COMMISSIONER OF INCOME-TAX, MADRAS vs. S. RAMAN CHETTIAR

CIVIL APPEAL No. 1096/1963Supreme Court[1965] 1 S.C.R. 88327 October 1964Bench: 3 JudgesAuthor: K. SUBBA RAO, J.C. SHAH, S.M. SIKRI A B7 pages
AI SummaryDismissed

What were the facts?

The assessee, a Hindu Undivided Family, did not file returns for assessment years 1944-45 and 1945-46. On April 3, 1948, the Income Tax Officer issued notices under Section 34. The assessee filed returns for both years on September 4, 1948. Proceedings for 1944-45 were dropped. For 1945-46, an assessment order was passed. The Appellate Tribunal, on November 19, 1952, held that a portion of profit was assessable in 1944-45 and allowed the Income Tax Officer to take appropriate action. Subsequently, on February 27, 1953, after obtaining the Commissioner's sanction, a fresh notice under Section 34 was issued for 1944-45. An assessment order was passed on June 30, 1953. The assessee's appeals were unsuccessful, and the High Court held the reassessment under Section 34 for 1944-45 invalid. The Commissioner appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the first return submitted by the assessee was a valid return under Section 22(3). The Department could not ignore this valid return and issue a subsequent notice under Section 34 on the assumption that there had been an omission or failure on the part of the assessee to make a return under Section 22. Section 22(3) permits an assessee to furnish a return at any time before assessment is made. Even if the initial notice under Section 34 was invalid due to non-compliance with amendments, a return filed in response to it, if otherwise valid and filed before a valid notice under Section 34, must be treated as a valid return under Section 22(3). The Court distinguished the case of Commissioner of Income-tax, Bihar and Orissa v. Maharaja Pratap Singh Bahadur of Gidhaur, noting that in that case, returns had already been filed under Section 22. The Court overruled the decision in R. K. Das & Co. v. Commissioner of Income-tax, West Bengal. The ratio is that a return filed before the receipt of a valid notice under Section 34, regardless of the impelling cause, is to be treated as a valid return under Section 22(3) if it falls within the language of the sub-section.

What were the issues?

1. Whether a return submitted in response to an invalid notice under Section 34 can be treated as a valid return under Section 22(3) of the Indian Income-tax Act, 1922, thereby precluding the issuance of a subsequent notice under Section 34 on the assumption of a failure to file a return. (Mixed law and fact, turns on Sections 22(3) and 34). Assessee's contentions: Supported the High Court's reasoning, arguing that the return filed on September 4, 1948, even if in response to an invalid notice, could not be ignored by the Department. The Department could not issue a further notice under Section 34(1)(a) on the assumption of a failure to file a return. The case of Commissioner of Income-tax v. Ranchhoddas Karsondas was applicable. Assessment could have been made under Section 23 treating the return as one under Section 22. Revenue's contentions: Argued that the return was not voluntary and, having been made in pursuance of an invalid notice, must also be treated as invalid. No assessment could be made on its basis. The case of Ranchhoddas Karsondas was distinguishable. The Department also contended that the notice issued on April 3, 1948, and the return filed on September 4, 1948, were valid, and proceedings initiated thereby ended on October 27, 1950, leaving no pending proceedings when the second notice was issued on February 27, 1953.

Which sections of the Income-tax Act were involved?

Section 22(3),Section 34,Section 22(2),Section 34(3),Section 23

AI-generated summary — verify with the full judgment below

• A B c D E F G COMMISSIONER OF INCOME·TAX, MADRAS v. S. RAMAN CHETTIAR October 27, 1964 (K. SUBBA RAo, J. c. SHAH AND s. M. Snoo JI.)

Indian Income-tax Act (11 of 1922), ss. 22(3) and 34-Invalid notice under s. 34--Return submitted-Subsequent proceedings under s. 34-If can be taken ignoring return.

Jn response to a notice dated 3rd April 1948, under s. 34 of the Indian Income-tax Act, 1922, the assessee submitted returns for the assessment years 19-14-45 and l 9~5-46. The Income-tax Officer dropped proceedings [or the former year and determined the net taxable income for the latter year. The assessee appealed first to the Appellate Assistant Commissioner ar.d then to the Appellate Tribunal. The Tribunal allowed the appeal in part, held that a portion of the profit determined was assessable in the assessment y~ar 1944-J5 and observed, that the Income-tax Officer was at liberty to take appropriate action.

The InCome-tax Officer again issued a notice under s. 34 after obtaining the sanction of the Commissioner, as required by the Amending Act 48 of 1948 (passed on 8th September 1948, but !!1'•.le retrospective from 30th March 1948), in respect of the asses

The order continues below.

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