the year 1929-30 was served within the time limited under Section 34 of the Act and he abandoned the contention that by reason of the actual form of the notice it was not a valid notice under that section. What we are really now concerned with, therefore, is the question whether or not the notice dated 31st March, 1931, requiring Messrs. Burn & Company to deliver to the Income-tax Officer not later than the 5th May, 1931, or within 30 days of the receipt of the notice a return of their income from all sources which were assessable for the year ending the 31st March, 1929, was in form a good notice, and otherwise, even if it were, whether it nevertheless constituted a valid notice under Section 34 of the Act. A copy of the actual notice is set out on page 41 of the paper-book. It is headed Notice under Section 34 of the Indian Income Tax Act (Act XI of 1922). It is quite true that the notice was in the form of a letter instead of being in the common form prescribed by the Central Board of Revenue but it was conceded by Mr. Pugh that in fact all the details provided for in that form of notice had, in fact, been dealt with in the letter and we gathered the impression that Mr. Pugh did not seriously desire to stress this particular point. It is to be observed that there is no standard form of notice prescribed in Section 34 itself. All that the section requires is that a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 22 shall be served. Mr. Sundaram in his well-known text book The Law of Income Tax in India 3rd Edition at page 844 says : If the information on which the supplementary assessment is proposed to be made has already been furnished by the assessee himself, though in some other connection, and it has also been verified by him, it is strictly speaking unnecessary for the Income Tax Officer to issue a notice, though in practice the assessee is probably given an opportunity of being heard, on the analogy of the provision in Section 35. We are quite satisfied that the form of the notice which was given on the 31st March, 1931, sufficiently and properly complied with the requirements of Section 34 of the Income Tax Act. The substantial questions which we have to decide as regards 1928-29 assessments is first of all the question whether on the ground that the income of the year 1928-29 did not escape assessment, Section 34 can be made applicable at all. Section 34 reads as follows :- If for any reason income, profits or gains chargeable to income-tax has escaped assessment in any year or has been assessed at too low a rate, the Income Tax Officer may, at any time within one year of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 22, and may proceed to assess or reassess such income, profits or gains, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section : Provided that the tax shall be charged at the rate at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be. ;