This is a writ petition under article 226 of the Constitution directed against the notices issued under section 22(4), section 28(1)(a) and section 46(5A) of the Income-tax Act (hereinafter referred to as the Act). The prayer is for the quashing of the aforesaid notices issued in respect of the assessment proceedings for 1953-54 and 1954-55. A prayer is also made for the issue of a writ of mandamus requiring the Income-tax Officer not to assess the firm, Messrs. Ram Bilas Kedar Nath, for the assessment years 1953-54 and 1954-55.
The petition is supported by an affidavit which makes allegations against the Income-tax officer of harassment. No counter-affidavit was field and, therefore, the allegations made in the petition must be taken to be true. The only point urged by the learned standing counsel is, what he calls a legal point for which no counter-affidavit was necessary, and that is that a writ of mandamus can never issue so long as the Income-tax officer had jurisdiction to make the assessment. According to him there is no period of limitation at all in respect of an assessment made under section 23 of the Act to which the provisions of section 28(1)(c) could be made applicable. In other words, his contention is that it is not obligatory on the Income-tax Officer to make any assessment within the period of four years and it would be open to him, theoretically speaking, to keep such an assessment pending beyond the period of four years and to justify the completion of the assessment after a number of years on the ground that the provisions of section 28(1)(c) were attracted. The question is whether that was the intention of the legislature in providing in section 34(3) that the normal period of four years for completing an assessment will not apply to an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies.
Before dealing with this point it is necessary to set out, in brief, the past history of this case. The relevant assessment years are 1953-54 and 1954-55. On the 10th December, 1955, an assessment order under section 23(4) in respect of the relevant assessment years was passed on the ground that there was default of notices under section 22(2) and section 22(4) of the Act. An appeal from this was taken to the Income-tax Appellate Tribunal who by its order dated 13th April, 1959, cancelled the assessment on the ground that notices under sections 22(2) were never served upon the petitioner. On the 28th March, 1960, the Income-tax officer issued a notice under section 34(1)(a) of the Act. Against the issue of this notice the petitioner came up to this court in writ petition No. 2207 of 1960, challenging the issue of that notice under section 34(1)(a) of the Act of the ground that the petitioner had already filed voluntary returns on the 20th of December, 1955, and 21st February, 1956, for the assessment years 1953-54 and 1954-55, respectively, and, therefore, the notice under section 34(1)(a) was invalid. This court accepted the fact that voluntary returns had been filed and, following the decision of the supreme court in commissioners of Income-tax v. Ranchhoddas Karsondas, quashed those notices by the issue of a writ of certiorari. Thereafter, sections 23(2) and 22(4) notices were issued on the 20th July, 1962, and, though the notice under section 22(4) was duly signed, the notices under sections 23(2) were not signed. The petitioner replied on 28th July, 1962, submitting that the assessments had become time-barred as the four-years period of limitation had already expired on 31st March, 1958, and 31st March, 1959, respectively. Thereafter, no further action was taken for several months till the 14th January, 1963, when the Income-tax Officer issued notices for rehearing of the section 28(1)(a) proceedings which had been initiated earlier, before the notices under section 34(1)(a) were quashed by this court by its order dated the 13th December, 1961. On the 21st January, 1963, the petitioner pointedly drew the attention of the Income-tax Officer to the fact the proceedings under section 28(1)(a) stood to be dropped because the notice under section 34(1)(a) itself had been quashed by the High Court. Notwithstanding this, the Income-tax Officer still persisted by his notice dated the 6th April, 1963, and required the petitioner to attend his office at Kanpur on the 24th April, 1963, in connection with the above case to explain as to why penalty under sections 271 and 273 of the Income-tax Act, 1961, be not impose on him. The Income-tax Officer proceeded to issue notice under section 22(4) and on the 15th April, 1963, and 18th April, 1963, for the two relevant assessment years respectively fixing the date as the 13th May, 1963. The Income-tax officer earlier on the 16th July, 1959, even before the assessment was made or the petitioner could be said to be in default had also issued notices under section 46(5A) to the Upper India Sugar Exchange to withhold payment of the sums of Rs. 1,507.37 nP. and Rs. 2,963.36 nP. due by them to the petitioners, Messrs. Ram Bilas Kedar Nath. The present writ petition was field on the 8th May, 1963.
The learned standing counsel has conceded that a writ in the nature of certiorari may issue quashing all the notices issued under section 46(5A) to the Upper India Sugar Exchange Ltd. and also the penal notices issued from time to time under section 28(1)(a) of the Act relating to the proceedings under section 34(1)(a) of the Act. The only question for consideration, therefore, that remains is the one set out hereinabove as to the bar of limitation to the making of an assessment in respect of voluntary returns filed after the lapse of four years. No penalty notice in fact was ever issued under section 28(1)(c) of the Act during the course of the assessment proceedings under section 23(4) of the Act and when that assessment order was set aside and the Income-tax Officer was required to make an assessment on the basis of the voluntary returns filed by the assessee, he was bound to complete that assessment under section 23 of the Act within the normal period of 4 years provided for the completion of all assessments under section 34(3) of the Act, unless there exists a prima facie case for the applicability of the provisions of section 28(1)(c) of the Act. If for four long years the Income-tax Officer had not been able to glean any information from any outside source of any concealment and no notice under section 28(1)(c) was issued when the assessment under section 23(4) was completed by him, he cannot on any theoretical or on the remote possibility of discovering some concealment in the future arrogate to himself the right to complete the assessment after the lapse of four years. If that were the law then no assessment need ever be completed within the normal period of four years and the sword of Damocles could be kept hanging over the head of the assessees for all time to come. The Income-tax Officer cannot by merely saying to himself that some day he may discover something which might justify his applying the provisions of section 28(1)(c) confer upon himself the necessary jurisdiction to make an assessment under section 23 without any bar of limitations.
Some sanctity requires to be attached to the period of limitation of four years which the legislature at the relevant time had provided in section 34(3) for the completion of assessments. That limitation, on the interpretation sought to be placed by the department in this case, would virtually be a dead letter, as in every case the Income-tax Officer could keep assessments pending, again theoretically speaking, till the end of time on the ground that some concealment or the furnishing of inaccurate particulars might come to light at some distant future date.
Reliance was placed by Mr. Gulati, the learned standing counsel, on the decision in Mir Suba Hari Bhakta and Lalji Haridass case, for the propositions that when the proviso to section 28(1)(c) can be invoked, there is no period of limitation and that such a question would not be one which went to the root of Jurisdiction but was one which fell to be determined, like any other issue, at the making of the assessment. The cases relied upon are clearly distinguishable. In Mir Suba Hari Bhakta v. Income-tax Officer, the question that arose in a writ petition under article 226 of the Constitution was whether an assessment made section 23(4) of the Act, beyond the period of limitation of four years, was justified on the ground that section 28(1)(c) applied. In that case it was observed :
'After the proceedings had been taken under section 22(4) and section 23(2) of the Income-tax Act and the Income-tax Officer had made all necessary enquiries, the stage arrived when the Income-tax Officer had to make an order under section 23(3) of the Income-tax Act, and at that stage he had to keep in view the provisions of section 34(3) of the Act so that he could not make a valid order of assessment unless that order was within the period of limitation prescribed under section 34(3) of the Act. At this stage, therefore, he had to record a finding as to the period which had expired from the end of the year assessment, and had also determine the facts which would show whether the order of assessment could be made within four years only or whether it could be made within eight years in view of the principles laid down in section 34(3) of the Act mentioned above. It was at this stage, therefore, that the Income-tax Officer had to determine whether the order of assessment which he was going to make was an order section 23 to which clause (c) of sub-section (1) of section 28 was applicable.'
It was pointed out that under article 226 of the Constitution, if there was an an error apparent on the face of the record or it suffered from any error in regard to the question of jurisdiction then the matter could be agitated in a writ petition. In the present case the manifest error of jurisdiction is, and this would distinguish the present case form the case of Mir Suba Hari Bhakta, that no action under section 28(1)(c) was at all taken when the assessment under section 23(4) was pending. Therefore, in a case like the present, where the assessment has already once been made and no notice under section 28(1)(c) was issued and when that assessment itself is cancelled by the Tribunal, the Income-tax officer will have no jurisdiction ordinarily to keep the subsequent assessments to be made by him, pending beyond the period of four years without making out at least a prima facie case for the applicability of the provisions of section 28(1)(c). The period of limitation cannot be extended at the sweet will and pleasure of the Income-tax Officer and the sword of Damocles cannot be kept hanging over the heads of assessees for all time to come, on the off-chance that some concealment or furnishing of inaccurate particulars might come to light at some distant future date. The error of jurisdiction in the present case was patent and, therefore, it would be amenable to the writ jurisdiction of this court by the issue of a writ of mandamus requiring the Income-tax officer not to proceed against the petitioner after the lapse of four years when not even a counter-affidavit was filed by the department suggesting the possibility of some concealment or furnishing of inaccurate particulars.
In the other case relied upon, that of Lalji Haridas v. Income-tax Officer, the Supreme Court observed at page 390 that :
'Question of limitation under section 34(3) of the Act can and ought to be raised by the assessee before the Income-tax Officer and that it was not a point which could be legitimately agitated in writ proceedings. We, therefore, do not propose to deal with this point. If the appellant is so advised he may raise this point before the first respondent, and we have no doubt that if it is so raised the first respondent will deal it in accordance with law.'
In the present case, in response to the notice issued under section 22(4) dated the 20th July, 1962, the petitioner had by his letter dated the 28th of July, 1962, pointed out to the Income-tax Officer that the assessment for both the years had become time-barred and could not be proceeded with further. No reply to the question of limitation raised was given by the Income-tax Officer and instead the penalty notice dated the 14th of January, 1963, under section 28(1)(a) was issued by the Income-tax Officer. The Income-tax Officer did not care to decide the question of limitation nor to indicate that the assessment was not being completed because of the possibility of section 28(1)(c) of the Act being invoked by him. At no stage of the proceedings, before the Income-tax Officer, not even in the correspondence which passed between the parties was it even hinted or suggested that the Income-tax Officer intended to press into service the provisions of section 28(1)(c) of the Act for obtaining an unlimited period of limitation in which to make the assessment against the assessee. It is significant that a penalty notice was issued but that was only under section 28(1)(a) and not under section 28(1)(c) of the Act.
In the peculiar circumstances of the case it must be held that the Income-tax Officer had, prima facie, no jurisdiction to continue the proceedings for making a fresh assessment under section 23 in respect of the returns filed under section 22(3) of the Act, after the assessment under section 23(4) had been cancelled by the Income-tax Appellate Tribunal, beyond the normal period of four years when there was not the remotest indication on the record that the provisions of section 28(1)(c) would be invoked; and further when the allegation made in paragraph 53 of the petition to the effect the opposite party No. 1 was adopting a harassing attitude and was pursuing the penalty and assessment proceedings without any jurisdiction or purpose, had not been controverted. The continuance of the assessment proceedings in these circumstances would only amount to harassment which according to the Supreme Court in Calcutta Discount Co. case, it is the duty of prevent even if there is an alternative remedy available.
For these reasons, apart from the write of certiorari which has admitedly to issue quashing the notices under section 22(4) annexures 'D', 'D-1' and 'K', 'K-1', the penalty notices under section 28(1)(a) 'F', 'F-1' and 'G', 'G-1' and the notices under sections 46(5A) annexures 'L' and 'L-1', a writ in the nature of mandamus will also issue to the opposite party No. 1 requiring him not to proceed any further with the assessment proceedings on the basis of the voluntary returns filed by the assessee under section 23 as more than 8 years have already passed since the end of the relevant assessment years 1953-54 and 1954-55.
Accordingly, the writ petition is allowed; but in the circumstances of the case there will be no order as to costs.