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PETITIONER: BALCHAND

       Vs.

RESPONDENT: INCOME-TAX OFFICER, SAGAR

DATE OF JUDGMENT: 19/08/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V.

CITATION:  1969 AIR  496            1969 SCR  (1) 704  CITATOR INFO :  R          1986 SC1853  (17)

ACT: Income-tax Act (11 of 1922), s. 34 and Income-tax Act (43 of 1961),  148-Assessment  made by  Income-Tax  Officer-Further return     thereafter by assessee-Whether such return should be disposed  of     before taking action under s. 34 of  the 1922-Act  or  s.  148  of  the  1961-Act.

HEADNOTE: The appellant was assessed to pay tax on his income for  the assessment  years 1945-46 and 1946-47 under s. 23(3) of  the Income-tax  Act,  1922. Thereafter, on June  24,  1959,  the Income-Tax Officer issued a notice of reassessment under  s. 34 requiring the appellant to submit a return of his  income assessable for the year ending March 31, 1946 on the  ground that  the  income of the appellant had  escaped  assessment. The  preamble  to  the  notice  however,  referred  to   the assessment   years   1946-4-7  and  1945-46.  The  appellant filed  a return for the assessment year  1946-47,  and  when his attention was drawn to the body of the notice, he  flied a  fresh return for the assessment year  1945-46   admitting that   he  had misunderstood the notice.  On March 14,  1963 the Income-Tax Officer issued another notice under s. 148 of the  Income-tax  Act, 1961, calling upon  the  appellant  to submit a return of his income for the assessment year  1946- 47,  on the ground that his income for that year  also   had escaped  assessment.  The appellant, thereupon flied a  writ petition  in  the High Court for quashing  the  two  notices dated June 24, 1959 and March 14, 1963 but the petition  was dismissed. In appeal to this Court, on the questions, whether; (1 )  by the notice dated June 24, 1959 the appellant was called upon to  file  a  return  for the  assessment  year  1946-47  and therefore  the reassessment proceedings for  the  assessment year  1945-46 were incompetent; and (2) since the  appellant had submitted another re.turn for the assessment year  1946- 47  the  notice  dated March  14,  1963.,  was  incompetent, because a notice under s. 34 of the Income-tax Act, 1922, or s.  148 of the Income-tax Act 1961, could not be  issued  so long as the return was not considered and disposed of, HELD: (1) Though there was some negligence in drawing up the

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preamble to the notice dated June 24, 1959 it did not affect its validity for the assessment year 1945-46.  The appellant was  clearly  informed that he had to file a return  of  his income assessable for the year ending March 31, 1946 that is for  the assessment year 1945-46, and the appellant  himself had admitted his mistake in construing it. [706 B-D] (2) The Act does not provide any machinery for dealing  with voluntary  returns filed by an assessee after assessment  of income  for the year of assessment was completed.  When  the income of the assessee had been assessed to tax, it was  not open to him, to file another voluntary return  and avoid the issue of a notice either under s. 34 of the 1922 Act or   s. 148 of the 1961-Act.  The cases,  Commissioner  of   Income- tax   v.  Ranchhoddas Karsondas, 36 I.T.R.  569  (S.C.)  and Commissioner  of Income-tax v.S. Raman Chettiar,  55  I.T.R. 630  (S.C.)  on which the appellant relied are  cases  where there was no order of assessment for the rele- 705 vant  year  and their principle has no  application  to  the present  case. Unless a notice of reassessment is issued  by the Income-Tax Officer, the assessee cannot, after an  order of assessment is made, submit a return of his income for the year  for  which he was already assessed and call  upon  the Income-Tax Officer to assess his income. [707 G; 708-C, F-G]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 640 of 1966. Appeal by special leave from.’ the judgment and order  dated September 2, 1965 of the Madhya Pradesh High Court in  Misc. Petition No. 92 of 1964. N.D. Karkhanis, and A.G. Ratnaparkhi, for the appellant. D. Narsaraju and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by Shah,  J.   The  Income-tax  Officer,  Sagar,  assessed  the appellant to pay under s. 23(3) of the Income-tax Act, 1922, tax  on  his income computed for the       assessment  years 1945-46 and 1946-47.  On June 24, 1959,       the/Income-tax Officer  issued  a notice of reassessment under  s.   34  of the/ncome-tax  Act,  1922, reciting that the income  of  the appellant had escaped assessment and requiring the appellant to submit a return of his total world income assessable  for the  year ending March 31,  1946.  On August 17,  1959,  the appellant  filed a return for the assessment of  his  income for  the  year 1946-47.  The appellant was informed  by  the Income-tax  Officer  that  he was called upon  to  submit  a return of his income for the assessment year 1945-46 and not for the assessment year 1946-47.  The appellant on March 22; 1960, filed a fresh return for the assessment year   1945-46 admitting that he had "misunderstood the notice" served upon him.   In his return he admitted that he had a third   share in  a   firm  styled "Sheoprasad Shobharam".  On  March  14, 1963, the Income-tax Officer issued another notice under  s. 148 of the Income-tax Act, 1961, calling upon the  appellant to  submit  a return of his income for the  assessment  year 1946-47  on  the  ground that income of  the  appellant  had escaped  assessment.   The appellant then   moved  the  High Court  of Madhya Pradesh for an order quashing  the  notices dated  June 24. 1959 and March 14, 1963, and for a  writ  of mandamus  or prohibition restraining the Income-tax  Officer from continuing the proceedings of assessment under the  two notices.   The  High  Court  rejected  the  writ   petition. Against  the  order  of the High Court,  the  appellant  has appealed to this Court with special leave.

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The  appellant contended that by the notice dated June   24, 1959, he was called upon to file a return for the assessment year  1946-47 and initiation of proceedings on  that  notice for  reassessment of income for the assessment year  1945-46 was incompetent. 706 In the preamble of the notice it is recited: "Whereas I have reason  to believe that your income assessable to  mcome-tax for  the assessment year 1946-47, 1945-46  has--(a)  escaped assessment  ....  , I therefore propose to assess  the  said income",   but   in  the body of the notice  it  is  clearly recited  that  the appellant was called upon  to  deliver  a return  of  his total world income assessable for  the  year ending  March  31,  1946.  A demand  for  return  of  income assessable  for  the  year  ending  March  31,  1946   could obviously  be  for the assessment year 1945-46 and  not  for 194647.   By his letter dated March 22, 1960, the  appellant admitted  that he was called upon to file a return  for  the assessment  year  1945-46  and he  had  "misunderstood"  the notice and had filed a return for the assessment year  1946- 47.  There was apparently some negligence in drawing up  the preamble  to  the  notice,  but that  does  not  affect  the validity  of  the  notice, for  the  appellant  was  clearly informed  that he had to file a return for the  year  ending March 31, 1946. The appellant then contended that in any event on August 17, 1959,   the  appellant  had  submitted  a  return  for   the assessment year 1946-47 and even if no notice for assessment year  1946-47 calling upon him to submit a return  for  that year was issued, a notice under s. 34 of the Income-tax Act, 1922,  or  under  s. 148 of the Income-tax  Act,  1961,  was incomp.etent  so  long  as  the  ,return  submitted  by  the appellant in August 1959 for the assessment year 1946-47 was not considered and disposed of.  Reliance in support of this contention  was placed upon two decisions  of   this  Court: Commissioner  of Income-tax v. Ranchhoddas Karsondas(1)  and Commissioner of Income-tax v. S. Raman Chettiar(2). Under s. 22( 1 ) of the Income-tax Act, 1922, the Income-tax Officer was required before the 1st day of May in each  year to  give  notice,  by  publication  in  the  press  and   by publication  in  the prescribed manner. calling  upon  every person whose total income during the previous year  exceeded the  maximum   amount   not  chargeable  to  income-tax   to furnish,  within such period not being less than sixty  days as  may  be  specified  in  the  notice,  a  return  in  the prescribed form.  Sub-section (2) authorised the  Income-tax Officer to serve a notice upon any person whose total income was  in  the opinion of the Income-tax Officer  of  such  an amount  as  to  render such  person  liable  to  income-tax, requiring him to furnish within such period, not being  less than  thirty  days,  as may be specified in  the  notice,  a return  of his total income during the previous year.   Sub- section ( 3 ) provided:               "If  any  person has not  furnished  a  return               within  the  time  allowed by  or  under  sub-               section (1 ) or sub-section (1)  36  I.T.R. 569.                         (2)  55  I.T.R. 630. 707               (2 ) or having furnished a return under either               of those sub-sections, discovers any  omission               or  wrong statement therein, he may furnish  a               return  or a revised return, as the  case  may               be,  at  any  time before  the  assessment  is               made."

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Section  34 of the Act authorised the Income-tax Officer  to serve   a   notice  on  the  assessee  for   assessment   or reassessment  if-(a)  the Income-tax Officer had  reason  to believe  that  by reason of the omission or failure  on  the part of an assessee to make a return of his income under  s. 22 for any year or to disclose fully and truly all  material facts  necessary for his assessment for that  year,  income, profits  or  gains  chargeable to  income-tax  have  escaped assessment  for that year, or have been under  assessed,  or assessed at too low a rate, or have been made the subject of excessive  relief  under  the  Act,  or  excessive  loss  or depreciation allowance has been computed, or if (b) in cases not   mentioned   in cl. (a) the Income-tax Officer  had  in consequence  of  information  in his  possession  reason  to believe that income, profits or gains chargeable to  income- tax had escaped assessment for any year, or had been  under- assessed,  or assessed at too low a rate, or had  been  made the  subject  of  excessive relief under  the  Act  or  that excessive loss or depreciation allowance had been  computed, and to proceed to reassess the income of the assessee. The  appellant  was already assessed to income-tax  for  the years  1945-46 and 1946-47 under the Act of  1922.   Counsel for the appellant concedes that the appellant did not comply with  the  notice  dated June 24, 1959, and  filed  first  a return  for  the assessment year 1946-47  and  thereafter  a return for the assessment year 1945-46. He, however, submits that even if the return  was not demanded, since the  return for  1946-47  was  filed by  the  appellant  the  Income-tax Officer  was bound to consider that return according to  law and to pass appropriate orders of assessment thereon and  so long  as  he did not do so, he was incompetent  to  issue  a notice of reassessment either under s. 34 of the  Income-tax Act of 1922, or s. 148 of the Income-tax Act, 1961.  We  are unable to accept that contention.  The Act does not  provide for  any machinery for dealing with voluntary returns  filed by  an assessee after assessment of income for the  year  of assessment is completed.  Such a voluntary return does  not_ operate as a bar to the Income-tax Officer issuing a  notice of reassessment. This Court has held in Ranchhoddas’s case(1) that ’where  no return  has  been filed by the assessee  within  the  period prescribed  by  s. 22(1) of the Income-tax  Act,  2922,  the assessee is entitled in law to submit a voluntary return  in answer,  to  the  general  notice under  s.  22(1  )  before assessment is completed, for a return (1) 36 I.T.R. 569. 135up. CI/68--14 708 answer to the general notice can under s. 22 (3) be/lied  at any  time  before assessment and for filing  such  a  return there is no limit of time, and when such a voluntary  return is  filed, the Income-tax Officer cannot ignore that  return voluntarily  filed and issue a notice of reassessment  under s. 34 of the Income-tax Act, 1922.  A notice of reassessment before  the  voluntary  return is disposed of  is  therefore invalid.   But the principle of Ranchhoddas’s  case(1)  only applies  to cases where no assessment of the income  of  the assessee  has been made.  Where the income of  the  assessee has been assessed to tax, it is not open to the assessee  on coming to learn or apprehending that proceedings under s. 34 of  the  Act will be taken against him to file  a  voluntary return  and avoid the issue of a notice under s. 34  against him.  In S. Raman Chettiar’s case(2) also a Hindu  undivided family  had  not filed any return for  the  assessment  year 1944-45.  The Income-tax Officer issued a notice under s. 34

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of  the Indian Income-tax Act, 1922, in April  1948  calling upon  the  assessee  to file a return  of  income,  and  the assessee  complied  with the notice and filed  a  return  on September 4, 1948.  In the course of the proceeding, it  was discovered that the notice under s. 34 was invalid,  because the  Commissioner’s sanction was not obtained.  The  Income- tax Officer then issued a fresh notice on February 27, 1953, in  respect  of the assessment year 1944-45  and  passed  an order  of assessment in respect of the income which had  not been assessed.  This Court held that the return submitted on September  4,   1948,  by the assessee in  response  to  the invalid  notice under s. 34 was a return within the  meaning of s. 22(3) of the Act, and the Income-tax Officer could not ignore  it and issue a notice under s. 34 on the  assumption that  there had been omission or failure by the assessee  to make  a  return  of his income under s.  22,  and  on  that’ account  the  assessment under s. 34 was invalid.   In  that case also no return had been filed by the assessee  pursuant to  s.  22 and no order of assessment of the income  of  the assessee  for the year 1944-45 was recorded.  The  principle of  Ranchhoddas’s  case(x) and S. Raman  Chettiar’s  case(2) has, in our judgment, no application to cases where a return has  been  filed  by the assessee and  assessment  made  and thereafter  apprehending  proceedings  under s.  34  of  the Indian  Income-tax  Act, 1922, the  assessee  files  another return.   Unless a notice of reassessment is issued  by  the Income-tax  Officer, the assessee cannot after an  order  of assessment  is  made submit a return of his income  for  the year  for  which he is already assessed and  call  upon  the Income-tax    Officer   to  assess  his  income.    Such   a proceeding would be futile.  It is true that a notice  under s.  34 is also a notice of assessment, but relying  upon  s. 22(3)  the assessee may furnish a’revised return to  rectify an omission or wrong statement, or furnish a return pur- (1) 36 I.T.R. 569. (1) 55 I.T.R. 630. 709 suant  to  a  requisition under s. 34:  he  cannot  seek  to rectify  his  return  on which assessment has  already  been made. The  return  filed on August 17, 1959,  therefore,  did  not deprive  of  the Income-tax Officer of his  jurisdiction  to start proceedings under s. 34 of the Indian Income-tax  Act, 1922,  against the assessee. There is no dispute that  after the  repeal  of  the Act of 1922, it was  competent  to  the Income-tax  Officer  to issue a notice under s. 148  of  the Income-tax  Act, 1961, for assessment of the income  of  the assessee if no proceeding for assessment had been  commenced prior to April 1, 1962. The appeal fails and is dismissed with costs. V.P.S.                                    Appeal dismissed. 710