Case: Commissioner Of Income-Tax, New Delhi Vs. Rao Thakur Narayan Singh

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 S. 34 of the Act was invalid as them was no "discovery" that the relevant income escaped assessment, had become final.10. The only two sections that enable the Income-tax Officer to reopen final assessments are Ss. 34 and 35. If the Appellate Tribunal committed a mistake under S. 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 these circumstances, can S. 34 of the Act be resorted to? Learned counsel for the Revenue says that S. 34(1) (a), as amended in 1948, confers such a power on the Income-tax Officer. The material part of S. 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 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 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 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 S. 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 assessees 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-tax 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.11. The decisions cited by the learned counsel for the Revenue do not countenance such a contention. Chakravartti, C. J., in R. K. Das and Co. v. Commr. of Income-tax, West Bengal, (1956) 30 ITR 439 : (AIR 1956 Cal 161 ), 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 S. 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 Commr. of Income-tax, B. and O. v. Maharaja Pratapsingh Bahadur, (1961) 41 ITR 421 : (AIR 1961 SC 1026 ), held that, as the earlier notice issued under S. 34(1) of the Act without the sanction of the Commissioner was bad, the entire proceedings for reassessment 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 S. 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.12. The said decisions, therefore, have no bearing on the question raised before us.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. 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, S. 33 provides for a further appeal to the Income-tax Appellate Tribunal; and sub-s. (6) of S. 33 says that save as provided in S. 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 S. 66A 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 S. 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 only two sections that enable the Income-tax Officer to reopen final assessments are Ss. 34 and 35. If the Appellate Tribunal committed a mistake under S. 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 remaincannot 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 assessees 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-tax 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.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 S. 34 of the Act only discussed the question of the escape of the syar income; it did not advert to the interest income at all. It came to the conclusion, having regard to the fact that theOfficer at the time he made the original assessment had knowledge of the existence of the syar income, that theOfficer did not come into possession of definite information within the meaning of S. 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 theOfficer under S. 23(3) of the Act. The legal effect of the order was that the reassessment of the entire income, including the syar income and interest income, was set aside on the ground that theOfficer did not come into possession of definite information leading to a "discovery" and, therefore, he could not initiate proceedings under S. 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 also; but, so long as that order stands, it comprehends both the incomes.