THE FIRST ADDITIONAL INCOME-TAX OFFICER, MYSORE vs. H.N.S. IYENGAR

CIVIL APPEAL No. 60/1961Supreme Court1961 INSC 28605 October 1961Bench: 3 JudgesAuthor: S.K. DAS, J.L. KAPUR, M. HIDAYATULLAH7 pages
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What were the facts?

The Income-Tax Officer (ITO) issued a notice under Section 34(1)(a) of the Indian Income-Tax Act, 1922, to the respondent assessee on November 27, 1956, requiring a return for income escaping assessment for the assessment year ending March 31, 1949. The assessee contended that the notice was time-barred, as eight years had elapsed from the end of the accounting year. The ITO overruled this objection. The assessee then filed a writ petition in the Mysore High Court. The High Court, interpreting Section 34(1)(a), held that 'any year' referred to the accounting year, not the assessment year. The ITO appealed this decision to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the words 'for any year' in Section 34(1)(a) of the Indian Income-Tax Act, 1922, refer to the assessment year and not the accounting year. The Court reasoned that income-tax is charged for the assessment year, even though it is based on the income of the previous year (accounting year). The reference to Section 22(1) in Section 34(1)(a), which requires a return for the 'previous year' for the 'year of assessment', further supports this interpretation. The Court found the High Court's interpretation erroneous, citing the judgment in C.W. Spencer v. Income-tax Officer, Madras, which held that the year referred to in Section 34 is the assessment year. The Court also noted that allowing different starting points for limitation for different income sources would be contrary to legislative intent. Consequently, the appeal was allowed, and the High Court's order quashing the proceedings was set aside.

What were the issues?

1. Whether the words 'any year' in Section 34(1)(a) of the Indian Income-Tax Act, 1922, refer to the assessment year or the accounting year, for the purpose of computing the limitation period for issuing a notice for income escaping assessment. The assessee argued that the eight-year limitation period for issuing a notice under Section 34(1)(a) should be calculated from the end of the accounting year. The revenue (Income-Tax Officer) contended that 'any year' in Section 34(1)(a) refers to the assessment year, and therefore the limitation period should be computed from the end of the assessment year. The revenue relied on the charging section (Section 3) and Section 9 of the Indian Finance Act, 1948, to support its interpretation that assessments are made for the assessment year based on the income of the previous year. The revenue also referred to a Supreme Court judgment in Panna Lal Nand Lal Bhandari v. Commissioner of Income Tax and a Madras High Court judgment in C.W. Spencer v. Income-tax Officer.

Which sections of the Income-tax Act were involved?

Section 34(1)(a),Section 22(1),Section 3,Section 9

AI-generated summary — verify with the full judgment below

" •. THE SUPREME COURT REPORTS THE FIRST ADDITIONAL INCOME-TAX OFFICER, MYSORE v. H. N. S. IYENGA!'t (S. K. DAS, J. L. KAPUR and M. HIDAYATULLAH, JJ.)

Income Ta.~-lnco171e escaping assessment-Notice to mrike re!u.rn-T.imitation-Eight years, if from end of acconnti'.ng or a.Jse.~8ment y~ar-' Any year', Meaning of- ln'lian ln~ome-tric Act, 1922 (II of 1.922), 88. 22(1), 34 (J)(a)- India.n Fin.once Act, 1948 (XX of 1948).

In 1956 a notice was issued to the respondent under s. 34(l)(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 respon- dent l'.'.on tended that notice under s. 34 of the Act could not be i.sued 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 asse,,ee then filed an ap- plication 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 ins. 34(l)(a) mean, not the assessment year but the accounting year.

The Income-tax officer ap- pealed. The contention was that the wor

The order continues below.

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