Appeal No 954 of 1963
On appeal
from the judgment and decree dated March 9 1964 of the Allahabad High Court in Income tax Miscellaneous Case No 143 of 1954
991 K N Rajagopala Sastri R H Dhebar and R N Sachthey for the appellant
A V Viswanatha Sastri Z section Meeratwal B P Singh and Naunit Lal for the respondent
The Judgment of the Court was delivered by Subba Rao J
This appeal by special leave is directed against the order of a Division Bench of the High Court of Judicature at Allahabad holding that the Income tax Officer in the circumstances of the case went wrong in initiating proceedings under section 341 of the Indian Income tax Act 1922 hereinafter called the Act in respect of the assessment year 1942 43
The facts may briefly be stated
The assessee was a holder of an impartible estate in the district of Ajmer
On March 25 1944 the Income tax Officer assessed him to income tax for the year 1942 43
On April 5 1945 on the ground that two items of the assessee s income namely s year forest income and interest income were not included in the original assessment a notice under section 34 of the Act was issued to him
In response to the said notice the assessee filed a return wherein he disclosed fully and completely the particulars of his interest income but raised the plea that his forest income was not taxable
The Income tax Officer by his order dated July 12 1945 made a revised assessment including both the incomes
The respondent eventuallytook the matter on appeal to the Income tax Appellate Tribunal which by it  order dated April 25 1949 held that the Income tax Officer had no jurisdiction to initiate proceedings under section 34 of the Act in respect of the forest income on the ground that the Income tax Officer had knowledge that the assessee had such income when he made the original assessment
Though the Tribunal only dealt with the question of forest income by inadvertence or by mistake it set aside the entire order of reassessment dated July 12 1945 made by the Income tax Officer and restored the original order passed by him
The Income tax Department did not take any steps to rectify the mistake under section 35 of the Act or make any attempt to have the question of the illegality referred to the High Court
Having allowed the order to become final on January 3 1950 the Income tax Officer after obtaining the sanction of the Commissioner initiated proceedings under section 34 of the Act with respect to the interest income
On January 19 1950 the Income tax Officer issued to the assessee a fresh notice under the said section
On September 25 1950 a 992 revised assessment order was made in regard to the assessment year 1942 43 in which the respondent s interest income was also included
On appeal the Appellate Assistant Commissioner confirmed the said order
On further appeal the Income tax Appellate Tribunal held that since the assessee had failed to disclose his interest income in the return filed by him under section 222 of the Act in connection with the original assessment the said income had escaped assessment and therefore the provisions of section 34 1  a of the Act were attracted
On application filed by the assessee the Tribunal referred the following question to the High Court under section 661 of the Act Whether on the facts and in the circumstances of this case the provisions of section 341 were applicable in respect of the assessment year 1942 43 on 19th January 1950 when the notice under that provision was issued for the purpose of assessing the escaped interest income The High Court came to the conclusion that the Tribunal in its order dated April 25 1949 committed a clear error in setting aside the assessment of tax on the interest income without going into the correctness of the imposition of tax thereon but that order had become final it further held that the said order did not invalidate the entire proceedings taken under section 34 of the Act and therefore the Income tax Officer could not take proceedings afresh under section 34 of the Act
In the result the High Court answered the question in the negative
Hence the appeal
Mr Rajagopala Sastri learned counsel for the Revenue con tended that the interest income had escaped assessment and therefore the Income tax Officer was competent to initiate proceedings under section 341 a of the Act for assessing the same
Mr Viswanatha Sastri learned counsel for the respondent on the other hand argued that the assessment made by the Income tax Officer pursuant to the notice issued under section 34 of the Act was in its entirety set aside by the Tribunal on the ground that there was no discovery within the meaning of section 34 of the Act and that order had become final and therefore the Income tax Officer could not initiate fresh proceedings under that section on the principle of res judicata
To appreciate the contentions of the parties it is necessary to notice the scope of the order of the Tribunal dated April 25 1949
Before the Appellate Tribunal it was contended on behalf of the assessee that the Income tax Officer who issued the said notice had 993 no definite information which led to the discovery that the said income had escaped assessment within the meaning of the said section
Adverting to the said argument the Tribunal observed We do not agree with the contention of the department that the Income tax Officer who made the original assessment did not apply his mind to this fact as there is no evidence to show that at the material time such income was considered taxable by the Department
Ordinarily one would expect that when an Income tax Officer makes the assessment he does according to law and on the facts as produced before him
If the fact is before him he refused to take it into account thinking that it was immaterial or even inadvertently takes no notice of it it cannot be said that the Income tax Officer came in possession of a definite information within the meaning of section 34
We are therefore of the opinion that proceedings
under section 34 could not be initiated against the assessee for the four assessment years under reference
The orders passed by the Income tax Officer in respect of these four years are therefore set aside and the original orders under section 233 are restored
 We have extracted the order in extenso as the argument really turns upon the scope of the said order
The Appellate Tribunal in considering the validity of the notice under section 34 of the Act only discussed the question of the escape of the year income it did not advert to the interest income at all
It came to the conclusion having regard to the fact that the Income tax Officer at the time he made the original assessment had knowledge of the existence of the syar income that the Income tax Officer did not come into possession of definite information within the meaning of section 34 of the Act
Though the finding was arrived at on the basis of the syar income alone the Tribunal set aside the entire order of reassessment and restored the original order of assessment made by the Income tax Officer under section 23 3 of the Act
The legal effect of the order was that the are assessment of the entire income including the syar income and interest income was set aside on the ground that the Income tax Officer did not come into possession of definite information leading to a discovery and therefore he could not initiate proceedings under section 34 of the Act
It is true that the Tribunal had committed a mistake in setting aside the reassessment order in respect of the interest income 994 also but so long as that order stands it comprehends both the incomes
The Income tax Officer did not take any further proceedings by way of reference to the High Court on any question of law arising out of the order of the Tribunal nor did he take any proceedings under section 35 of the Act to have the order corrected on the ground of mistake
With the result the order has become final
The question therefore is not whether the order of the Tribunal in so far as it related to the interest income was made by inadvertence or under a mistake but whether the Income tax Officer could initiate proceedings over again under section 34 of the Act in derogation of the finding given by the Tribunal that the Income tax Officer did not discover that the income had escaped assessment
The Income tax Act is a self contained one
It creates a hierarchy of tribunals with original appellate and revisional jurisdictions
Section 31 gives inter alia right of appeal against some orders of the Income tax Officer to the Appellate Assistant Commissioner section 33 provides for a further appeal to the Income tax Appellate Tribunal and sub section
6 of section 33 says that save as provided in section 66 orders passed by the Appellate Tribunal on appeal shall be final
Section 66 provides for reference to the High Court on a question of law and section 66 A provides for appeals in certain cases to the Supreme Court
It is clear from the said provisions that the order of the Tribunal made within its jurisdiction subject to the provisions of section 66 of the Act is final
Therefore the decision of the Tribunal in respect of the subject matter under appeal before it is final and cannot be reopened by the assessee or the Department
The Judicial Committee in Commissioner of Income tar Bombay  Aden vs Khemchand Ramdas1 succinctly stated the legal position thus  But it is not true that after a final assessment under those sections sections 23 and 29 has been made the Income tax Officer can go on making fresh computations and issuing fresh notices of demand to the end of all time 
But when once a final assessment is arrived at it cannot in Their Lordships  opinion be reopened except in the circumstances detailed in 1  424 426
995 Sections 34 and 35 of the Act and within the time limited by those sections
 Later on the same idea is restated thus In Their Lordships opinion the provisions of the two sections are exhaustive and prescribe the only circumstances in which and the only time within which such fresh assessments can be made and fresh notices of demand can be issued
 The Judicial Committee again in Commissioner of Income tax West Punjab vs The Tribune Trust Lahore1 after noticing the relevant sections of the Act reaffirmed the same position and held that assessments once made would be valid and effective until they were set aside in the manner prescribed by the Act and that if not so set aside they were final
If so it follows that the order of the Tribunal on the said question namely that the whole order of reassessment under section 34 of the Act was invalid as there was no discovery that the relevant income escaped assessment had become final
The only two sections that enable the Income tax Officer to reopen final assessments are sections 34 and 35
If the Appellate Tribunal committed a mistake under section 35 it can be rectified within four years from the date of the order
In the present case it was a clear case of mistake for the Tribunal set aside the order of reassessment in respect of the interest income though its validity to that extent was not disputed
But for one reason or other the Revenue did not resort to the obvious remedy and allowed the mistake to remain uncorrected
In the se circumstances can section 34 of the Act be resorted to  Learned counsel for the Revenue says that section 341 a as amended in 1948 confers such a power on the Income tax Officer
The material part of section 34 before amendment read 1 If in consequence of definite information which has come into his possession the Income tax Officer discovers that income profits or gains chargeable to income tax have escaped assessment in any year Section 34 1  a as amended in 1948 reads  If the Income tax Officer has reason to believe that by reason of the omission or failure on the part of in assessee to disclose fully and truly all material facts necessary for his assessment for that year
1 996 income profits or gains chargeable to income tax have escaped assessment for that year he may in cases falling under clause a at any time    serve on the assessee a notice    It is said that the words has reason to believe that by reason of the omission or failure on the part of an assessee 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 are more comprehensive than the words the Income tax Officer discovers that income etc have escaped assessment in any year and therefore though there was a finding by the Tribunal that the Income tax Officer did not discover that there was escape of assessment
the Income tax Officer under the amended section 34 can initiate proceedings in spite of that finding
We cannot accept this argument
It could not have been the intention of the Legislature by amending the section to enable the Income tax Officer to reopen final decisions made against the Revenue in respect of questions that directly arose for decision in earlier proceedings
The Tribunal held in the earlier proceedings that the Income tax Officer knew all the facts at the time he made the original assessment in regard to the income he later on sought to tax
The said finding necessarily implies that the Income tax Officer had no reason to believe that because of the assessee s failure to disclose the facts income has escaped assessment
The earlier finding is comprehensive enough to negative any such reason on the part of the Income tax Officer
That finding is binding on him
He could not on the same facts reopen the proceedings on the ground that he had new information
If he did so it would be a clear attempt to circumvent the said order which had become final
We are not concerned in this appeal with a case where the Income tax Officer got new information which he did not have at the time when the Tribunal made the order
The finding of the Tribunal is therefore binding on the Income Officer and he cannot in the circumstances of the case reopen the assessment and initiate proceedings over again
If that was not the legal position we would be placing an unrestricted power of review in the hands of an Income tax Officer to go behind the findings given by a hierarchy of tribunals and even those of the High Court and the Supreme Court with his changing moods
The decisions cited by the learned counsel for the Revenue do not countenance such a contention
Chakraverti CJ in 997 R K Das  Co vs Commissioner of Income tax West Bengal1 speaking for the Division Bench only decided that the Income tax Officer could not make a reassessment unless he issued the prescribed notice and issued it in a valid form
As the notice under section 34 of the Act issued therein was held to be bad inasmuch as the Income tax Officer did not take the sanction of the Commissioner the learned Chief Justice held that the returns filed pursuant to such notice was also bad
We are not here concerned with that aspect of the case
The judgment of this Court in Commissioner of Income tax Bihar  Orissa vs Maharaja Pratapsingh Bahadur of Gidhaur2 held that as the earlier notice issued under section 341 of the Act without the sanction of the Commissioner was bad the entire proceedings for are assessment were illegal
There was an observation at the end of the judgment to the effect that there was time enough for fresh notices to have been issued and we fail to see why the old notices were not recalled and fresh ones issued
The point now raised before us viz how far and to what extent a final order made in earlier proceedings under section 34 of the Act would be binding on the Income tax Officer in subsequent proceedings under the said section was neither raised nor decided in that case
The said decisions therefore have no bearing an the question raised before us
For the foregoing reasons we hold that the answer given by the High Court to the question referred to it is correct
In the result the appeal fails and is dismissed with costs
Appeal dismissed


Summary:
The Income tax Officer issued a notice to the assessee under section 34 on the ground that two items of the assessee s income namely forest income and interest income were not included in the original assessment for the year 1942 43
In response the assessee filed a return fully disclosing his interest income but raised the plea that his forest income was not taxable
The Income tax Officer however assessed both items to tax
On appeal the Appellate Tribunal in its order dated April 25 1961 although dealing only with the forest income and holding that the Income tax Officer had no jurisdiction to initiate proceedings under section 34 in respect of such income by inadvertence or by mistake set aside the entire order of reassessment both in respect of forest income as well as the interest income
The Department did not take any steps to rectify the mistake under section 35 or to have the question of illegality referred to the High Court
Having allowed the order of the Tribunal to become final the Income tax Officer initiated fresh proceedings under section 34 in respect of the interest income and made a revised assessment order which included this income
The Appellate Tribunal confirmed the assessment but the High Court on a reference to it under section 661 took the view that fresh proceedings under section 24 could not be taken for the reason inter alia that the Tribunal s order dated April 25 1949 had become final
HELD  The Tribunal had committed a mistake in setting aside the reassessment order in respect of interest income also but the income tax Officer did not resort to the obvious remedy of having the mistake rectified as provided for under section 35 and allowed the Tribunal s order dated April 25 1949 to become final
He could not in the circumstances reopen the assessment by initiating proceedings under section 34 as otherwise there would be an unrestricted power of review in the hands of the Income tax Officer to go behind the findings of a hierarchy of Tribunals and Courts
995 E F 996 F H CIT Bombay and Aden vs Khemchand Ramdas 19386 ITR 414 and CIT West Punjab vs The Tribune Trust Lahore 194816 ITR 214 referred to
R K Das  Co vs CIT West Bengal 195630 ITR 439 and CIT Bihar  Orissa vs Maharaja Pratapsingh Bahadur of Gidhaur distinguished