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

2. The facts leading up to this appeal are as follows: For the assessment year 1945-46, a public notice under S. 22 (1) of the Income-tax Act (hereinafter called the Act) was issued, requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income-tax to furnish, within such period not being less than sixty days as might be specified in the notice, a return of his income in the prescribed form and verified in the prescribed manner. This notice was published on or about 1-5-1945. The assessee did not make a return of his income. The Income-tax Officer, while examining the books of account of a partnership called the "Assar Syndicate" of which the assessee was a partner, found that in the account year corresponding to the assessment year 1945-l946, there were six cash credits aggregating to Rs. 59,026 in the name of the assessees wife. Before, however, the Income-tax Officer could take any action, the assessee submitted a "voluntary" return on 5-1-1950 of his income for the accounting year 1944-1945 (assessment year 1945-1946) showing a total net income of Rs. 1,935. He added a footnote to the return to the following effect:"My wife has sold her old ornaments and deposited the sum of Rs. 59026 in the firm of Assar Syndicate in which I am a partner."3. The assessee appealed, in turn, to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. His contentions were three, viz., that the amount of Rs. 59,026 could not and should not have been included in his income, that the amended S.24 of the Act had no retrospective effect, and that the assessment completed on 26-2-1951 was invalid, inasmuch as it was completed four years after the end of the relevant assessment year. Both the Appellate Assistant Commissioner as well as the Tribunal rejected his contentions, but the Tribunal on being moved by him, raised and referred two questions of law under S. 66 (1) of the Act to the High Court of Judicature, Bombay, for its decision. These questions were:"(1) Whether the notice issued under S. 34 of the Act by the Income-tax Officer on 27-2-1950 after the assessee had filed a voluntary return was valid in law?4. This reference was heard by the High Court on 18-3-1954, and by a judgment delivered on the same day, Chagla C. J., and Tendolkar J., answered both the questions in the negative. Before the High Court, it was again contended by the assessee that since he had submitted a return under S. 22 (3) of the Act on 5-1-1950, the assessment, if any, had to be completed before 31-3-1950, as required by S. 34 (3) of the Act. He also contended that he was entitled under S. 22 (3) to make a voluntary" return on the date he did, and with a voluntary return before the Income-tax Officer, there was no scope for the issuance of a notice under S. 34. The High Court upheld the contentions of the assessee, and gave its opinion that the Department ought to have issued a notice under S. 22 (2) within the assessment year, and if no return was made within the time fixed by the notice, the Department should have proceeded under S. 23 (4) to a best judgment assessment. The other alternative for the Department was to issue a notice under S. 34 of the Act, if the period for sending a notice under S: 22 (2) had expired. But it could not issue a notice under S. 34 after a return was already made before it, and the benefit of the extended period of limitation for assessment available under the first proviso to sub-s. (3) of S. 34 of one year from the service of the notice under sub-s. (1) of that section was not available in this case. The High Court granted a certificate of fitness, and hence this appeal.

Reasoning:
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