Case: Income-Tax Officer, Award, Sitapur  Vs. Murlidhar Bhagwandas, Lakhimpur Kheri

2. The facts lie in a small compass and they are as follows : The respondent is a firm carrying on business in different lines. It was assessed to income-tax under S. 23 (4) of the Act for the assessment year 1949-50 on the ground that the notice issued under sub-ss (2) and (4) of S. 22 of the Act had not been complied with. On September 27, 1955, the said assessment was cancelled under S. 27 of the Act. But before the said cancellation it was found that an interest income of Rs. 88,737/- in the shape of U. P. Encumbered Estates Act Bonds revived by him in discharge of the debts due from third parties had escaped assessment as the assessee failed to disclose the same. The Income-tax Officer issued a notice under S. 34(1) (a) of the Act for the assessment year 1949-50 on the ground that the said sum of Rs. 88,737/- had escaped assessment in the said assessment year. After the assessment of that year was set aside under S. 27 of the Act, the Income-tax Officer, ignoring the notice issued by him under S. 34 (1) (a) of the Act, included that amount in the fresh assessment made by him. The assessee preferred an appeal against that order and that was disposed by the Appellate Assistant Commissioner on December 4, 1957. The Appellant Assistant Commissioner in his order held that the bonds were reveived by the assessee in the previous accounting year and therefore, directed that the sum representing interest on the bonds should be deleted from the assessment for the year ending 1949-50 and included in the assessment for the year ending 1948-49. Pursuant to the direction given by the Appellate Assistant Commissioner the Income-tax Officer initiated proceedings under S. 34 (1) of the Act in respect of the assessment year 1948-49. The notice issued under that section was served on the respondent on December 5, 1957. The assessee filed a petition under Art. 226 of the Constitution in the High Court of judicature at Allahabad for quashing the said proceedings, mainly on the ground that the proceedings were initialed beyond the time prescribed by S. 34 of the Act. The High Court accepted the contention and quashed the proceedings initiated by the Income-tax Officer. Hence the appeal.

Reasoning:
It may, therefore, be held on a construction of the provisions of S. 31. that the jurisdiction of the Appellate Assistant Commissioner is strictly confined to the assessment orders of a particular year under appeal. Section 33, inter alia, deals with an appeal to the Tribunal against of the order of the Appellate Assistant Commissioner under S. 31: and S. 33B confers power of revision on the Commissioner against an order of the Income-tax Officer. The jurisdiction of the Appellate Tribunal or the Revisional Tribunal, as the provisions indicate, is confined only to the subject-matter which is under appeal or revision. The jurisdiction of the High Court or the Supreme Court under S. 66 or S. 66B, as the case may be, is far more limited and it is confined only to the questions referred to them. Obviously the questions referred by the Tribunal cannot exceed its jurisdiction. It is, therefore, manifest that assessment or re-assessment made under the said sections or pursuant to the orders or directions made thereunder must necessarily relate to the assessment of the year under review, revision or appeal, as the case may be. It is important to remember that the proviso does not confer any fresh power upon the Income-tax Officer to make assessments in respect of escaped incomes without any time limit. It only lifts the ban of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the ban cannot be so construed as to increase the jurisdiction of the Tribunals under the relevant section. The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-s. (3) of S. 34 which deals with completion of an assessment, but would have been added to sub-s. (1) thereof.In the result, we hold that the said proviso would not save the time limit prescribed under sub-s. (1) of S. 34 of the Act in respect of an escaped assessment of a year other than that which is the subject-matter of the appeal or the revision, as the case may be. It follows that the notice under S. 34 (1) (a) of the Act issued in the present case was clearly barred by limitation.