Case: Commissioner Of Income-Tax, Madras Vs. S. Raman Chettiar

2. The respondent, hereinafter referred to as the assessee, is a Hindu undivided family. For the assessment years 1944-45 and 1945-46, the assessee filed no returns under S. 22 of the Indian Income Tax Act, hereinafter referred to as the Act, nor were any notices issued under S. 22(2) of the Act. On April 3, 1948, the Income-tax Officer issued notices under S. 34 for both the assessment years. At that time it was not necessary to obtain sanction of the Commissioner of Income-tax and none was obtained. The assessee filed a return for the assessment year 1944-45 on September 4, 1948, showing an income of Rs. 4,053 / - which was below the HUF taxable limit of Rs. 7200/-. The assessee also filed a return for the assessment year 1945-46. It appears that the Income-tax Officer dropped proceedings for 1944-45 as infructuous, but for the assessment year 1945-46, he passed an order on October 27, 1950, determining the net taxable income as Rs. 1,20,603/-. The assessee appealed to the Appellate Assistant Commissioner and then appealed to the Appellate Tribunal. On November 19, 1952, the Appellate Tribunal allowed the appeal in part. It held that out of a total profits of Rs. 79,760 /- arising from the sale of certain properties, only Rs. 33,000 /was assessable in the assessment year 1945-46 and Rs. 46,760/- was assessable in the assessment year 1944-45. The Appellate Tribunal observed thus in the orderIncome Tax Officer is at liberty to take such action as he may be advised about the assessees liability for the earlier year 1944-45.On February 27, 1953, after having obtained the sanction of the Commissioner, the Income-tax Officer issued a notice purporting to be under S. 34 of the Act in respect of the assessment year 1944-45. It is the validity of this notice that is now in question. The Income Tax Officer passed an order on June 30, 1953, assessing the total income as Rs. 51, 523/-. The Appellate Assistant Commissioner affirmed the order. He held that the action of the Income Tax Officer in starting proceedings under S. 34(1)(a) was valid. He further held that in view of the finding of the Appellate Tribunal that the Income Tax Officer would be at liberty to take action about the assessees liability to tax for 1944-45 assessment, the second proviso to subs. (3) of S. 34, as amended by Amendment Act of 1953, was applicable and consequently the time limit specified in S. 34 would not be applicable. The Appellate Tribunal, without going into the question whether S. 34 (1)(a) could be invoked by the Revenue, affirmed the assessment on the ground that the second proviso to S. 34 (3) of the Act, as amended, applied.4. At the instance of the assessee, the Appellate Tribunal referred the question set out in the beginning of the judgment. The High Court, as already stated, answered the question in the negative. It held that notwithstanding that the return filed by the assessee on September 4, 1948, was the result of an invalid notice, the return itself could not be ignored or disregarded by the Department, and the Department cannot issue a further notice under S. 34(1)(a) of the Act on the assumption that there had been an omission or failure on the part of the assessee to make a return of his income under S. 22. It further held that the ratio of the decision of this Court in Commissioner of Income-tax v. Ranchhoddas Karsondas, 1959-36 ITR 569  : (AIR 1959 SC 1154 ) governed the present case.

Reasoning: These observations certainly show that this Court assumed that fresh notices could have been issued in that case. Mr. Sastri says that the Department has done exactly what the Supreme Court indicated in that case should be done. But, apart from the fact that there is no discussion on the question of the validity of the return, it is possible to say that on the facts in that case fresh notices could have beenare satisfied that there is no substance in this contention. The decision of the Calcutta High Court in R. K. Das and Co. v. Commissioner of Income-tax West Bengal, 1956-30 ITR 439  : (AIR 1956 Cal 161 ) certainly supports Mr. Sastris contention but, with respect, we are unable to agree with the reasoning of the High Court. Apart from fact that this Court did not approve of this decision in AIR 1959 SC 1  154, we are unable to appreciate that if the Income-tax Officer had based his assessment on the return treating it to be a return under S. 22(3), the assessment would not stand a moments scrutiny.12. We think that some confusion has crept into this branch of the Income Tax Law by the use of the words voluntary return and a non-voluntary return. Section 22 (3) does not use this expression and whatever the impelling cause or motive if a return otherwise valid is filed by an assessee before the receipt of a valid notice under S. 34, it is to be treated as a return within S. 22(3) for it falls within the language of the sub-section.In our opinion the appellant is not raising any new point. It is true that in the above cited proposition the appellant says that the return is valid but this follows the assertion that the notice issued on April 3, 1948 is22(3) permits an assessee to furnish a return at any time before the assessment is made. By virtue of S. 34(3), as it stood in 1949, assessment could have been made at least up to March 31, 1949, if the return was valid. Therefore, it may be implied, as laid down in Santosha Nadar v. First AdditionalITR 715 (Mad) and Commissioner ofBombay City II v. Bagwandas Amersey,ITR 239 (Bom) that the return must be filed before the time mentioned in S. 34(3). This condition is, however, satisfied in this case. Mr. Sastri says that it is further implicit in S. 22(3) that the return must be voluntary we are unable to appreciate that every return made under S. 22(3) must be a voluntary return, in the sense that it must be suo motu. If a return is made in pursuance to a general notice under S. 22(1) or a special notice under S. 22 (2), it is a return made voluntarily but not suo motu. It is a return made in response to a public notice or a special notice. If no return is made in response to notices under S. 22(1), and S. 22(2), the Act attaches certain penalties. In our view, it is not correct first to describe a return made under S. 22(3) in response to a notice under S. 22(1) or S. 22(2) as voluntary, and then say that a return made in response to a notice under S. 34 is not voluntary just because it warns the assessee that some income has escaped assessment. In our opinion, both types of returns are under S. 22(3) of the Act. In the first type of cases it is directly under S. 22(3). In case of a notice under S. 34, it is deemed to be notice under S. 22(2) and the return deemed to be a return under S. 22(3). From the language of S. 22(3), we are unable to say that the return dated September 4, 1948, was not a return within S. 22(3).