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
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
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
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
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