COMMISSIONER OF INCOME-TAX, CALCUTTA vs. BIDHU BHUSHAN SARKAR (DEAD) THROUGH HIS LEGAL REPRESENTATIVE MIHIR KUMAR SARKAR

CIVIL APPEAL No. 401/1965Supreme Court[1967] 1 S.C.R. 68503 October 1966Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, VISHISHTHA BHARGAVA COMMISSIONER OF INCOME10 pages
AI SummaryAllowed

What were the facts?

The assessee, Bidhu Bhushan Sarkar, filed a voluntary return for assessment year 1947-48. Proceedings under Section 34 were initiated by the Additional Income-tax Officer (A.I.T.O.) on February 23, 1950. On February 4, 1952, the A.I.T.O. passed an order stating the case was 'filed' as income would be assessed in proceedings before the Principal Income-tax Officer (P.I.T.O.) concerning military contract income. The P.I.T.O. issued a notice under Section 34 on February 12, 1952, and passed an assessment order on January 31, 1953. The P.I.T.O. later admitted lack of jurisdiction, and the Appellate Assistant Commissioner set aside the assessment on December 7, 1955. The Commissioner transferred the case from the A.I.T.O. to the P.I.T.O. on December 30, 1955. The P.I.T.O. issued a fresh notice under Section 34 on February 11, 1956, and passed an assessment order on May 2, 1956. The assessee appealed, arguing the first notice was still pending and the second assessment was time-barred. The Appellate Assistant Commissioner agreed, but the Tribunal reversed this. The High Court favored the assessee.

What did the Supreme Court hold?

The Supreme Court held that the order of the Additional Income-tax Officer (A.I.T.O.) on February 4, 1952, stating the case was 'filed', was equivalent to 'disposed of', effectively terminating the proceedings before him. Even if the order was invalid, it still terminated the proceedings, and the proper recourse would have been to have it set aside by a higher authority. Therefore, the proceedings on the first notice were not pending when the Commissioner transferred the case. The Court also held that the term 'case' in Section 5(7A) is comprehensive and includes both pending and future proceedings, meaning a transfer order could be validly made even if no proceedings were actively pending. The Principal Income-tax Officer (P.I.T.O.) was therefore competent to issue a fresh notice under Section 34 on February 11, 1956. This notice was valid as it was issued within eight years of the end of the assessment year 1947-48. The subsequent assessment order of May 2, 1956, was also valid as it was made within one year of the notice. The High Court's decision was reversed.

What were the issues?

1. Whether proceedings pursuant to the notice under Section 34 issued by the Additional Income-tax Officer on February 23, 1950, were still pending on December 30, 1955, rendering the subsequent notice and assessment by the Principal Income-tax Officer invalid, concerning Section 5(7A) and Section 34 of the Income-tax Act, 1922. - Assessee's contention: The A.I.T.O.'s order of February 4, 1952, was invalid and did not terminate the proceedings, meaning they were still pending when the Commissioner transferred the case. Therefore, the subsequent notice and assessment by the P.I.T.O. were invalid. - Revenue's contention: The A.I.T.O.'s order, even if irregular, effectively terminated the proceedings before him. The term 'case' in Section 5(7A) includes future proceedings, allowing for a valid transfer and subsequent assessment. 2. Whether the assessment order passed by the Principal Income-tax Officer on May 2, 1956, was barred by limitation, concerning Section 34(3) of the Income-tax Act, 1922. - Assessee's contention: If the first notice was still effective, the assessment made was barred by time. - Revenue's contention: The notice was validly issued within the eight-year period, and the assessment was completed within one year thereafter, making it valid.

Which sections of the Income-tax Act were involved?

Section 5(7A),Section 34,Section 22(2),Section 23(2),Section 34(3),Section 34(4)

AI-generated summary — verify with the full judgment below

A COMMISSIONER OF INCOME-TAX, CALCUTTA B c D E F G H l'. BIDHU BHUSHAN SARKAR (DEAD) 'fllJlOUGH HIS LEGAL REPRESENTATIVE MIHIR KUMAR SARKAR October 3, 1966 ( J. C. SHAH, V. RAMASWAMJ AND V. BHARGAVA, JJ.] Income-tax Act, 1922, ss. 5(7A), 34-Proceeding pursuant to notice under s. 34 "filed" by Additional Income-tax Officer as another prloceed- ing for same year pending before Principal income-tax Officer-Latter Issuing another notice under s. 34-Whether proceeding on first notice still pending-Whether second notice and assessment thereafter val/4- Whether transfer under s. 5(7A) only possible when proceedings pend- ing-Notice under s. 34 iust before expiry of eight years-Assessment completed within one year thereafter-Whether valid or barred by limit~ tion.

In proceedings pursuant to a notice under s. 34 of the Income-tax Act, 1922, the Additional Income-tax Officer passed an order to the effect that the income should be taken in the assessment on a second re- turn for the same year pending before the Principal Income-tax Officer, for which tbete was another file and that the case was, therefore, "filed".

The Principal Officer, after issuing a n<>tice under

The order continues below.

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