Full Judgment Text
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PETITIONER:
PANNALAL NANDLAL BHANDARI
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY, BOMBAY.
DATE OF JUDGMENT:
18/10/1960
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
DAS, S.K.
HIDAYATULLAH, M.
CITATION:
1961 AIR 446 1961 SCR (2) 35
CITATOR INFO :
RF 1962 SC 478 (9)
ACT:
Income-tax--General notice--Non-resident liability to submit
return--Period of Limitation--Indian Income Tax Act, 1922
(XI of 1922), s. 22(1) & (2), s.34(1)(a) & (b).
HEADNOTE:
The appellant, a non-resident for the purposes of the Indian
Income-tax Act, did not submit returns of certain dividend
income accruing to him within the taxable territory. The
Income-tax Officer served upon him notices under S. 34 read
with S. 22(2) of the Act for assessment of tax in respect of
those years. The notices in question were issued within
eight years from the end of the years of assessment and were
within the period prescribed by s. 34(i)(a). The appellant
contended that notices for assessment were governed by cl.
(i)(b) of S. 34 and not by cl. (i)(a), even though the
appellant had not made a return of his income for the years
in question as a general notice under s. 22(1) did not give
rise to a liability to submit a return and his inaction did
not amount to omission or failure to submit a return as he
was a non-resident, and the assessment proceedings were
barred by limitation.
Held, that the expression "every person " in s. 22 (1) of
the Indian Income-tax Act, 1922, includes all persons who
are liable to pay tax and non-residents are not exempted
from liability to submit a return pursuant to the general
notice thereunder.
Once a notice is given by publication in the prescribed
manner under s. 22(i), every person whether resident or non-
resident whose income exceeds the maximum amount exempt from
tax is obliged to submit a return and if he does not do so,
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it will be deemed that there was omission on his part to
make a return within the meaning of S. 34(i)(a) of the
Indian Income tax Act. Section 34(1)(b) applied only to
those cases where there was no omission or failure to make a
return of the income or to make a full and true disclosure
of facts material to the assessment.
In the instant case the proceedings for assessment were pro-
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perly commenced within the period of limitation prescribed
by s. 34(1)(a).
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 408 of 1957.
Appeal by Special Leave from the Judgment and Order dated
the 28th September, 1955, of the former Bombay High Court in
Income-tax Reference No. 5 of 1955.
Sanat P. Mehta, S. N. Andley, J. B. Dadachanji, Rameshwar
Nath and P. L. Vohra, for the appellant.
A. N. Kripal, R. H. Dhebar and D. Gupta, for the
respondent.
1960. October 18. The Judgment of the Court was delivered
by
SHAH J.-To the appellant who was a non-resident for the
purposes of the Indian Income Tax Act, 1922, had accrued in
the assessment years 1943-44, 194445, 1946-47 and 1947-48
certain dividend income within the taxable territory of
British India, but the appellant did not submit returns of
his income for those assessment years. In exercise of his
powers under s. 34 of the Indian Income Tax Act, 1922, the
Income Tax Officer, Bombay City, served upon the appellant
notices under s. 34 read with s, 22(2) of the Act for
assessment of tax in respect of those years. The notice for
the year 1943-44 was served on the appellant on March 27,
1952, for the year 1944-45 on February 16, 1953, for the
year 1946-47 on April 4, 1951 and for the year 1947-48 on
April 2, 1952. The Income Tax Officer completed the
assessments in respect of the years 1943-44, 1944 45 and
1947-48 on May 6, 1953 and for the year 1946-47 on March 19,
1952. The orders of assessment were confirmed by the
Appellate Assistant Commissioner and by the Income Tax
Appellate Tribunal. At the instance of
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the appellant, the Income Tax Appellate Tribunal drew up a
statement of the case under s. 66(1) of the Income Tax Act
and submitted to the High Court of Judicature at Bombay the
following two questions:
(I). Whether the notices issued under s. 22(2) of the
Act read with s. 34 of the Act for the assessment years
1943-44, 1944-45, 1946-47 and 1947-48 were served after the
period of limitation prescribed by s. 34 of the Act?
(2) If the answer to Question No. 1 is in the affirmative,
whether the assessments for the years in question were
invalid in law?
The High Court answered the first question in the negative
and observed that on that answer, the second question " did
not arise ". With special leave under Art. 136 of the
Constitution, this appeal is preferred by the appellant
against the order of the High Court.
The only question which falls to be determined in this
appeal is whether the proceedings for assessment were
commenced within the period of limitation prescribed for
serving notice of assessment under s. 34(1)(a) of the Act.
At the material time, by s. 34 (1)(a), the Income Tax
Officer was invested with power amongst others to serve at
any time within eight years from the end of any year of
assessment notice of assessment if he had reason to believe
that income, profits or gains had escaped assessment by
reason of omission or failure on the part of the assessee to
make a return of his income under s. 22 for that year, or to
disclose fully and truly all material facts necessary for
his assessment of that year. In those cases where the
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Income Tax Officer had in consequence of information in his
possession reason to believe that income, profits or gains
had escaped assessment even though there was no omission or
failure as mentioned in el. (a), he could under cl. (b)
within four years from the end of the year of assessment
serve a notice of assessment. Admittedly, the notices
issued by the Income Tax Officer for the years in question
were issued within eight years from the end of the years of
assessment and if el. (1)(a) of s. 34 applied, the
assessment was not barred by the law of limitation.
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But the appellant contended that the notices for assessment
were, even though he had not made a return of his income for
the years in question, governed not by cl. (1)(a) of s. 34,
but by cl. (1)(b) of s. 34. He contended that being a
resident outside the taxable territory in the years of ,
assessment, a general notice under s. 22(1) did not give
rise to a liability to submit a return, and his inaction did
not amount to omission or failure to submit a return,
inviting the applicability of s. 34(1)(a). He submitted
that omission or failure to make a return can only arise qua
a non-resident, if no return is filed after service of an
individual notice under s. 22(2). In other words, the plea
is that a notice under s. 22(1) imposes an obligation upon
persons resident within the taxable territory and not upon
non-residents, and support for this argument is sought to be
obtained from s. 1 sub-s. (2) which extended the Income Tax
Act at the material time to British India.
The expression " every person whose total income during the
previous year exceeded the maximum amount which is not
chargeable to income-tax " in s. 22(1) includes all persons
who are liable to pay tax and there is nothing in the
section or in its context which exempts non-residents from
liability to submit a return pursuant to a notice
thereunder. The fact that a non-resident assessee may not
come to know of the general notice issued under s. 22(1) is
not a ground for not giving effect to the plain words used
in the section. In terms, the clause read with r. 18
requires every person who has taxable income to submit his
return, and if he fails to do so, under s. 34 of the Act the
Income Tax Officer may commence proceedings for assessment
within the period prescribed by cl. (1)(a). Section
34(1)(b) applies only to those cases where there is no
omission or failure to make a return of the income or to
make a full and true disclosure of facts material to the
assessment. To the appellant though non-resident income bad
admittedly accrued in the taxable territory and that income
exceeded the maximum amount not chargeable to income-tax.,
The appellant not having submitted a return in pursuance of
the notice issued under s. 221 the Income Tax
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Officer was competent under s. 34(1)(a) to issue notice at
any time within eight years of the end of the year of
assessment for assessing him to tax. Once a notice is given
by publication in the press and in the prescribed manner
under s. 22(1), every person whose Th. income exceeds the
maximum amount exempt from tax is obliged to submit a return
and if he does not do so, it will be deemed that there was
omission on his part to a make a return within the meaning
of s. 34(1)(a). There is no warrant for the submission that
s. 22(1) applies to residents only and that an obligation to
make a return on the part of a nonresident can only arise if
a notice under sub-s. (2) is served. Under sub-s. (2) it is
open to the Income Tax Officer to serve a special notice
upon any person requiring him to furnish a return in the
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prescribed form, but that provision does not derogate from
the liability arising under sub-s. (1) to submit a return.
The Income Tax Act extends by s. 1(2) to the taxable
territory and not beyond; but within that territory, the
Income Tax Officer has power to tax income which accrues,
arises or is received, and that is not disputed by the
appellant. If power to tax be granted, it is difficult to
appreciate the ground on which the plea that the general
provision imposing liability upon persons receiving taxable
income is subject to an unexpressed limitation that it is to
apply only to residents and not to non-residents. The
submission that a person liable to pay tax but resident
outside the taxable territory must be served with a special
notice under s. 22(2) before his inaction in the matter of
making a return may be deemed omission within the meaning of
s. 34(1) is without force. There is no such express
provision made by the statute and none can be implied from
the context.
The High Court was therefore right in holding that the
proceedings for assessment were properly commenced within
the period of limitation prescribed by s. 34(1)(a) from the
close of the year of assessment. The appeal fails and is
dismissed with costs.
Appeal dismissed.
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