Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3
PETITIONER:
THE VIth INCOME-TAX OFFICER, CITY CIRCLE II-A, ABANGALORE
Vs.
RESPONDENT:
K.Y. PILLAIAH & SONS
DATE OF JUDGMENT:
18/07/1967
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
SIKRI, S.M.
RAMASWAMI, V.
CITATION:
1968 AIR 260 1968 SCR (1) 6
ACT:
Mysore Income-tax Act of 1923, s. 34-Notice served within 4
years of the close of assessment year-Completion of
assessment proceeding-Time limit for.
HEADNOTE:
The Income-tax Officer, Bangalore commenced a proceeding
under s. 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]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil 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 S. P.
Nayar, for the appellant.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3
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 s. 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 s. 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 s. 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
s. 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. S. Subbarayappa and Sons v. 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 -
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 3
"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 s. 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 s. 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 Art. 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.
V.P.S.
10