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PETITIONER: THE FIRST ADDITIONAL INCOME-TAX OFFICER, MYSORE

       Vs.

RESPONDENT: H.N.S. IYENGAR

DATE OF JUDGMENT: 05/10/1961

BENCH: KAPUR, J.L. BENCH: KAPUR, J.L. DAS, S.K. MUDHOLKAR, J.R.

CITATION:  1962 AIR  478            1962 SCR  Supl. (1)   1

ACT:      Income Tax-Income  escaping assessment-Notice to make  retun-limitation-English years,  if  from end of  accounting or  assessment  year-Any  year’ Meaning of  Indian  Income-tax  Act  1922  (11  of 1922), ss.  22 (1), 34 (1) (a)-Indian Finance Act, 1948 (XX of 1948)

HEADNOTE:      In 1956 a notice was issued to the respondent under s.  34(1)(a) of  the Indian  Income-tax Act, calling upon  him to  make a  return on the ground that his  income had  escaped assessment  for  the year  ending   31st  March,  1949  The  respondent contended that notice under s. 34 of the Act could not be issued to him because of the lapse of eight years from  the end  of the  accounting year. This contention was  not accepted  by  the  Income  Tax officer. The  assessee then  filed an  application under Art. 226 of the Constitution. The High Court held on  a construction  of s. 34 of the Act, that the words  ’any year’ as used in s. 34(1)(a) mean. not the  assessment year  but the accounting year. The Income-tax officer appealed The contention was that the  words ’any year’ in cl. (a) refer to the assessment year. ^      Held, that the correct way of interpreting s. 34(1)(a) of  the Indian Income-tax Act, 1922, read with the  provisions of  the Indian  Finance  Act, 1948, is  that the  words ’for  any year’ mean for any assessment  year and  not for  any  accounting year because  the assessment is for the assessment year although  of the  income which accrued in the previous year  (year of account) The Previous year for  different   heads  of  income  falling  under different sections  of the  Indian Income -tax Act may vary  but does  not  give  different  starting points of  limitation  for  different  sources  of income.      Panna Lal  Nand Lal Bhandari v. Commmissioner

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of Income  Tax, Bombay City, [1961] 2 S. C. R. 35, referred to.      C. W.  Spencer v. Income-tax officer, Madras, [1957] 31 I. T. R. 107, approved.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION:   Civil Appeal No. 60 of 1961. 2      Appeal from  the  judgment  and  order  dated September 15,  1958, of  the Mysore  High Court at Bangalore in Writ Petition No. 144 of 1957.      K. N.  Rajagopal Sastri  and P. D. Menon, for for the appellant.      Rameshwar Nath, S. N. Andley and P. L. Vohra, for the respondent.      1961. October  5. The  Judgment of  the Court was delivered by      KAPUR, J.-This  is an appeal on a certificate of the  High Court  under Art.  133 (1)(c)  of the Constitution against the judgment and order of the High Court  of Mysore  passed in  a petition under Art.  226   of  the  Constitution  of  India.  The appellant before  us is  the 1st Additional Income tax officer  and the  respondent is  the assessee, and the  matter relates  to  the  assessment  year 1948-49 the accounting year being 1947-48.      The facts  of this  appeal are as follows. On November 27,  1956, a  notice was  issued  to  the respondent  under  B.  34  (1)(a)  of  the  Indian Income-tax Act  calling upon  him to make a return on  the   ground  that   his  income  had  escaped assessment for  the assessment  year  ending  31st March,  1949.   This  notice  was  served  on  the respondent on  November 29,  1956. The  respondent objected that no notice under B. 34 of the Income- tax Act  could be  issued to  him because  of  the lapse  of   eight  years   from  the  end  of  the accounting year.  This objection was overruled and the respondent filed on June 12, 1957, in the High Court of  Mysore, a petition under Art. 226 of the Constitution for a writ of certiorari quashing the order made by the Income-tax officer.      The High Court held on a construction of s 34 of the  India Income-tax  Act, that the words ’any year"  as   used  in  s.  31(1)(a)  mean  not  the assessment year  but the  accounting year.  It  is that question  which is  required to be decided in this appeal. Section 34(1 )(a) reads:- 3 s. 34(1) "If-           (a) the Income-tax officer has 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 section 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 date, or      have  been  made  the  subject  of  excessive      relief under  the Act,  or excessive  loss or

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    depreciation allowance has been computed, or           (b) ..................................he      may in  cases falling under clause (a) at any      time  within   eight  years   serve  on   the      assessee, or  if the assessee is a company on      the  principal   officer  thereof,  a  notice      containing all  or  any  of  the  requirement      which may  be included in a notice under sub-      section (2)  of section 22 and may proceed to      assess or  re-assess such  income, profits or      gains or  recompute the  loss or depreciation      allowance; and  the provisions  of  this  Act      shall, so for as may be, apply accordingly as      if the notice were a notice issued under that      sub-section;".      The argument  is that the words "any year" in cl.(a) refer  to the assessment year because under the Income-tax Act the income of the previous year is assessed  for the  assessment  year.  For  this purpose reference  was made  to some  of the other provisions of  the Income-tax Act. In s. 3 of that Act,  which   is  the   charging  section,  it  is provided:-           S. 3  "Where any  (Central  Act)  enacts      that income-tax shall be charged for any year      at any  rate or  rates tax  at that  rate  or      those rates shall be charged for that year in      accordance   with,   and   subject   to   the      provisions 4      of, this Act in respect of (the total income)      of the  previous year  of every  (individual,      Hindu undivided  family, (company  and  other      local authority,  and of every firm and other      ar association  of persons or the partners of      the firm  or the  members of  the association      individually)‘’ . This shows  that income-tax  is charged  for  "any year" at  the rate  or rates  set out in a Central Act and  the reference  is to  the Indian  Finance Act-in this  case to  that of  1948,  (Act  XX  of 1948):      Section 9 of that Act reads as follows: -           S. 9(1)  "Subject to  the provisions  of      sub-sections (3),(4),  (5) and  (6), for  the      year beginning  on  the  1st  day  of  April,      1948,-           (a) income-tax  shall be  charged at the      rates specified  in  Part  I  of  the  Second      Schedule to this Act, and           (b).............................           (2) In  making any  assessment  for  the      year  ending   on  the  31st  day  of  March,      1949,...........           (3) In  making any  assessment  for  the      year ending on the 31st day of March, 1949,-           (a)  ..........................           (b)  ............... ........... It is quite clear from this section that according in to  the Finance Act 1948, the income tax was to be charged  at the rates specified in the Schedule attached thereto for the year beginning on the 1st day of April, 1918, and the assessment was for the year ending  on March  31, 1949  under sub-ss. (2) and (3).  Thus according to the Indian Finance Act

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assessment was  to be  made for  the  year  ending March 31,  1949 at  rates specified  for the  year beginning April 1, 1948.           Coming now  to 8.  22(1) it is there (1)      provided  that   s.  22(1)   "The  Income-tax      officer 5       shall,  can or  before the 1st day of May in      each year  give notice  by publication in the      press  and   publication  in  the  prescribed      manner, requiring  every person  whose  total      income during  the previous year exceeded the      maximum amount  which is  not  chargeable  to      income-tax to  furnish,  within  such  period      less than  sixty days  as may be specified in      the  notice,  a  return,  in  the  prescribed      manner, setting  forth (along with such other      particulars as may be required by the notice)      his  total  income  and  total  world  income      during that year: ..... " It shows,  therefore, that a return has to be made for the  year of assessment in regard to the total income during  the  previous  year  which  is  the accounting year;  in  other  words  income-tax  is assessed for  the assessment  year on total income of the previous year.      When under s. 34 (1) (a) a return is required the return  has to  be made  under s.  22 for  any year, and  when the  reference is  to omission  to make a  return of  the income  under s. 22 for any year, the  year is  the assessment  year, although the  income  which  is  declared  relates  to  the previous year.  The reference in cl. (a) of sub-s. (1) to  B. 22  of  the  Act  therefore  makes  the meaning of  the phrase  for any year" referable to an assessment year. The clause makes it clear that an assessee  can be called upon to make a full and true disclosure of all materials necessary for his assessment of  that year  which  necessarily  must mean an assessment year and it is, in our opinion, erroneous to  say that a return under s. 22 of the assessees  income   for  any  year  would  have  a different meaning  in the  first  part  from  that dealing with  the full  and true disclosure of all material facts  necessary for  the assessment  for that year.      With due respect to the learned Judges of the High Court who gave the decision, the view 6 taken by  them as to the meaning of "any year" was erroneous, and  the correct way of interpreting s. 34 (1)  (a) is  that the words "for any year" mean for any assessment year and not for any accounting year because as we have said above, the assessment is for  the assessment year although of the income which accrued  in the  previous year.  It  may  be added that  the previous  year for different heads of income  falling under different sections of the Indian Income  -tax Act  may vary and it could not have been the intention of the Legislature to give different  starting   points  of   limitation  for different sources  of income.  Reading the various sections of  the Indian  Income Tax Act, which are set out  above  and  the    provisions  of  Indian Finance Act 1948, it is clear that the words "that

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year." in  s. 31(1)  (a)  have  reference  to  the assessment year and not the accounting year.      Our attention  was drawn  to a,  judgment  of this  court   in  Pannalal   Nandlal  Bhandari  v. Commissioner of  Income tax,  Bombay  City(1).  In that case  it was held that once a notice is given in the  prescribed manner  under s. ’22 (1) of the Income-tax Act  every person  whose income exceeds the maximum amount, exempt from tax, is obliged to submit a return, and, if he does not do so it will be deemed  that there  was an omission on his part within s. 34 (1) (a). The question now debated was not raised  there but  it was  observed  that  the notices had  been issued  within eight  years from the end  of the years of assessment and if cl. (1) (a) of  s. 34  was applied  the assessment was not barred by  the law  of  Limitation.  It  was  also observed at page 79 that "the appellant not having submitted a  return in  pursuance  of  the  notice issued under s. 22 (1 ) the Income-tax officer was competent under  s. 34  (1) (a) to issue notice at any time within eight years of the end of the year of assessment for assessing him to tax". (1)[1961] 2 S. C. R. 35. 7      The appellant  also relied  upon C.W. Spencer v. Income-tax  officer, Madras(1).  It  was  there observed:           The period  of limitation, whether it is      eight years  for cases  falling under section      34  (1)  (a)  or  four  years  falling  under      section 34  (1) (b),  has to be computed from      the end  of that  year. Though the expression      "year"  has   not  been  further  defined  by      section 34  itself, it  should be  clear from      the context  to the  section itself  that the      year referred  to is  the assessment year and      has no  reference  to  the  accounting  year,      which  is  elsewhere  specified  by  the  Act      itself as the previous year." In our  opinion therefore,  the view  taken by the Madras High  Court in  C. W. Spencer’s (1) case is the correct view and the view taken by the learned judges of  the Mysore  High Court is erroneous. We therefore  allow   this  appeal,   set  aside  the judgment and  order of the High Court by which the proceedings  taken  against  the  respondent  were quashed. The  respondent will pay the costs of the appeal in this court and in the High Court.                                     Appeal allowed      (1) [1957] 31 I.T.R.107