Appeal No 200 of 1960
Appeal from the Judgment and Order dated the 19th March 1959 of the Mysore High Court Bangalore in Writ Petition No 263 of 1957
KSrinivasan and R Gopalakrishnan for the appellant
A N Kirpal and D Gupta for the respondent
December 5
The Judgment of the Court was delivered by SHAH J
This appeal with certificate of fitness granted by the High Court of Judicature of Mysore is from an order rejecting the petition of the appellant for a writ to quash a notice of reassessment under section 34 of the Indian Income Tax Act
The appellants are a Hindu Undivided Family carrying on business in groundnuts and other commodities at Goribidnur Kolar District in the territory which formed part of the former State of Mysore
The Mysore Income Tax Act was repealed and the Indian  Income Tax Act was brought into force in the Part B State of Mysore as from April 1 1950
The appellants had adopted as their year of account July 1 to June 30 of the succeeding year and they were assessed under the Mysore Income Tax Act on that footing for the year of assessment 1949 50 corresponding to the year of account July 1 1948to June 30 1949
After the Indian Income Tax Act was applied to the State of Mysore on December 26 1950 notice under section 222 of the Indian Income Tax Act was served upon the appellants requiring them to submit their 913 return of income for the assessment year 1950 51
On September 8 1952 the appellants submitted their return stating that for the year ending June 30 1949 corresponding to the assessment year 1949 50 they were assessed under the Mysore Income Tax Act that their income for the year ending June 30 1950 was assessable under the Indian Income Tax Act in the assessment year 1951 52 and that they had no assessable income for the assessment year 1950 51
The Income Tax Officer passed on that return an order no proceeding and closed the assessment
For the assessment year 1951 52 the appellants submitted their return of income
In the books of account produced by the appellants an opening cash credit balance of Rs 187000 odd on July 1 1949 was disclosed
The Income Tax Officer called upon the appellants to produce their books of account of previous years but the books were not produced on the plea that the same were lost
In assessing the income of the appellants for the year of account 1949 50 the Income Tax Officer held that Rs 137000 out of the opening balance in the books of account dated July 1 1949 represented income from an undisclosed source
In appeal the Appellate Assistant Commissioner observed that the appellants not having exercised their option under section 2ii of the Indian Income Tax Act and in the absence of any system of accounting adopted by them the only course open to the Income Tax Officer was to take the financial year ending March 31 1950 as the previous year for the income from an undisclosed source and directed the Income Tax Officer to consider this credit in the assessment for the year 1950 51 after giving opportunity to the appellants to explain the nature and source thereof
Before the appeal was disposed of by the Appellate Assistant Commissioner the appellants had submitted a fresh return for the assessment year 195051 purporting to do so under section 223 of the Indian Income Tax Act
Pursuant to the direction of the Appellate Assistant Commissioner the Income Tax Officer issued a notice of reassessment under section 34 of the Income Tax Act and served it on October 15 1957 914 calling upon the appellants to submit a fresh return
The appellants thereupon submitted a petition under article 226 of the Constitution to the High Court of Mysore praying for an order declaring that the notice under section 34 was without jurisdiction and for quashing the notice and proceeding consequent thereon
This petition was dismissed by the High Court but the High Court on the application of the appellants certified that the appeal was a fit one for appeal to this court
Section 341 of the Indian Income Tax Act at the relevant time in so far as it is material provided 1 If a the Income Tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year income profits or gains chargeable to incometax have escaped assessment for that year or b notwithstanding that there has been no omission or failure as mentioned in clause a on the part of the assessee the Income Tax Officer has in consequence of information in his possession reason to believe that income profits or gains chargeable to income tax have escaped assessment for any year he may in cases falling under el
a at any time within eight years and in cases falling cl
b within four years of the end of that year serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub section
2 of section 22 and may proceed to assess or reassess such income profits or gains and the provisions of this Act shall so far as may be apply accordingly as if the notice were a notice issued under that sub section
 In the course of the assessment proceedings for 1951 52 the appellants produced their books of account containing an entry dated July 1 1949 showing an opening cash balance of Rs 187000 odd which was not satisfactorily explained
Though called upon they did not produce their books of account for the earlier year
The appellants had failed to disclose in their return for the assessment year 1950 51 any 915 income
In the circumstances the Income Tax Officer had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all  material facts necessary for assessment for that year income chargeable to tax had escaped assessment
The Income Tax Officer had therefore jurisdiction to issue the notice for reassessment
The submission that the previous return submitted on September 8 1952 had not been disposed of and until the assessment pursuant to that return was made no notice under section 341 for reassessment could be issued has in our judgment no substance
The Income Tax Officer had disposed of the assessment proceeding accepting the submission made by the appellants that they had no income for the assessment year 1950 51
Under section 231 of the Indian Income Tax Act it is open to the Income Tax Officer if he is satisfied that the return made by an assessee under section 22 is correct to assess the income and to determine the sum payable by the assessee on the basis of the return without requiring the presence of the assessee or production by him of any evidence
The appellants had in their return dated September 8 1952 submitted that they had no assessable income for the year in question and on this return the Income Tax Officer had passed the order no proceeding
Such an order in the circumstances of the case meant that the Income Tax Officer accepted the return and assessed the income as nil
If thereafter the Income Tax Officer had reason to believe that the appellants had failed to disclose fully and truly all material facts necessary for assessment for that year it was open to him to issue a notice for reassessment
Under section 22 sub section
3 an assessee may submit a revised return if after he has furnished the return under sub section
2 he discovers any omission or wrong statement therein
But such a revised return can only be filed at any time before the assessment is made and not thereafter
The return dated February 26 1957 was submitted after the assessment was made pursuant to the earlier return and it could not be entertained
Nor could the lodging of such a return 916 debar the Income Tax Officer from commencing a proceeding for reassessment of the appellant under section 341 of the Indian Income Tax Act
There is also no substance in the contention that for the assessment year 1950 51 the assessee could be assessed under the Mysore Income Tax Act and not under the Indian Income Tax Act
By the Finance Act XXV of 1950 section 13 cl
1 it was provided in so far as it is material that If immediately before the 1st day of April 1950 there is in force in any Part B State any law relating to income tax or super tax or tax on profits of business that law shall cease to have effect except for the purposes of the levy assessment and collection of income tax and super tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income Tax Act 1922 XI of 1922 for the year ending on the 31st day of March 1951 or for any subsequent year
 By virtue of section 131 the Mysore Income Tax Act ceased to be in operation as from April 1 1950 except for the purposes of levy assessment and collection of income tax and super tax in respect of any period which was not included in the previous year for the purposes of assessment under the Indian Income Tax Act for the assessment year 1950 51
The appellants had been assessed for the period July 1 1948 to June 30 1949 under the Mysore Income Tax Act
It is manifest that for any account year which was the previous year in relation to the assessment year 195051 the appellants were liable to be assessed under the Indian Income Tax Act and not under the repealed Act
The year of account July 1 1949 to June 30 1950 was not a period prior to such previous year and therefore liability to pay tax in respect of that period could be assessed not under the Mysore Income Tax Act but under the Indian Income Tax Act
It was urged that this interpretation of section 13 may when the account year of an assessee does not coincide with the financial year lead to double taxation of the income for the account year ending between April 1 1949 917 and March 31 1950
But in order to avoid the contingency envisaged by the appellants the Central Government has in exercise of its power under section 60A of the Indian Income Tax Act issued the Part B States Taxation Concessions Order 1950 which by cl
51 provides amongst other things that the income profits and gains of any previous year ending after the 31st day of March 1949 which is a previous year for the State assessment year 1949 50 shall be assessed under the Act Indian Income Tax Act 1922 for the year ending on the 31st March 1951 if and only if such income profits and gains have not before the appointed day been assessed under the State law
If in respect of the previous year for the purposes of the assessment year ending 31st March 1951 the appellants had been assessed by any State Government under a law relating to income tax in force in the State the Indian Income Tax authorities would be in competent to assess income for that year but in default of such assessment income of the appellants for that year was assessable under the Indian Income Tax Act
The notice under section 34 was also not issued after the expiry of the period prescribed in that behalf
The notice was issued by the Income Tax Officer because he had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all material facts necessary for the assessment for the the year 1950 51 income had escaped assessment
Such a notice fell manifestly within section 341a and could be issued within eight years from the end of the year of assessment
The impugned notice under section 34 for reassessment of the income of the appellants for the year 1950 51 was in our judgment properly issued and the High Court was right in dismissing the petition for a writ to quash the notice
The appeal fails and is dismissed with costs


Summary:
The appellants a Hindu undivided family carrying on business in the former State of Mysore were assessed under the Mysore Income tax Act for the year of assessment 1949 50 corresponding to the year of account July 1 1948 to June 30 1949
The Indian Income tax Act came into force in that area in April 1 1950 and on December 26 1950 notice under section 222 of that Act was served upon the appellants to submit their return for the assessment year 1950 51
On September 8 1952 the appellants submitted their return stating that they had no assessable income for that year
The Income Tax Officer passed on that return an order no proceeding and closed the assessment
When the appellants submitted their return for the next assessment year their books of account disclosed an opening cash credit balance of Rs 187000 and odd on July 1 1949
They failed to produce the books of account of the previous years and the Income tax Officer held that Rs 137000 out of the said opening balance represented income from an undisclosed source
The appellants submitted a fresh return for the assessment year 1950 51 purporting to do so under section 223 of the Indian Incometax Act
Pursuant to the direction of the Appellate Assistant Commissioner the Income Tax Officer on October 15 1957 served on the appellants a notice under section 34 of the Act and thereupon the appellants moved the High Court under article 226 for an order quashing the said notice and the proceeding as without jurisdiction
The High Court dismissed the petition
Held that it was not correct to say that the issue of the notice for reassessment was without jurisdiction as the assessment was yet pending
Under section 231 of the Indian Income tax Act it is open to the Income tax Officer if he is satisfied as to correctness of the return filed by the assessee to assess the income and determine the sum payable on the basis of the return without requiring the assessee either to be present or to Produce evidence
The order no proceeding recorded on the
return must therefore mean that the Income Tax Officer bad accepted the previous return and assessed the income as nil
A revised return under section 223 filed by the assessee may be 912 entertained only before the order of assessment and not thereafter
Lodging of such a return after the assessment is no bar to reassessment under section 341 of the Act
It could not be said having regard to the provisions of section 131 of the Finance Act XXV of 1950 and cl
51 of Part
B States Taxation Concessions Order 1950 issued by the Central Government under section 60A of the Indian Income tax Act that for the assessment year 1950 51 the appellants were assessable under the Mysore Income tax Act and not under the Indian Income tax Act