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S.S. Shirgaonkar Vs. Commissioner of Income-tax, Poona - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 16 of 1963
Judge
Reported in[1970]78ITR576(Bom)
ActsIncome-tax Act, 1922 - Sections 34(3)
AppellantS.S. Shirgaonkar
RespondentCommissioner of Income-tax, Poona
Appellant AdvocateR.J. Kolah and ;S.E. Dastoor, Advs.
Respondent AdvocateG.N. Joshi and ;R.J. Joshi, Advs.
Excerpt:
.....which is in the following terms, must be in the negative :whether, on the facts and in the circumstances of the case, initiation of proceedings under section 34(1)(b) of the income-tax act, for the year 1951-52, was in accordance with law......added to the total income as determined in the original assessment. the assessee appealed to the appellate assistant commissioner, who annulled the assessment by his order dated 6th april, 1959, holding that for the taxation of the dividends the previous year of the assessee was always the financial year and for the present amount of dividend, which was deemed to have been distributed on the 29th october, 1950, the relevant financial year would be 1950-51, and, consequently, the proper assessment year for the assessment would be 1951-52, and the income-tax officer's action, therefore, in bringing it to tax in the assessment year 1952-53 was not in accordance with law and the assessment would not be sustained. thereafter, the income-tax officer issued a fresh notice under section.....
Judgment:

V.S. Desai, J.

1. The question required to be considered on this reference relates to the legality of the section 34(1)(b) proceedings instituted against the assessee for the assessment year 1951-52.

2. The assessee was a shareholder in a limited company, to which the provisions of section 23A were applied for the assessment year 1951-52 and the dividend of Rs. 23,352 was deemed to have been distributed to the assessee as on October 29, 1950. The order under section 23A was passed on the 28th March, 1956, but long before that the original assessments of the assessee for the assessment years 1951-52 and 1952-53 also had been completed. In view of this order the Income-tax Officer issued a notice under section 34(1)(b) to the assessee for the assessment year 1952-53, which was served on the assessee on the 11th September, 1956. The assessment was subsequently completed and the amount of Rs. 23,352 was added to the total income as determined in the original assessment. The assessee appealed to the Appellate Assistant Commissioner, who annulled the assessment by his order dated 6th April, 1959, holding that for the taxation of the dividends the previous year of the assessee was always the financial year and for the present amount of dividend, which was deemed to have been distributed on the 29th October, 1950, the relevant financial year would be 1950-51, and, consequently, the proper assessment year for the assessment would be 1951-52, and the Income-tax Officer's action, therefore, in bringing it to tax in the assessment year 1952-53 was not in accordance with law and the assessment would not be sustained. Thereafter, the Income-tax Officer issued a fresh notice under section 34(1)(b) for the assessment year 1951-52 and this notice was served on the assessee on the 1st March, 1960. The assessee protested that the assessment was time-barred. His protest, however, was ignored by the Income-tax Officer, who took the view that since the fresh assessment had been initiated to give effect to a finding of the Appellate Assistant Commissioner in his order for the assessment year 1952-53, the bar of limitation was removed in view of the provisions of section 34(3) of the Income-tax Act. The Income-tax Officer accordingly brought the said amount to tax in the assessment year 1951-52. The decision of the Income-tax Officer was confirmed in appeals by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal relied on the authority of the Madras High Court in K. Simrathmull v. Additional Income-tax Officer, Ootacamund, and of this court in General Construction and Supply Co. v. Income-tax Officer (8th), C-Ward, Section III, Bombay, and held that there was a finding in the Appellate Assistant Commissioner's order for the assessment year 1952-53 that the amount in question was assessable in the year 1951-52, and the Income-tax Officer could reopen the assessment under section 34(1)(b) read with section 34(3) for the said year irrespective of the time-limit in order to give effect to the finding of the Appellate Assistant Commissioner.

3. The Supreme Court, however, in later cases in Income-tax Officer, Sitapur v. Murlidhar Bhagwan Das, and N. Kt. Sivalingam Chettiar v. Commissioner of Income-tax, has taken a different view of the provision of section 34(3) from the one taken by this court and the Madras High Court. In view of the decisions it is beyond doubt that the second proviso to section 34(3) did not save the time-limit prescribed under section 34(1) in respect of an escaped assessment of a year other than that which was the subject=matter of the appeal or revision, as the case might be (see Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das) and that a finding or direction by an appellate authority in an order relating to the assessment of one year does not warrant avoidance of the bar of limitation under section 34 of the Indian Income-tax Act, 1922, against the initiation of proceedings for assessment for another year. Since the provision of section 34(3) is not capable of being availed of in the present case for saving the bar of limitation and since, but for the said provision, the proceedings initiated under section 34(1)(b) in the present case were clearly beyond the time-limit prescribed therefor, under section 34(1), our answer to the question, which is in the following terms, must be in the negative :

'Whether, on the facts and in the circumstances of the case, initiation of proceedings under section 34(1)(b) of the Income-tax Act, for the year 1951-52, was in accordance with law.'

4. We answer accordingly. The Commissioner will pay the costs of the assessee.


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