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

2. The facts may briefly be stated. The assessee was a holder of an impartible estate in the district of Ajmer. On March 25, 1944, the Income-tax Officer assessed him to income-tax for the year 1942-43. On April 5, 1945, on the ground that two items of the assessees income namely, syar (forest) income and interest income, were not included in the original assessment, a notice under S. 34 of the Act was issued to him. In response to the said notice, the assessee filed a return wherein he disclosed fully and completely the particulars of his interest income, but raised the plea that his forest income was not taxable. The Income-tax Officer, by his order dated July 12, 1945, made a revised assessment including both the incomes. The respondent eventually took the matter on appeal to the Income-tax Appellate Tribunal, which, by its order dated April 25, 1949, held that the Income-tax Officer had no jurisdiction to initiate proceedings under S. 34 of the Act in respect of the forest income on the ground that the Income-tax Officer had knowledge that the assessee had such income when he made the original assessment. Though the Tribunal only dealt with the question of forest income, by inadvertence or by mistake, it set aside the entire order of reassessment dated July 12, 1945, made by the Income-tax Officer and restored the original order passed by him. The Income-tax Department did not take any steps to rectify the mistake under S. 35 of the Act or make any attempt to have the question of the illegality referred to the High Court. Having allowed the order to become final, on January 3, 1950, the Income-tax Officer after obtaining the sanction of the Commissioner initiated proceedings under S. 34 of the Act with respect to the interest income. On January 19, 1950, the Income-tax Officer issued to the assessee a fresh notice under the said section. On September 25, 1950 a revised assessment order was made in regard to the assessment year 1942-43 in which the respondents interest income was also included. On appeal, the Appellate Assistant Commissioner confirmed the said order. On further appeal, the Income-tax Appellate Tribunal held that since the assessee had failed to disclose his interest income in the return filed by him under S. 22(2) of the Act in connection with the original assessment the said income had escaped assessment and, therefore, the provisions of Section 34(1)(a) of the Act were attracted. On application filed by the assessee, the Tribunal referred the following question to the High Court under S. 66(1) of theon the facts and in the circumstances of this case the provisions of S. 34(1) were applicable in respect of the assessment year 1942-43 on 19th January, 1950, when the notice under that provision was issued for the purpose of assessing the escaped interestHigh Court came to the conclusion that the Tribunal in its order dated April 25, 1949, committed a clear error in setting aside the assessment of tax on the interest income without going into the correctness of the imposition of tax thereon, but that order had become final, it further held that the said order did not invalidate the entire proceedings taken under S. 34 of the Act and, therefore, the Income-tax Officer could not take proceedings afresh under Section 34 of the Act. In the result the High Court answered the question in the negative. Hence the appeal.

Reasoning: 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.