Case: The Commissioner Of Income-Tax, Bombay V Vs. Ranchhoddas Karsondas, Bombay

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. 15. The Calcutta view, is shown above, really proceeds upon the wording of section 22.(1). 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. 16. 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 S. 22(2). The notice under S. 22(1) requires in a general way what a notice under S. 22(2) requires of an individual. If a return of income below the taxable limit is a good return in answer to a notice under S. 22(2), 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 S. 22(1).No doubt, under that subsection 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 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 future 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. 17. 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 1948-16 ITR l19: (AIR 1948 Bom 401 ) and in the judgment under appeal. That view was accepted by the Madras High Court in 1957-32 ITR 458: (AIR 1958 Mad 40 ) 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 headnote):"Notice under S. 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 S. 22(2),but where the assessee himself chooses voluntarily to make a return, no question can arise under S. 34 of assessment escaping, and therefore there is no necessity to serve any notice under S. 34." This represents the law applicable to the facto 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 22(2). There was, however, the general notice under S. 22(1).A return in answer to that notice could be filed under S. 22(3) 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 assessees 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 before March 31, 1950, the assessment would have been valid. He chose to ignore the return, and served on the assessee a notice under S. 34(1).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 S. 34(1) was, therefore, in- valid and the consequent assessment, equally so. We accordingly agree with the judgment under Appeal. 18. 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 S. 34(1). An argument ab inconvenient is not a decisive argument. The Income-tax Officer could have avoided the result by issuing a notice under S. 23(2) 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. 19. The other argument was that the return was not a true one, and fell within the mischief of cl. (c) of sub-s. (1) of S. 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 Departments case at any prior stage, and cannot be allowed to be raised now. 20. In our opinion, the answers given by the High Court of Bombay were correct in all the circumstances of this case.

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

Explanation:
0[ds]7. We are not here concerned with the quantum but only with the legality of the assessmentThe side issue whether, in point of fact, the cash credits in the name of the wife represented the income of the husband does not survive for decisionIt is, therefore, quite clear that the extra period is available only if a notice under sub-s. (1) of S. 34 has been issued within the time therein limited. This takes us to S. 34 (1)11. It will be seen from this, that, as the Bombay High Court correctly pointed out, there is a time limit provided in sub-ss. (l) and (2) and the failure or omission occurs when that period passes, but sub-s. (3) allows a locus paenitentiae 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 S. 34 of the Act. There16. 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 S. 22(2). The notice under S. 22(1) requires in a general way what a notice under S. 22(2) requires of an individual. If a return of income below the taxable limit is a good return in answer to a notice under S. 22(2), 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 S. 22(1).No doubt, under that subsection 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 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 future 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 income17. We are unable (and we say this with due respect) to accept the view adumbrated in the Calcuttae contrary view is expressed by the Bombay High Court in the earlier case of 1948-16 ITR l19: (AIR 1948 Bom 401  ) and in the judgment under appeal. That view was accepted by the Madras High Court in 1957-32 ITR 458: (AIR 1958 Mad 40  ) and also, in our opinion; is the sounder view of the twoThis 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 S. 34(1) was, therefore, in- valid and the consequent assessment, equally so. We accordingly agree with the judgment under AppealAn argument ab inconvenient is not a decisive argument. The Income-tax Officer could have avoided the result by issuing a notice under S. 23(2) 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 ActThe short answer to that is that this was not a part of the Departments case at any prior stage, and cannot be allowed to be raised now20. In our opinion, the answers given by the High Court of Bombay were correct in all the circumstances of this case