S. B. JAIN, I.T.O. NAGPUR vs. MAHANDERA

CIVIL APPEAL No. 1301/1971Supreme Court[1972] 1 S.C.R. 61407 September 1971Bench: 2 JudgesAuthor: K.S. HEGDE, A.N. GROVER S. B. JAIN, I.T.O. NAGPUR5 pages
AI SummaryDismissed

What were the facts?

The Income-tax Officer (ITO) issued a notice on January 5, 1962, under Section 34(1)(a) of the Indian Income-tax Act, 1922, to reopen the assessment of the respondent for the assessment year 1946-47. The respondent challenged this notice, and the High Court quashed it on March 6, 1963, finding it time-barred. The Indian Income-tax Act, 1961, came into force on April 1, 1962. Subsequently, the ITO issued another notice on March 26, 1963, under Section 148 of the 1961 Act, for the same assessment year. The respondent again challenged this notice, and the High Court quashed it, holding the ITO incompetent to issue it. The appeals before the Supreme Court challenge this latter High Court decision.

What did the Supreme Court hold?

The Supreme Court dismissed the appeal, holding that Section 297(2)(d)(ii) of the 1961 Act requires the factual pendency of proceedings under Section 34 of the repealed Act. The question of whether that proceeding was barred by limitation is irrelevant. The Court reasoned that proceedings initiated by a competent authority cannot be deemed not pending merely because no relief can be granted due to a limitation bar. Since the initial proceedings were factually pending before a competent authority, even though quashed later for being time-barred, they were considered pending at the commencement of the 1961 Act. Consequently, the ITO was not competent to issue a fresh notice under Section 148 of the 1961 Act. The Court relied on its decisions in Raja Kulkarni and Mela Ram & Sons to support its reasoning that factual pendency is key, not the ultimate validity or enforceability of the proceedings.

What were the issues?

1. Whether proceedings initiated by a notice under Section 34(1)(a) of the Indian Income-tax Act, 1922, which was subsequently quashed as time-barred, can be considered "pending" within the meaning of Section 297(2)(d)(ii) of the Indian Income-tax Act, 1961, at the commencement of the 1961 Act. The Assessee (Respondent) argued that the initial notice under Section 34(1)(a) of the 1922 Act was invalid due to being barred by limitation. Therefore, the proceedings initiated on the basis of this invalid notice should not be considered pending when the new Act came into force. The Revenue (Appellant) contended that the factual pendency of proceedings under Section 34 of the repealed Act is what matters, irrespective of whether such proceedings were ultimately found to be barred by limitation or not.

Which sections of the Income-tax Act were involved?

Section 297(2)(d)(ii),Section 34(1)(a),Section 148,Section 147,Section 149

AI-generated summary — verify with the full judgment below

614 S. B. JAIN, I.T.O. NAGPUR v. MAHANDERA September 7, 1971 [K. S. HEGDE AND A. N. GROVER, JJ.J Income-tax Act, 1961, s. 291(2)(d) (ii)-lncome-tax Act, 1922, S. 34(1) (a)--Notice under latter Act held beyond time-··l/ proceedings pending within meaning of s. 297(2) (d)(ii).

The Income-tax Officer issued a notice to the respondent on January 5, 1962 under s. 34(l)(a) of the Indian Income-tax Act, 1922, seeking to reopen his assessment for the assessment year 1945-47. The respon- dent challenged the validity of that notice. The High Court quashed the impugned notice by its order dated .March 6, 1963 on the ground that the notice was issued beyond the time prescribed by law.

On April 1. 1962 the Indian Income-tax Act, 1961, came into force. Under s. 297(2) (d) (ii) of this Act if "any income chargeable to tax had escaped assessment \vith- in the meaning of that expression in s. 147 and no proceedings under s. 34 of the ·repealed Act in respect of any such income are pending at the commencement of this Act, a notice under s. 148 may . . . . be issued \Vith respect to that assessment year . ... " The Incon1e-tax Officer again issued a noticl! under s .. 148 of t

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