Appeal No 281 of 1955
Appeal from the judgment and order dated March 18 1954 of the Bombay High Court in Income tax Reference No 35 of 1953
K N Rajagopal Sastri and D Gupta for the appellant
R J Kolah and Ram Ditta Mal for the respondent
May 8
The Judgment of the Court was delivered by HIDAYATULLAH J
This appeal on a certificate of fitness granted by the High Court of Judicature at Bombay has been filed by the Commissioner of Income tax Bombay against Ranchhoddas Karsondas of Bombay hereinafter referred to as the assessee under section 66A of the Indian Income tax Act
The facts leading tip to this appeal are as follows For the assessment year 1945 46 a public notice under section 221 of the Income tax Act hereinafter called the Act was issued requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income tax to furnish within such period not being less than sixty days as might be specified in the notice a return of his income in the prescribed form and verified in the prescribed manner
This notice was published on or about May 1 1945
The assessee did not make a return of his income
The Income tax Officer while examining the books of account of a partnership called the  Assar Syndicate  of which the assessee was a partner found that in the account year corresponding to the assessment year 1945 46 there were six cash credits aggregating to Rs 59026 in the name of the assessee s wife
Before however the Income tax 116 Officer could take any action the assessee submitted a  voluntary  return on January 5 1950 of his income for the accounting year 1944 45 assessment year 1945 46 showing a total net income of Rs 1935
He added a footnote to the return to the following effect  My wife has sold her old ornaments and deposited the sum of Rs 59026 in the firm of Assar Syndicate in which I am a partner The Income tax Officer did not act on this return but on February 27 1950 he issued a notice purporting to be under section 34 of the Act calling upon the assessee to submit his return
This notice was served on the assessee on March 31950 and in answer thereto the assessee submitted a similar return on March 14 1950 showing the same income and adding the same footnote
The Income tax Officer then issued and served upon the assessee notices under sections 224 and 232 of the Act asking him to produce his books of account and to tender any evidence he cared to lead
It appears from the record that these notices were complied with but on February 26 1951 the Income tax Officer included the sum of Rs 59026 in the total income of the assessee and assessed him on it for the assessment year 1945 46
The assessee appealed in turn to the Appellate Assistant Commissioner and the Income tax Appellate Tribunal
His contentions were three viz that the amount of Rs 59026 could not and should not have been included in his income that the amended section 34 of the Act had no retrospective effect and that the assessment completed on February 26 1951 was invalid inasmuch as it was completed four years after
the end of the relevant assessment year
Both the Appellate Assistant Commissioner as well as the Tribunal rejected his contentions but the Tribunal on being moved by him raised and referred two questions of law under section 661 of the Act to the High Court of Judicature Bombay for its decision
These questions were  1 Whether the notice issued under Section 34 of the Act by the Income tax Officer on 27 2 1950 117 after the assessee had filed a voluntary return was valid in law 2 Whether the assessment made on 26 2 1951 is valid in law This reference was heard by the High Court on March 18 1954 and by a judgment delivered on the same day Chagla CJ and Tendolkar J answered  both the questions in the negative
Before the High Court it was again contended by the assessee that since he had submitted a return under section 223 of the Act on January 5 1950 the assessment if any had to be completed before March 31 1950 as required by section 343 of the Act
He also contended that he was entitled under section 223 to make a  voluntary  return on the date he did and with a voluntary return before the Income tax Officer there was no scope for the issuance of a notice under section 34
The High Court upheld the contentions of the assessee and gave its opinion that the Department ought to have issued a notice under section 222 within the assessment year and if no return was made within the time fixed by the notice the Department should have proceeded under section 234 to a best judgment  assessment
The other alternative for the Department was to issue a notice under section 34 of the Act if the period for sending a notice under section 222 had expired
But it could not issue a notice under section 34 after a return was already made before it and the benefit of the extended period of limitation for assessment available under the first proviso to sub section
3 of section 34 of one year from the service of the notice under sub section
1 of that section was not available in this case
The High Court granted a certificate of fitness and hence this appeal
The arguments which were urged before the High Court were all raised in this Court by the parties
The case of the Department was supplemented by an argument that inasmuch as the assessee had suppressed his income or given incorrect particulars thereof the period during which action under section 34 could be taken was the extended one of 8 years
In the arguments before us our attention was drawn to a cleavage of opinion between the Bombay High 118 Court on the one hand and the Calcutta High Court on the other
While the Bombay High Court seems to be of the view that a  voluntary  return showing a nontaxable income is still a good return for all purposes under the Act the Calcutta High Court is of the view that what section 221 of the Act requires is a return of taxable income and not a return of income which shows a loss or is below the taxable limit
It appears that at one time the Calcutta High Court also entertained the view that such a return was no return at all but it was explained later that this meant that the return was ineffective for the purposes of section 221 of the Act though it might be a  return  being in the prescribed form
The Bombay High Court also entertains the view that the assessment proceedings commence with the issue of a public notice and that section 34 of the Act cannot apply where in answer to the public notice a return is made whether of taxable income or not
The view of the Calcutta High Court is that assessment proceedings commence either with a notice under section 222 of the Act or with the filing of a return showing taxable income
We are not here concerned with the quantum but only with the legality of the assessment
The side issue whether in point of fact the cash credits in the name of the wife represented the income if the husband does not survive for decision
Thus the only question is whether the notice issued under section 34 of the Act on February 27 1950 after the assessee filed his  voluntary  return on January 5 1950 and the assessment thereon were valid in law
Section 343 of the Act provides that no assessment except the assessment within el
a of sub section
1 thereof or under section 23 to which el
c of sub section
1 of section 28 applies shall be made after the expiry of four years from the end of the year in which income profits or gains were first assessable
A proviso however allows one year from the date of the service of the notice for the completion of the assessment
It reads omitting matters not relevant here   where a notice under sub section 1 has been issued within the time therein limited the assessment or reassessment to be made in pursuance of such 119 notice may be made before the expiry of one year from the date of the service of the notice even if such period exceeds the period of 
four years 
 It is therefore quite clear that the extra period is available only if a notice under sub section
1 of section 34 has been issued within the time therein limited
This takes us to section 341
Section 341 omitting parts not relevant reads  1If        a the Income tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year
I 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 clause a at any time within eight years and in cases falliny under clause b at any time within four years of the end of that year serve on the assessee
a notice 
and may proceed to assess such income
 It would appear from this that if the return filed on January 5 1950 was a return of income there was no failure or omission on the part of the assessee so as to bring the matter within section 341a of the Act and subs
3 of section 34 would then apply to the case limiting the period to four years
In that event the assessment should have been completed on or before March 31 1950
But if the return made by the assessee was no return at all then the conditions under the first subsection of section 34 obtained and the assessment could be completed within one year of the date of service of the notice March 3 1950 ie on or before March 2 1951
In that event the assessment would be valid
The validity of the return in this context is tied to the validity of the notice and also vice versa
120 Section 22 of the Act omitting the parts not relevant may now be quoted  1 The Income tax Officer shall on or before the 1st day of May in each year give notice by publication in the press  requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income tax to furnish within such period not being less than sixty days a return setting forth his total income and total world income during that year 2 In the case of any person whose total income is in the Income tax Officer s opinion of such an amount as to render such person liable to income tax the Income tax Officer may serve a notice upon him requiring him to furnish within such period not being less than thirty days a return  setting forth  his total income and total world income during the previous year 3 If any person has not furnished a return within the time allowed by or under sub section 1 or sub section 2 or having furnished a return under either of those sub sections discovers any omission or wrong statement therein he may furnish a return or a revised return as the case may be at any time before the assessment is made
 It will be seen from this that as the Bombay High Court correctly pointed out there is a time limit provided in sub sections
1 and 2 and the failure or omission occurs when that period passes but sub s 3 allows a locus poenitentiae before the assessment is actually made
There is no dispute that a return could be filed in this case late though it was
The controversy centres round the fact that the return when it was filed disclosed an income which was below the maximum not chargeable to tax and the question is whether in such an event the Income tax Officer was precluded from issuing a notice under section 34 of the Act
There has been in the past a well marked difference of opinion between the Bombay and the Calcutta High 121 Courts the leading cases in Bombay being Harakchand Makanji  Co vs Commissioner of Income tax 1 All India Groundnut Syndicate Ltd vs Commissioner of Income tax2 and the decision under appeal here while the Calcutta view is to be found in Commissioner of Agricultural Income tax vs Sultan Ali Gharami 3 R K Das  Co vs Commissioner of Income tax 4 and Commissioner of Income tax vs Govindlal Dutta 5
To these may be added P section Rama Iyer vs Commissioner of Income tax 6 in which the Madras High Court has accepted the Bombay view
No useful purpose will be served in discussing these cases in detail
In some of them the point need not have been taken up for decision though it was
We shall refer very briefly to the two rival views and the grounds on which they are rested and in doing so we begin with the Calcutta decisions
In Sultan Ali Gharami s case 3 a notice under section 241 of the Bengal Agricultural Income tax Act corresponding to section 221 of the Act was issued
No return was filed
Three years later a notice under section 242 of that Act corresponding to section 222 of the Act was served and a return showing an income below the taxable minimum was filed
The contention was that without a notice under section 242 within the assessment year or a notice under section 381 corresponding to section 34 1 of the Act the best judgment  assessment was bad
The contention further was that the return could be taken to be under section 241 or section 243
Chakravarti J as he then was and Das Gupta J held that a person who had no assessable income was not placed under a duty to file a return that the return whether filed under section 241 or section 243 which had failed to show an assessable income could not possibly be treated  as a return under section 241 or even section 243when filed in answer to a notice under section 242
They further observed at p 442  A return under section on 241 is a return filed by a person who decides for himself that he had an assessable income in the previous year and by filing 1 1948 16  4 1056 2 1954 25 1
T R R 5 1957 33  3 16 122 the return he offers that income for assessment
A person who had no assessable income in the previous year is placed under no duty by a notice under section 241 to furnish a return and a person who thinks rightly or wrongly that he had no assessable income will furnish none
A return under section 241 whether filed within the time allowed under the section or filed subsequently under the provisions of section 243 will therefore show an assessable income
A return which showed no assessable income could not possibly be treated  as a return filed under section 241 or a return called for under that section but filed under section 243 when in fact it was filed in response to a notice under section 242
 The opinion here expressed was criticised in the judgment under appeal and in the next case R K Das  Co vs Commissioner of Income tax1 the Calcutta High Court Chakravarti CJ and Sarkar J explained what was really meant
It is not necessary to refer to the facts of that case
This is what Chakravarti CJ observed at p 449  It should be remembered  I observed that the return in the present case is being sought to be treated as a return under section 241 belatedly filed  And then I went on to say that a return under section 241 would only be filed by a person who thought that he had a taxable income and therefore a return showing an income below the taxable limit could not be held on a construction thereof to be a return under section 241 and consequently the return in the case we were then considering could not be treated as such a return filed under section 243
To say that was not to say that even a return filed in compliance with a notice under section 222 if filed belatedly under section 223 could not be a return showing an income below the taxable limit
 This left the matter somewhat ambiguous as to what was really meant and in Commissioner of Income tax vs Govindlal Dutta2Chakravarti C J and Guha J 1 2 123 again explained the true import of the law laid down
They referred to section 221 of the Act as it stood prior to the amendment of 1953 and observed that under that section a person was required to file a return only if his total income during the preceding year exceeded the maximum amount which was not chargeable to tax
The return contemplated was thus only a return of income and not a return of loss and not even a return of income but a return of taxable income
Not only had a person no duty but he had even no right to file a return voluntarily if he had suffered a loss to report  that loss
The learned Judges concluded that it was a complete mistake to think that section 223 provided for the filing of a voluntary return showing loss at any time before assessment
That section they opined contemplated the filing of a return of taxable income and a return not showing such income was not a return at all in law
The Calcutta view as shown above really proceeds upon the wording of section 221
It lays down that the public notice requires only persons having an income above the taxable limit to make a return
A person who has no such income need not make a return and if he does make a return it is not a return which need be considered being not a return in law
It is a little difficult to understand how the existence of a return can be ignored once it has been filed
A return showing income below the taxable limit can be made even in answer to a notice under section 222
The notice under section 221 requires in a general way what a notice under section 222 requires of an individual
If a return of income below the taxable limit is a good return in answer to a notice under section 222 there is no reason to think that a return of a similar kind in answer to a public notice is no return at all
The conclusion does not follow from the words of section 221
No doubt under that sub section only those persons are required to make a return whose income is above taxable limits but a person may legitimately consider himself entitled to certain deductions and allowances and yet file a return to be on the safe side
He may show his income and the 124 deductions and allowances he claims
But it may be that on a correct processing his income may be found to be above the exempted limit
No doubt it is futile for a person not liable to tax to rush in with a return but the return in law is not a mere scrap of paper
It is a return such as the assessee considers represents his true income
We are unable and we say this with due respect to accept the view adumbrated in the Calcutta cases
The contrary view is expressed by the Bombay High Court in the earlier case of Harakchand Makanji  Co vs Commissioner of Income tax 1 and in the judgment under appeal
That view was accepted by the Madras High Court in P section Rama Iyer vs Commissioner of Income tax 2 and also in our opinion is the sounder view of the two
In the earlier of the two Bombay cases Chagla C J and Tendolkar J held as stated in the head note  Notice under section 34 is only necessary if at the end of the assessment year no return has been made by the assessee and the authorities wished to proceed under section 222 but where the assessee himself chooses voluntarily to make a return no question can arise under section 34 of assessment escaping and therefore there is no necessity to serve any notice under section 34
 This represents the law applicable to the facts as they are to be found in this case
In the assessment year no return of income was filed nor was any notice served under section 222
There was however the general notice under section 221
A return in answer to that notice could be filed under section 223 before assessment and for this there is no limit of time
It was filed on January 5 1950
There was nothing to prevent the Income tax Officer from taking up the return and proceeding to assess the income of the assessee
It was open to him if there was sufficient justification for it to hold that the amount noted in the footnote was really the assessee s income in which case an assessable income would have been found and the tax could be charged thereon
If the Income tax Officer had acted on that return and assessed the assessee 1 2 125 before March 31 1950 the assessment would have been valid
He chose to ignore the return and served on the assessee a notice under section 341
This notice was improper because with the return already filed there was neither an omission nor a failure on the part of the assessee nor was there any question of assessment escaping 
The notice under section 341 was therefore invalid and the consequent assessment equally so
We accordingly agree with the judgment under appeal
Before leaving this case we may refer to two other arguments which were raised
Mr Rajagopala Sastri pointed out that an assessee might file the voluntary  return on the last day showing income less than the taxable limit and the Department would in that case be driven to complete the assessment proceedings within a few hours or lose the right to send a notice under section 341
An argument ab inconvenienti is not a decisive argument
The Income tax Officer could have avoided the result by issuing a notice under section 232 and not remaining inactive until the period was about to expire
Further all laws of limitation lead to some inconvenience and hard cases
The remedy is for the legislature to amend the law suitably
The Courts can administer the laws as they find them and they are seldom required to be astute to defeat the law of limitation
This argument is thus no answer to the clear meaning and implications of the Act
The other argument was that the return was not a true one and fell within the mischief of cl
c of sub s1 of section 28 and that therefore the period during which action could be taken was the extended one of 8 years
The short answer to that is that this was not a part of the Department s case at any prior stage and cannot be allowed to be raised now
In our opinion the answers given by the High Court of Bombay were correct in all the circumstances of this case
The appeal thus fails and is dismissed with costs
Appeal dismissed


Summary:
The High Court cannot issue a writ of certiorari to quash a decision passed with jurisdiction by a Labour Com missioner under the Madras Shops and Establishments Act 1947 an the mere ground that such decision is erroneous
Under section 51 of the Madras Shops and Establishments Act 1947 the Labour Commissioner is the only proper and compe tent authority todetermine the questions referred to him under that section and the decision of the Labour Commis sioner is final and not liable to be challenged in a Court of law