B. D. GUPTA J. - This is an appeal under Chapter VIII, rule 5, of the Rules of court, against the judgment and order Manchanda J., dated the 28th of March 1962, whereby the appellants petition under article 226 of the Constitution was dismissed. After hearing learned counsel for the appellants in support of this appeal, we find it devoed of merit.
The petitioners having filed their income-tax Officer return regarding the assessment year 1946-47, the Income-tax Officer passed the order of of assessment on the 21st of February, 1951. By that order the petitioners were assessed, under section 23 of the India Income-tax Act, 1922 (hereinafter referred to as 'the Act'), on an income of Rs. 1,17,932. An appeal filed by the petitioners was allowed, in part, by the order of the Appellate Assistant Commissioner dated the 21st of May, 1953. There-after the petitioners moved the Commissioner under section 33A of the Act. By an order dated 19th October, 1954, the Commissioner accepted the petitioners contenton, set aside the assessment order and directed the Income-tax Officer to scrutinise the accounts of the petitioners in the light of certain objections filed on their behalf.
It appears that during the pendency of the proceedings before the Commissioner, the Income-tax, Officer received information, as regards two fixed deposits of rupees one lakh each in the Hindustan Commercial Bank, Dholpur, that both those deposits belonged to the petitioners. These deposits stood in the names of Nirmal Chand and the wife of Udai Chand, who was the karta of the petitioners family. The Income-tax Officer recorded the statements of Udai Chand and Nirmal Chand of 11th October, 1954, and, after the case for assessment under section 23 of the Act came back to the Income-tax Officer in consequence of the remand order of the Commissioner dated 19th October, 1954, the Income-tax Officer, after obtaining the necessary sanction from the Commissioner, issued on 25th January, 1955, a notice to the petitioners under section 34(1)(a) of the Act proposing to reassess the income of the petitioners in respct of the assessment year 1946-47. On 14th March, 1955, the petitioners filed a return in response to the above notice. On 3rd October, 1955, however, the Income-tax Officer passed the following order :
'Assessment was set aside by the Commissioner of Income-tax on November 18, 1954, while proceedings under section 34 were intitiated in January, 1955, and are consequently mere duplication of the original proceedings. Proceedings under section 34 are, therefore, dropped.'
Following the order of remand dated 19th October, 1954,the Income-tax Officer completed the assessment regarding the assessment year 1946-47 on 14th January, 1958. The order of assessment did not take into consideration the two fixed deposits of rupees one lakh each in the Hindustan Commercial Bank, Dholpur, referred to earlier in this judgment.
After the Central Board of Revenue had sanctioned the proceedings under section 34(1)(a) of the Act in respect of the two bank deposits mentioned above, the Income-tax Officer issued on 3rd November, 1961, a fresh notice under section 34(1)(a) of the Act in respect of those bank deposits. This notice was received by the petitioners on 9th November, 1961. Thereafter, on 27th November, 1961, the petitioners filed certain objections before the Income-tax Officer questioning the legality of that notice and followed it up by filing on 8th December, 1961, the petition which has given rise to this appeal. After dismissal of the said petition the petitioners filed this appeal.
Three contentions have been raised by learned counsel for the appellants. The first is that after the Income-tax Officer had dropped the proceedings under section 34(1)(a) of the Act by this order dated 3rd October, 1955, quoted earliar in this judgment, it was no longer open to the Income-tax Officer to issue judgment, it was no longer open 3rd November, 1961. The second was that, since the assessment of the petitioners income in respect of the assessment year 1946-47 was completed by the order of the Income-tax Officer dated 14th January, 1958, the Income-tax Officer was precluded from taking any action thereafter under section 34(1)(a) of the Act, notwithstanding the fact that the said assessment was completed without taking into account the two fixed deposits of rupees one lakh each in the Hindustan Commercial Bank, Dholpur. The third contention was that the notice under section 34(1)(a) of the Act, issued on 3rd November, 1961, was also barred by limitation.
As regards the first contention, the learned single judge took the view that since the order 3rd October, 1955, dropping the earlier procedings had not been passed after considering the matter on the merits, the Income-tax Officer was not precluded from initiationg prceedings again. The said order of 3rd October, 1955, quoted earlier in this judgment. Itself makes it clear that the proceedings were dropped to avoid duplication of proceedings about the original assessment, under section 23 of the Act, which were then pending before the Income-tax Officer in consequence of the order of remand passed by the Commissioner on 19th October, 1954. A persual of the provisions contained in section 34 of the Act makes it clear that action under section 34(1)(a) of the Act is taken when the Income-tax Officer has reason to believe that :
'.....by reason of the omission or failure of the part of an assessee... to disclose fully and truly all material facts necessary for his assessment for a particular year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have under-assessed.....'
The question, therefore, of issuing a notice under section 34(1)(a) of the Act would arise only after the assessment for the year 1946-47 was completed, because it could only be after the completion of that assessment that it could be said that the two fixed deposits in the Hindustan Commercial Bank, Dholpur, had escaped assessment. A similar situation arose before Pathak J. in the case of Satya Narain Prasad v. Income-tax Officer, C-Ward, Varanasi, under parallel provisions contained in the Income-tax Act of 1961. It was held that, while proceedings for the original assessment were pending before the Income-tax Officer, there was no question of issuing notice under section 148 of the Income-tax Act of 1961, which, in terms, is similar to the provisions contained in section 34 of the Income-tax Act of 1922.
We are of the opinion that the learned single judge was perfectly right in his view that the order of the Income-tax Officer dated 3rd October, 1955, dropping the proceedings did not, in the circumstances, prevent him from issuing fresh notice under section 34(1)(a) of the Act.
As regards the second contention, learned counsel for the appellants, had failed to point out any provision in the Act laying down, expressly or impliedly, that if the assessment order under section 23 of the Act is passed at a time when the Income-tax Officer has knowledge of income which has not been disclosed by the assessee in his return, the Income-tax Officer would be precluded thereafter from issuing notice in respect of such income under section 34(1) of the Act. Learned counsel placed reliance on an observation in the decision of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta. The observation relied upon is to be found in paragraph 8 page 376 of the above report; it runs as follows :
'From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable.'
Learned counsel relied on the expression 'or otherwise' occurring in the above quotation and contended that if the Income-tax Officer has knowledge of any income at the time he makes the assessment under section 23 of the Act, he is bound to include that income in that assessment and, further, that failure on his part to do so would preclude him from dealing with that income later on under section 34(1)(a) of the Act. This contention of the learned counsel is wholly unsupported by the above observation, which relates only to the manner in which the assessing authority has to arrive as its conclusion as regards the income on which the assessee is to be directed to pay tax. We are of the opinion that the expression 'or otherwise' has no relevance to the contention now raised by learned counsel for the appellants. The reasons given by us in support of our view regarding the first contention equally apply to the second contention and we have no doubt that the completion of the assessment by the order dated 14th January, 1958, did not preclude the Income-tax Officer from, later on, dealing with the two fixed deposits in the Hindustan Commercial Bank Ltd., Dholpur, because admittedly these deposits had not been taken into consideration in arriving at the conclusions recorded in that assessment order.
As regards the third contention, there is no dispute that the combined effect of the amendment by section 18 of the Finance Act, 1956, passed on April 27, 1956, and the Income-tax (Amendment) Act, 1959, passed on March 12, 1959, as interpreted by the Supreme Court in the case of S. C. Prashar v. Vasantsen Dwarkadas is that, even though the period of eight years may have already expired, the Income-tax Officer would have the power to take action under section 34(1)(a) of the Act, provided the aggregate amount under-assessed was more than rupees one lakh and the sanction of the Central Board of Revenue had been obtained. There is no controversy that these conditions stood fully satisfied in the present case and it is, therefore, clear that the plea of limitation was also devoid of merits.
No other contention has been raised. In our opinion, therefore, the decision recorded by the learned single judge was perfectly correct.
Accordingly this appeal fails and is dismissed with costs.