Judgment Case ID: 2220

Judgment:
Appeal No. 2177 of1966. Appeal by special leave from the judgment and order dated July 12	 1963 of the Mysore High Court in Writ Petition No. 1076 of 1962. Veda Vyasa	 R. Ganapathy Iyer	 R. N. Sachthey and section P. Nayar	 for the appellant. R. Gopalakrishnan	 for the respondent. The Judgment of the Court was delivered by Shah	 J. The respondents a Hindu undivided family were assessed for the assessment year 1949 50 to tax under s ' 23 of the Mysore Income tax Act on a total income of Rs. 10	100/ The Second Additional Income tax Officer (Urban Circle)	 Bangalore	 commenced a proceeding under section 34 of the Mysore Income tax Act for re assessment of the income of the respondents for the 7 assessment year 1949 50	 and served a notice in that behalf on March 6	 1951. On May 21	 1954 the Income tax Officer determined the respondents ' total income at Rs. 75	957/ . In appeal against the order	 the Appellate Assistant Commissioner of Income tax. 'A ' Range	 Bangalore	 by order dated November 4	 1961	 set aside the order and directed the Income tax Officer to make a fresh assessment after making inquiries on certain matters specified in the order. At the request of the respondents under section 66(2) of the Mysore Income tax Act	 the Commissioner of Income tax	 Mysore	 referred the following questions to the High Court of Mysore: "1. On the facts and in the circumstances of the assessee 's case whether within the meaning of section 34 of the Mysore Income tax Act	 if a notice under that section is issued within the prescribed period	 whether the Income tax Officer can proceed to assess or re assess such escaped income after four years from the close of the assessment year? 2. On the facts and in the circumstances of the case	 whether the Appellate Assistant Commissioner of Incometax is competent to set aside and give directions to the Income tax Officer to re do the assessment in the manner the Appellate Assistant Commissioner of Income tax has done?" At the hearing of the reference	 the respondents did not press the first question	 and the High Court answered the second question in the affirmative. The Income tax Officer commenced inquiry directed by the Appellate Assistant Commissioner. The respondent 	 then applied to the High Court of Mysore for issue of a writ of prohibition restraining the Income tax Officer from continuing the assessment proceeding for the year 1949 50 on the plea that the proceeding was because of expiry of the period of limitation barred. The High Court of Mysore upheld the contention of the respondents and allowed the petition. In the view of the High Court the provisions of section 34 of the Mysore Income tax Act were "more or less similar to Rule 34 of the Mysore Sales Tax Act	 1948. Hence the present case clearly comes within the rule laid down by this Court in M/s K. section Subbarayappa and Sons vs State of Mysore [(1952)] Mysore L. J. 2341 which means that the present proceedings are barred". The Commissioner of Income tax has appealed to this Court with special leave. The question arising in this appeal must	 it is common ground	 be determined in the light of the provisions of the Mysore Incometax Act	 1923. Even after the merger of the State of Mysore with 8 the Union of India a proceeding for assessment of income tax relating to the assessment year 1949 50 has to be heard and disposed of under the Mysore Act. Section 34 of the Mysore Incometax Act reads as follows "If for any reason	 profits or gains chargeable to income tax have escaped assessment in any year	 or have been assessed at too low a rate	 the Income tax Officer may	 at any time within four years of the end of that year	 serve on the person liable to pay tax on such income	 profits or gains	 or in the case of a company	 on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22	 and may proceed to assess or re assess such income	 profits or gains and the provision of this Act shall	 so far as may be	 apply according as if the notice were a notice issued under that sub section". A proceeding for re assessment under section 34 of the Mysore Act may be commenced if two conditions co exist: (i)that the profits and gains chargeable to income tax have escaped assessment or have been assessed at too low a rate	 and (ii) the notice is served within four years of the end of the year of assessment. But if a proper notice is served within the period provided by the section	 the proceeding may be completed even after the expiry of four years from the close of the assessment year	 for the Act prescribes no period for completion of the proceeding. A notice for re assessment was in fact served on the respon dents on March 6	 1951 under section 34 of the Mysore Act. That notice was served within four years of the end of the year of assessment 1949 50	 and the Income tax Officer was of the view that tie profits or gains chargeable to income tax had escaped assessment in the year 1949 50. It is true that the Appellate Assistant Commissioner vacated the order of assessment dated May 21	 1954	 but he did not set aside the notice served upon the respondents. He merely remanded the case for further inquiry to be made in the light of the directions given by him. It is difficult to appreciate the grounds on which it could be held that the proceeding for re assessment to tax the income which had escaped assessment in the year 1949 50 commenced after due notice served on March 1951 was barred. The High Court was	 in our judgment	 plainly in error in holding that the proceeding for re assessment was barred. It must also be remembered that the respondents had under an order of the Commissioner obtained a reference on the first question set out hereinbefore. That question was not pressed before the High Court	 and it must be deemed to have been answered 9 against the respondents. That question could not thereafter be reagitated by the respondents in a petition for the issue of a writ under article 226 of the Constitution. The appeal is allowed. The order passed by the High Court is set aside. The respondents will pay the costs of the Commissioner in this Court and in the High Court. Appeal dismissed.

Summary:
The Income tax Officer	 Bangalore commenced a proceeding under section 34 of the Mysore Income tax Act for reassessment of the income of the respondents for the assessment year 1949 50 and served a notice in that behalf in March 1951	 on the respondents. The Income tax Officer determined the total income of the respondents in May 1954	 but the order was set aside by the Appellate Assistant Commissioner in November 1961	 and the Income tax Officer was directed to make a fresh inquiry	 When the Income tax Officer commenced inquiry	 the respondents applied to the High Court for a writ of prohibition and the High Court passed an order restraining the Income tax Officer on the ground that the assessment proceeding was barred because of the expiry of the period of limitation. In appeal to this Court	 Held: The High Court was in error	 because	 though the Appellate Assistant Commissioner vacated the Income tax Officer 's assessment order of 1954 and remanded the case for further inquiry	 the Appellate Assistant Commissioner did not set aside the notice of March 1951 served on the respondents	 If a proper notice was served within the period provided by the section (four years from the close of the assessment year) the proceeding could be completed even after the expiry of four years for the Act prescribes no period for completion of the proceeding. [8E G]