This petition under artile 226 of the Constitution has been filed by the petitioner with a prayer, inter alia, for quashing the notices dated 28th April, 1964, 2nd October, 1964, and 24th December, 1964, issued to the petitioner under section 23(2) of the Indian Income-tax Act, 1922. The petitioner has also prayed for a writ in the nature of prohibition prohibiting the respondents from taking any steps in pursuance of the aforesaid notices or making any orders for assessment in pursuance thereof.
On 3rd of September, 1951, the petitioners mother filed a voluntary return for the assessment year 1948-49 with the respondents. In the said return she is alleged to have indicated that she was a partner in a firm with annas 0-7-0 share. A notice under section 23(2) of the Income-tax Act, 1922, was issued on the 20th December, 1951, on the basis of the aforesaid return and it is alleged that the said notice, which required the production of certain account books, was complied with by the petitioners mother. On that day there is a note in the order-sheet pointing out that a credit of Rs. 50,000 appears in the books of the firm and notice under section 34 of the Act should be issued. No notice, however, was thereafter issued for about 3 years. On 11th November, 1954, for the first time a notice under section 34(1)(a) was issued to the petitioners mother who filed a return declaring a net loss of Rs. 952. In part D of the return she stated that she had borrowed Rs. 50,000 from one Manohar Singh of Jaipur and that the said amount did not belong to her. The Income-tax Officer overruled the objection about the validity of the said notice under section 34(1)(a). Assessment in pursuance of the aforesaid notice was completed on the 24th of March, 1955. Appeals to the Appellate Assistant Commissioner and the Tribunal having failed, the matter came up to this court on a reference under section 66(1) of the Act. This court held that the return filed by the petitioners mother was a valid return and since the same remained undisposed of, initiation of reassessment proceedings by a notice under section 34(1)(a) was without jurisdiction. The petitioner had in the meantime paid the amount of Rs. 18,825.37 nP. in pursuance of the assessment made under section 23 read with section 34(1)(a). Nothing happened till the 28th April, 1964, when the respondent-Income-tax Officer issued a notice dated the 28th April, 1964, under section 23(2) requiring the petitioner as legal heir of his mother (since deceased) to appear before him on the 6th May, 1964. The petitioner wrote back to the Income-tax Officer pointing out that no proceedings could be taken in pursuance of the original return dated the 3rd September, 1951, as the statutory limit of 4 years prescribed under section 34(3) of the said Act had expired. The respondent-Income-tax Officer, however, issued another notice on the 2nd October, 1964, and then a third notice dated the 24th December, 1964, under section 23(2) of the Act. By the last mentioned notice the petitioner was called upon to appear before the Income-tax Officer on 14th January, 1965. The petitioner then filed a writ petition which was admitted on the 13th January, 1965.
Mr. S. K. Aiyar, learned counsel for the petitioner, submits that the time-limit for making an order of assessment is 4 years from the end of the year in which the income, profits and gains were first assessable. According to the learned counsel, the assessment year in question being 1948-49 (previous year being financial year 1947-48), no assessment could be made after March, 1953. He places strong reliance on a judgment of the Allahabad High Court in Ram Bilas Kedar Nath v. Income-tax Officer, Kanpur.
Mr. H. D. Hardy, learned counsel for the respondents, on the other hand, submits that there is not time-limit for making the assessment as the assessee had concealed the particulars of his income and had deliberately furnished inaccurate particulars of such income. Mr. Hardy further submits that, in any case, there is no bar in the Act to the Income-tax Officer issuing notice under section 23(2) and the bar arises only at the time of making an assessment. According to the learned counsel, if, at the time of making assessment, the Income-tax Officer finds that the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, then the Income-tax Officer would be entitled to make the assessment without any limitation as to time, for it would then be a case of an assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies, as contemplated by section 34(3) of the Act. I am in agreement with the submission of the learned counsel for the respondents and in my view the Income-tax Officer is competent to make an order of assessment without any bar of limitation if he finds, at the time of making the assessment, that the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. The position would, therefore, be that the Income-tax Officer is entitled to proceed with making enquires and issuing notice under section 23(2) and he is to consider the question of limitation at the time of making the assessment order. If, at the dtime of making the order, he finds that the assessee had concealed the particulars of his income or dieliberately furnished inaccrate particulars of such income, then he would be entitled to make the assessment order without any bar of limitation under section 34(3) of the Act. If, on the other hand, the Income-tax Officer comes to the conclusion that there has been no such concealment as would attract the provisions of section 28(1)(c), he would not be entitled to make an assessment order after the expiry of 4 years from the end of the year in which the income, profits of gains were first assessable. Again where an assessment order has been made after the expiry of four years, it would be open to the assessee to establish in appeal, revision or reference, as the case may be, that since no delinquency contemplated by section 28(1)(c) had been established, the assessment order, made beyond four years, was without jurisdiction.
I most respectfully disagree with the view taken by S. C. Manchanda J. in Ram Bilas Kedar Naths case mentioned above to the extent it takes a view contrary to what I have said above. In my humble opinion, it is not quite correct to say, as observed by the learned judge, that section 34(3) gives the powers to the Income-tax Officer to extend the period of limitation at his sweet will and pleasure. Section 34(3) lays down a condition for the exercise of his jurisdiction if four years have expired and that condition is the applicability of section 28(1)(c). The legislature has in its wisdom decided that in cases of concealment there should be no period of limitation and the courts cannot question the advisability of such decision.
Another argument mentioned at the bar was that in view of section 297(2)(g) of the Income-tax Act, 1961, proceedings under section 28 cannot be taken with respect to the assessment year in question. Section 297(2)(g) provides that in a case where the assessment in respect of the year ending on the 31st day of March, 1962, or any earlier year is completed on or after the 1st day of April, 1962, the penalty proceedings have to be initiated and penalty imposed under the 1961 Act. In the submission of the learned counsel, section 28(1)(c) is not applicable to this case, because the assessment order has not yet been made and consequently the four years limitation will apply. I do not agree. To enable the Income-tax Officer to make assessment after the expiry of four years, it is not the requirement of section 34(3) that section 28(1)(c) should in terms apply. All that is necessary is that the assessment must be in a case where the assessee has either concealed his income or deliberately furnished inaccurate particulars of such income. Coming now to the question of refund of Rs. 18,825.37 nP., nothing has been said in the petition as to whether the Income-tax Officer has been approached for the refund of the amount or not. In my opinion, it would not be appropriate in this case to issue a writ directing the refund of money unless the petitioner has first approached the authorities concerned for the refund. In the circumstances, the petition stands dismissed, but there will be no order as to costs.