Appeal No 2177 of1966
Appeal by special leave from the judgment and order dated July 12 1963 of the Mysore High Court in Writ Petition No 1076 of 1962
Veda Vyasa R Ganapathy Iyer R N Sachthey and section P Nayar for the appellant
R Gopalakrishnan for the respondent
The Judgment of the Court was delivered by Shah J
The respondents a Hindu undivided family were assessed for the assessment year 1949 50 to tax under s  23 of the Mysore Income tax Act on a total income of Rs 10100 The Second Additional Income tax Officer Urban Circle Bangalore commenced a proceeding under section 34 of the Mysore Income tax Act for re assessment of the income of the respondents for the 7 assessment year 1949 50 and served a notice in that behalf on March 6 1951
On May 21 1954 the Income tax Officer determined the respondents  total income at Rs 75957 
In appeal against the order the Appellate Assistant Commissioner of Income tax A  Range Bangalore by order dated November 4 1961 set aside the order and directed the Income tax Officer to make a fresh assessment after making inquiries on certain matters specified in the order
At the request of the respondents under section 662 of the Mysore Income tax Act the Commissioner of Income tax Mysore referred the following questions to the High Court of Mysore 1
On the facts and in the circumstances of the assessee s case whether within the meaning of section 34 of the Mysore Income tax Act if a notice under that section is issued within the prescribed period whether the Income tax Officer can proceed to assess or re assess such escaped income after four years from the close of the assessment year 2
On the facts and in the circumstances of the case whether the Appellate Assistant Commissioner of Incometax is competent to set aside and give directions to the Income tax Officer to re do the assessment in the manner the Appellate Assistant Commissioner of Income tax has done At the hearing of the reference the respondents did not press the first question and the High Court answered the second question in the affirmative
The Income tax Officer commenced inquiry directed by the Appellate Assistant Commissioner
The respondent  then applied to the High Court of Mysore for issue of a writ of prohibition restraining the Income tax Officer from continuing the assessment proceeding for the year 1949 50 on the plea that the proceeding was because of expiry of the period of limitation barred
The High Court of Mysore upheld the contention of the respondents and allowed the petition
In the view of the High Court the provisions of section 34 of the Mysore Income tax Act were more or less similar to Rule 34 of the Mysore Sales Tax Act 1948
Hence the present case clearly comes within the rule laid down by this Court in Ms K section Subbarayappa and Sons vs State of Mysore 1952 Mysore L J 2341 which means that the present proceedings are barred
The Commissioner of Income tax has appealed to this Court with special leave
The question arising in this appeal must it is common ground be determined in the light of the provisions of the Mysore Incometax Act 1923
Even after the merger of the State of Mysore with 8 the Union of India a proceeding for assessment of income tax relating to the assessment year 1949 50 has to be heard and disposed of under the Mysore Act
Section 34 of the Mysore Incometax Act reads as follows If for any reason profits or gains chargeable to income tax have escaped assessment in any year or have been assessed at too low a rate the Income tax Officer may at any time within four years of the end of that year serve on the person liable to pay tax on such income profits or gains or in the case of a company on the principal officer thereof 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 re assess such income profits or gains and the provision of this Act shall so far as may be apply according as if the notice were a notice issued under that sub section
A proceeding for re assessment under section 34 of the Mysore Act may be commenced if two conditions co exist ithat the profits and gains chargeable to income tax have escaped assessment or have been assessed at too low a rate and ii the notice is served within four years of the end of the year of assessment
But if a proper notice is served within the period provided by the section the proceeding may be completed even after the expiry of four years from the close of the assessment year for the Act prescribes no period for completion of the proceeding
A notice for re assessment was in fact served on the respon dents on March 6 1951 under section 34 of the Mysore Act
That notice was served within four years of the end of the year of assessment 1949 50 and the Income tax Officer was of the view that tie profits or gains chargeable to income tax had escaped assessment in the year 1949 50
It is true that the Appellate Assistant Commissioner vacated the order of assessment dated May 21 1954 but he did not set aside the notice served upon the respondents
He merely remanded the case for further inquiry to be made in the light of the directions given by him
It is difficult to appreciate the grounds on which it could be held that the proceeding for re assessment to tax the income which had escaped assessment in the year 1949 50 commenced after due notice served on March 1951 was barred
The High Court was in our judgment plainly in error in holding that the proceeding for re assessment was barred
It must also be remembered that the respondents had under an order of the Commissioner obtained a reference on the first question set out hereinbefore
That question was not pressed before the High Court and it must be deemed to have been answered 9 against the respondents
That question could not thereafter be reagitated by the respondents in a petition for the issue of a writ under article 226 of the Constitution
The appeal is allowed
The order passed by the High Court is set aside
The respondents will pay the costs of the Commissioner in this Court and in the High Court
Appeal dismissed


Summary:
The Income tax Officer Bangalore commenced a proceeding under section 34 of the Mysore Income tax Act for reassessment of the income of the respondents for the assessment year 1949 50 and served a notice in that behalf in March 1951 on the respondents
The Income tax Officer determined the total income of the respondents in May 1954 but the order was set aside by the Appellate Assistant Commissioner in November 1961 and the Income tax Officer was directed to make a fresh inquiry When the Income tax Officer commenced inquiry the respondents applied to the High Court for a writ of prohibition and the High Court passed an order restraining the Income tax Officer on the ground that the assessment proceeding was barred because of the expiry of the period of limitation
In appeal to this Court Held The High Court was in error because though the Appellate Assistant Commissioner vacated the Income tax Officer s assessment order of 1954 and remanded the case for further inquiry the Appellate Assistant Commissioner did not set aside the notice of March 1951 served on the respondents If a proper notice was served within the period provided by the section four years from the close of the assessment year the proceeding could be completed even after the expiry of four years for the Act prescribes no period for completion of the proceeding
8E G