S.R. Das Gupta, C.J.
1. The petitioner before us was served with a notice under section 34(1) of the Indian Income-tax Act in respect of the assessment year 1950-51. The accounting year of the petitioner as shown in his books used to be from the first day of July of a year to the June 30 of the following year. For the accounting year July 1, 1948, to June 30, 1949, he was assessed under the Mysore Income-tax Act for the assessment year 1949-50. On the April 1, 1950, the Indian Income-tax Act came to be applied to Part B States and the Mysore Income-tax Act was repealed. As it will be necessary to be seen hereafter, in certain respects and for certain accounting years, to which I shall have to refer more fully in this judgment, the provisions of the Mysore Income-tax Act were kept in force. For the assessment year 1950-51, the petitioner was served with a notice under section 22(2) of the Indian Income-tax Act calling upon him to file a return. On September 8, 1952. the petitioner filed a return. It is not clear as to what the said return contained. No copy of the return so filed has been produced by the petitioner, but it appears from the affidavit, which has been filed in support of this petition by the petitioner, that his case was that his income for the year ending with June 30, 1949, was assessed under the Mysore Income-tax Act for the assessment year 1949-50 and since his income for the year ending with June 30, 1950, was assessable under the Indian Income-tax Act for the assessment year 1951-52, he had no income assessable for the assessment year 1950-51, as in respect of his sources of income there was no previous year for as in respect of his sources of income there was no previous year for the assessment year 1950-51. It also appears from the said affidavit that the income-tax authorities wrote on the order sheet 'No proceedings' for the assessment year 1951-51. Thereafter on February 26, 1957, before the present notice under section 34 was served upon the petitioner, the petitioner voluntarily filed another return under section 22(3). In this return, the petitioner disclosed certain other income which was not disclosed in the return which he had originally filed on September 8, 1952. During the assessment proceedings for the year 1951-52, under the Indian Income-tax Act in respect of the petitioner's income, the books of the petitioner for the period July 1, 1949, to June 30, 1950, were seen and from the said books it appeared that on July 1, 1949, there was a cash balance of Rs. 1,87,000. The Income-tax Officer, while assessing the income of the petitioner for the assessment year 1951-52, held that Rs. 1,37,000 out of the said total sum of Rs. 1,87,000 was the income from undisclosed sources and Rs. 54,017 was the income from other heads. On that finding the Income-tax Officer proceeded to assess the petitioner for the assessment year 1951-52. Against that assessment there was an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner took the view that this income cannot be subject matter of the assessment for the year 1951-52. The Appellate Assistant Commissioner on that view directed the Income-tax Officer to consider this credit in the assessment of 1950-51, after giving sufficient opportunity to the appellant to explain the nature and the source of it. Thereafter, the present notice under section 34 of the Indian Income-tax Act was served on the petitioner requiring him to deliver within 35 days of the receipt of the notice, a return in the attached form of his total income and total world income assessable for the year ending March 31, 1951. In the said notice, it was stated that whereas the Income-tax Officer had reason to believe that the petitioner's income assessable to income-tax for the year ending March 31, 1951, had escaped assessment, he proposed to assess the said income that had so escaped. This return had to be filed, according to the said notice, by November 20, 1957. The present petition has been filed challenging the competency of the Income-tax Officer to issue such a notice under section 34 of the Indian Income-tax Act.
2. The learned advocate appearing for the petitioner has urged several grounds in support of this petition. The first ground urged by him is that no notice under section 34 can be issued in a case where a return under section 22(2) or section 22(3) has been filed unless the assessment has been completed under section 23 of the Income-tax Act. In this case, he contended, a return was called for under section 22(2) of the Income-tax Act and a return under that section had been filed. Besides, it was urged a return under section 22(3) had also been filed and that being the position the assessment had to be completed under section 23 of the Income-tax Act before any notice under section 34 can be issued. In this case, although the said return had been filed for the assessment year 1950-51, the assessment in question has not been made under any of the sub-sections of section 23 of the Income-tax Act. The being so, no notice under section 34 can be issued. In support of that contention, he relied on a decision of the Bombay High Court in Ranchhoddas Karsondas v. Commissioner of Income-tax. In that case, it was laid down that once a return under section 22(1) or under section 22(3) has been filed, the assessment must be completed before any notice under section 34 can be issued upon as assessee.
3. I shall at this stage refer to the material provisions of section 22 and section 23 of the Income-tax Act. Section 22(1) provided that the Income-tax Officer shall, on or before the first day of May in each year, give notice, by publication in the prescribed manner, requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax to furnish, within such period not being less than sixty days as may be specified in the notice, a return, in the prescribed form and verified in the prescribed manner, setting for this total income and total world income during that year.
4. sub-section (2) of section 22 provides that in the case of any person whose total income is, in the opinion of the Income-tax Officer, of such an amount as to render such person liable to income-tax, the Income-tax Officer may serve a notice upon him requiring him to furnish, within such period, not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth his total income and total world income during the previous year.
5. Sub-section (3) of the said section provides that if any person has not furnished a return within the time allowed by or under sub-section (1) or sub-section (2), or having furnished a return under either of those sub-sections discovers any omission or wrong statement therein, he may furnish a return, or a revised return as the case may be, at any time before the assessment is made.
6. Section 23 of the Indian Income-tax Act relates to assessment of income. Sub-section (1) provides that if the Income-tax Officer is satisfied that a return made under section 22 is correct and complete, he shall assess the total income of the assessee, and shall determine the sum payable by him on the basis of such return.
7. Sub-section (3) provides that on the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified, points, shall, by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment.
8. Sub-section (4) enables the Income-tax Officer to make best judgment assessment if the assessee fails to make the return required by any notice given under sub-section (2) of section 22 or a revised return under sub-section (3) of the same section or fails to comply with all the terms of a notice issued under sub-section (4) of the same section or having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 23.
9. The only other section, to which I need refer for the present, is section 34 of the Income-tax Act. That section, as it stood before it was amended in the year 1956, enabled the Income-tax Officer where he has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive loss or depreciation allowance has been computed, to give notice at any time within eight years under sub-section (2) of section 22 and may proceed to assessee or reassess such income, profits or gains or recompute the loss or depreciation allowance. Under section 34, as it stood before it was amended in 1956, the assessment, if any such notice is given within eight years, will have to be completed within one year from the date of the service of the said notice.
10. The substantial change, which was effected by the amendment of section 34 in the year 1956 was that under the amended section after a notice is given within eight years from the year in question, the assessment in question can be completed at any time thereafter.
11. The learned advocate for the petitioner contended before us that if the return which was originally filed by his client was a valid return under section 22(2) of the Income-tax Act, then the Income-tax authorities should have made an assessment on the said return either under sub-section (1) or under sub-sections (2) and (3) of section 23 of the Indian Income-tax Act. In this case, he contended, although a return was filed, no such assessment has been made by the Income-tax Officer and unless such an assessment is made no notice under section 34 can be issued. His contention was that even if the return in question which was filed by the petitioner, discloses no assessment of income under sub-section (1) of section 23 of the Income-tax Act. The alternative argument of the learned advocate for the petitioner was that even if we hold that the return filed was no return at all, even then assessment had to be made under sub-section (4) of section 23 of the Indian Income-tax Act. The learned advocate further contended before us that in view of the fact that a subsequent return was filed under sub-section (3) of section 22 of the Indian Income-tax Act, the authorities concerned had to make an assessment on the basis of the said return in accordance with the provisions of section 23 of the Indian Income-tax Act.
12. It is not necessary for us to consider the question, for the purpose of this petition as to whether or not the income-tax authorities are competent to issue a notice under section 34 of the Income-tax Act, if a return has been filed under any of the provisions of section 22 of the Indian Income-tax Act, without completing the assessment in respect of the said return. It seems to me that on the facts of this case, it should be held that assessment of the income of the assessee was made under sub-section (1) of section 23 of the Income-tax Act. I have already mentioned that after the petitioner had filed a return, in which it appears to have been stated that since his income for the year ending June 30, 1949, was assessed under the Mysore Income-tax Act for the assessment year ended June 30, 1950, was assessable under the Indian Income-tax Act for the assessment year 1951-52, he had no income assessable for the assessment year 1950-51. On that return the Income-tax authorities wrote 'No proceeding' and it appears that the matter was thereafter closed. The learned advocate for the petitioner contended before us that it is not enough to merely write 'No proceedings' to close the matter. The Income-tax authorities had to pass an order stating that there was no income which is assessable for income-tax or, in other words, it had to be stated that the Income-tax authorities had computed the income of the petitioner as nil. In my opinion, it is a mere technicality on which the petitioner is resting his case. On the return, filed by the petitioner, it must be admitted, there was no question of assessing him to any income for the assessment year 1950-51.
13. Both the learned advocates appearing before us agreed that in view of the events which have happened, viz., that for the period July 1, 1948, to June 30, 1949, there has been an assessment under the Mysore Income-tax Act for the year 1949-50, the income for the period July 1, 1949, to June 30, 1950, cannot be the subject matter of an assessment under the Indian Income-tax Act for the year 1950-51. But the learned advocate appearing for the State contended before us that that would be so, so far as disclosed sources of income are concerned, but so far as undisclosed sources of income are concerned, the accounting year would be for the period from first of April of a year to the end of March of the following year and for such income the petitioner was liable to be assessed for the assessment year 1950-51. The petitioner before us did not dispute that in respect of undisclosed income his accounting year would be the period between first of April of a year to March 31 of the following year and so far as the alleged undisclosed income is concerned his accounting year would be from April 1, 1949, to March 31, 1950. His contention, however, was that in view of the fact that a return under section 22 had already been filed and no assessment had been completed in respect of the said return, a notice under section 34 was not tenable. In my opinion, what the Income-tax authorities have done was in effect to hold that for the year 1950-51 there was no income assessable to tax and no that view of the matter have closed the proceedings. It is after they came to know that there was an undisclosed source of income for which the accounting year would be the period from April 1, 1949, to March 31, 1950, that they proceeded to take action under section 34 of the Indian Income-tax Act. The act of the Income-tax Officer in holding that there was no case for proceeding under the Indian Income-tax Act for the year 1950-51, in my opinion, amounts to a decision that the income of the asessee is not an assessable income and therefore no tax can be levied on the same. Such a decision, in my opinion, comes within sub-section (1) of section 23 of the Income-tax Act. I am unable to accept the contention of the learned advocate for the petitioner that it was necessary for the Income-tax Officer to state that the income of the petitioner had been computed as nil. If the effect of what the Income-tax Officer has done is that he has determined the income of the assessee, as disclosed in his return, as not liable to income-tax then such act in my opinion amounts to holding that the income of the petitioner for the purpose of assessment is nil. The contention to the contrary, in my opinion, is not tenable.
14. The next contention urged by the learned advocate for the petitioner rests on the provisions of section 13(1) of the Finance Act, 1950. It reads as follows :
'13. (I) If immediately before the April 1, 1950, there is in force in any Part B State other than Jammu and Kashmir or Manipur, Tripura of Vinchya pradesh or in the merged territory of Cooch-Behar any law relating to income-tax or super-tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment, and collection of income-tax uper-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922 (XI of 1922), for the year ending on the day of March 31, 1951, or for any subsequent year, or, as the case may be, the levy, assessment collection of the tax on profits of business for any char geable accounting period ending on or before the March 31, 1949.' The contention of the learned advocate for the petitioner was that in respect of this particular income it is the Mysore Act which would apply. His contention was that in view of the fact that it was not included in the assessment for the year 1950-51 this income can be said to be an income which was not included in the previous year for the purposes of assessment under the Income-tax Act for the year ending March 31, 1951, as mentioned in section 13(1) of the Indian Finance Act and therefore the Mysore Income-tax Act for that income would still remain valid and operative. This contention of the learned advocate proceeds on the basis that when it was said in section 13(1) of the Indian Finance Act, 1950, that the law in force in any Part B State will continue to be in force 'in respect of any period not included in the previous us year for the purpose of assessment under the Indian Income-tax Act, 1922, for the year ending on the March 31, 1951,' it was meant that the said law will remain in force in respect of any income which was not included by the Income-tax Act, 1922, for the year ending on March 31, 1951, or for any subsequent year, the Mysore Income-tax Act would be operative. The previous year for the purpose of the assessment year ending on March 31, 1950. What the Finance Act, 1950, laid down is that for any period prior to that year, i.e., in respect of income for any period prior to that year, the Mysore Income-tax Act would apply. In other words, for the income for the accounting years, which are prior to the year commencing from first of April, 1949, and ending with March 31, 1950, the taxation will be in accordance with the Mysore Income-tax Act. I cannot hold that for the accounting year between April 1, 1949, to March 31, 1950, which correspond to the assessment year ending with March 31, 1951, the Mysore Income-tax Act would be operative. The plain words of the section negative such a contention. The learned advocate for the petitioner contended before us that unless that was so there would be difficulty in making any assessment in respect of an accounting year, if that accounting year be for the period commencing from July 1, 1948, and ending on June 30, 1949, as it is in this case. In such a case, he contended, it would be difficult to hold that the Indian Income-tax Act would be operative and it is also not clear whether in such a case the Mysore Act would be operative. On the view, which I have taken as to the effect of the said section, the learned advocate contended, the income for that year would not be included for assessment under the Indian Income-tax Act for the year ending on March 31, 1951, and would not therefore be liable to tax either under the Mysore Income-tax Act or under the Indian Income-tax Act. It appears that this difficulty was envisaged by the authorities concerned and an order was promulgated, being the Part B States (Taxation Concessions) Order, 1950, which has removed it. Paragraph 5(1) of the said order provides that the income, profits and gains of any previous year ending after the March 31, 1949, which is a previous year for the State assessment year 1949-50, shall be assessed under the Act for the year ending on the March 31, 1951, if and only if, such income, profits and gains have not, before the appointed day, been assessed under the State law. The effect of this paragraph is that in such a cases if the State Government has already assessed the income in question, then the Indian Income-tax authorities will not assess it. Such income can be assessed under the Income-tax Act only if the State Government has not already assessed it. This seems to be the answer to the difficulty which was put forth before us by the learned advocate for the petitioner in accepting the view which I have taken as to the effect of section 13(1) of the Finance Act. I therefore do not see any force in this contention of the learned advocate for the petitioner.
15. The next contention urged by the learned advocate relates to section 34 of the Indian Income-tax Act. Shortly put, his contention was that the amendment, which was introduced into section 34 of the Indian Income-tax Act which came into force on the April 1, 1956, cannot be retrospective in operation. In other words, his contention was that the amended section can only be operative with regard to assessments which are to take place after the Amending Act came into force, that is to say, to assessments for the year 1956-57 and onwards. The amended section, according to him cannot apply to assessments which had already taken place before the amendment came into force. I fail to see how the question of retrospective operation of the amended section can at all arise. We have to see as was pointed out by Chief Justice Chakravartti, in the case reported in Income-tax Officer v. Calcutta Discount Co., what the section says. What it says is that in respect of income, which has escaped assessment, the Income-tax authority may at any time give notice within eight years from the accounting year in respect of which the assessment has so escaped. Sub-section (1) of section 34 gives the period of eight years, which was also the period mentioned in the un-amended section 34, within which the notice under the said section has to be given. Sub-section (3) of section 34 enables the authorities to complete the assessment at any time after the notice is given. Therefore, for the purposes of the present case, the only change brought about by the amendment was that the income-tax authorities can, after giving notice within the period of eight years mentioned in the said section, complete the assessment at any time thereafter. In this case, the eight years' time had not elapsed and the notice in question which was given was in time.
16. The only question, therefore, is whether or not the assessment in question can be made at any time after the notice was given which was within the prescribed period of eight years. I do not see any reason why that cannot be done. The section itself empowers it to be done. It decided ones not say that the power to make the said assessment at any time Appeal from the Judgment Order dated er the notice is restric ted only to cases where the original assessment has to be made after 1956-57. I could have understood if the period within which the Income-tax authorities could serve a notice under section 34 had already expired and as a result thereof the petitioner had acquired a valuable right. In such a case, as was held in the Calcutta decision, to which I have referred, the Income-tax authorities cannot serve notice and cannot make an assessment under section 34 of the Indian Income-tax Act. In such cases, it must be held, a valuable right had already accrued in favour of the petitioner and such a right cannot be taken away without express provisions to that effect made in the Act itself. That being so, I am of the opinion that the question of the amended section being retrospective in operation does not arise and the income-tax authorities are entitled to act in this case under the amended section 34 of the Indian Income-tax Act.
17. The last contention urged before us is that this is not a case where proceedings under section 34 can at all be initiated. It was urged that before a proceeding under section 34 can be initiated it has to be found that the income in question was chargeable under the Indian Income-tax Act. It was contended that in view of the finding of the Appellate Assistant Commissioner it cannot be said that it was an income which was chargeable under the Income-tax Act. In my opinion, this contention cannot be accepted as sound. I do not find from the Appellate Assistant Commissioner's finding that he has held that this income is not chargeable to income-tax under the Income-tax Act. On the other hand, the direction of the Appellate Assistant Commissioner, to which I have referred, clearly shows that his view was otherwise, or else, he would not have directed the Income-tax Officer to consider this credit in the assessment for 1950-51 after giving sufficient opportunity to the appellant to explain the nature and the source of it. In any event, I am of opinion that the question as to whether or not it is chargeable to income-tax under the income-tax Act will be gone into at the time when the matter is considered by the Income-tax Officer.
18. The result, therefore, is that all the contentions of the learned advocate for the petitioner fail and the petition is dismissed with costs.
(Advocate's fee assessed at Rs. 100.)
Somnath Iyer, J.
19. I agree.
20. Petition dismissed.