Case: The First Additional Income-Tax Officer, Mysore Vs. H.N.S. Iyengar

2. The facts of this appeal are as follows: On November 27, 1956, a notice was issued to the respondent under S. 34(1) (a) of the Indian Income-tax Act calling upon him to make a return on the ground that his income had escaped assessment for the assessment year ending 31st March, 1949. This notice was served on the respondent on November 29, 1956. The respondent objected that no notice under S. 34 of the Income-tax Act could be issued to him because of the lapse of eight years from the end of the accounting year. This objection was overruled and the respondent filed on June 12,1957 in the High Court of Mysore, a petition under Art. 226 of the Constitution for a writ of certiorari quashing the order made by the Income-tax Officer3. The High Court held on a construction of S. 34 of the Indian Income tax Act, that the wards "any year" as used in S. 34(l) (a) mean not the assessment year but the accounting year. It is that question which is required to be decided in this appeal.

Reasoning: It is quite clear from this section that according in the Finance Act 1948, the income-tax was to be charged at the rates specified in the Schedule attached thereto for the year beginning on the 1st day of April, 1948, and the assessment was for the year ending on March 31, 1949 under sub-secs. (2) and (3) Thus according to the Indian Finance Act assessment was to be made for the year ending March 31, 1949 at rates specified for the year beginning April 1 1948It shows, therefore, that a return has to be made for the year of assessment in regard to the total income during the previous year which is the accounting year; in other words income-tax is assessed for the assessment year on total income of the previous yearyear. The clause makes it clear that an assessee can be called upon to make a full and true disclosure of all materials necessary for his assessment of that year which necessarily must mean an assessment year and it is in our opinion erroneous to say that a return under S. 22 of the assessees income for any year would have a different meaning in the first part from that dealing with the full and true disclosure of all material facts necessary for the assessment for that year8. With due respect to the learned Judges of the High Court who gave the decision, the view taken by them as to the meaning of "any year" was erroneous, and the correct way of interpreting S. 34 (1)(a) is that the words "for any year" mean for any assessment year and not for any accounting year because, as we have said above, the assessment is for the assessment year although of the income which accrued in the previous year. It may be added that the previous year for different heads of income falling under different sections of the Indian Income-tax Act may vary and it could not have been the intention of the Legislature to give different starting points of limitation for different sources of income. Reading the various sections of the Indian Income Tax Act which are set out above and the provisions of Indian Finance Act 1948 it is clear that the words "that year" in S. 34(1) (a) have reference to the assessment year and not the accounting yearIn our opinion therefore, the view taken by the Madras High Court in C. W. Spencers case, (1957) 31 ITR 107 : ( (S) AIR 1957 Mad 133  ) is the correct view and the view taken by the learned judges of the Mysore High Court is erroneous.