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Nyalchand Malukchand Dagli Vs. Commissioner of Income-tax, Gujarat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 12 of 1964
Judge
Reported in[1966]62ITR102(Guj)
ActsIncome Tax Act, 1922 - Sections 22(2), 34 and 34(1)
AppellantNyalchand Malukchand Dagli
RespondentCommissioner of Income-tax, Gujarat
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate J.M. Thakore, Adv.
Cases ReferredNarayana Chetty v. Income
Excerpt:
.....year 1950-51 and made an order of assessment under section 34(1) (a) in respect of that assessment year. the assessee contended before the income-tax officer that the notice under section 34(1) (a) issued by the income-tax officer was bad sine it relate to the assessment year 1949-50, whereas the assessment that was sought to be reopened was for the assessment year 1950-51, but the contention was negatived by the income-tax officer who held that the notice under section 34(1) (a) was for the assessment year 1950-51. the assessee carried the matter in appeal to the appellate assistant commissioner, but the appeal was unsuccessful and the assessee thereupon preferred an appeal to the tribunal. where the conditions set out in clause (a) or clause (b) of section 34(1) are satisfied and the..........assumption, namely, that as in the case of the assessment year 1950-51, so also in this case, the notice headed under section 34(1) (a) set out the wrong assessment year, namely, 1950-51, and the correct assessment year, namely, 1951-52, was mentioned only in the notice headed under section 22(2). this assumption is obviously incorrect for it is clear from the notices under sections 34(1) (a) and 22(2) which have been put in by the learned advocate-general on behalf of the revenue and which by consent of parties have been taken as part of the statement of case before us, that both the notices, one headed under section 34(1) (a) and the other headed under section 22(2) related to the correct assessment year, namely, 1951-52, and there could, therefore, be no scope for the argument that.....
Judgment:

Bhagwati, J.

1. The short question that arises in this reference relates to the validity of a notice issued by the Income-tax Officer under section 34(1) (a) of the Income-tax Act, 1922. In order to appreciate the question, it is necessary to notice briefly the facts giving rise to the reference. On 9th March, 1959, the Income-tax Officer issued a notice under section 34(1) (a) to the assessee reciting : 'Whereas I have reason to believe that your income assessable to income-tax for the year ending 31st of March, 1950, has escaped assessment, I, therefore, propose to reassess the said income that has escaped assessment' and calling upon the assessee to deliver 'within 35 days of the receipt of the notice a return in the attached form of your total income and total world income assessable for the said year ending 31st March, 1950'. There was enclosed in the same envelope along with this notice another notice of the same date headed 'Notice under sections 22(2) and 38 of the Indian Income-tax Act, 1922' and this latter notice in express terms related to the assessment year 1950-51. Though the assessment was called upon to file a return of his income, the assessee, it appears, did not do so and the Income-tax Officer, therefore, issued another notice dated 15th July, 1959, under section 22(4) against the assessee. The assessee in the meantime finding that there was a discrepancy in the assessment years mentioned in the two notices sent by the Income-tax Officer on 9th March, 1959, addressed a letter dated 15th July, 1959, to the Income-tax Officer pointing out the discrepancy and requesting him to issue a fresh notice setting out the correct assessment year for which the assessment was sought to be reopened. The Income-tax Officer by his letter dated 16th July, 1959, pointed out to the assessee the proceedings under section 34(1) (a) had been initiated against the assessee for the assessment year 1950-51 and not for the assessment year 1949-50 and that if no return was filed, the Income-tax Officer would proceed to make a best judgment assessment under section 23(4). The Income-tax Officer then proceeded to assess the escaped income of the assessee for the assessment year 1950-51 and made an order of assessment under section 34(1) (a) in respect of that assessment year. The assessee contended before the Income-tax Officer that the notice under section 34(1) (a) issued by the Income-tax Officer was bad sine it relate to the assessment year 1949-50, whereas the assessment that was sought to be reopened was for the assessment year 1950-51, but the contention was negatived by the Income-tax Officer who held that the notice under section 34(1) (a) was for the assessment year 1950-51. The assessee carried the matter in appeal to the Appellate Assistant Commissioner, but the appeal was unsuccessful and the assessee thereupon preferred an appeal to the Tribunal. The Tribunal also took the same view as the Appellate Assistant Commissioner and held that reading the two notices, one headed under section 34(1) (a) and the other headed under section 22(2) as a whole, it was clear that the intention was to reopen the assessment for the assessment year 1950-51 and the matter was also clarified by the Income-tax Officer by his letter dated 16th July, 1959, and, moreover, the main notice under section 34(1) (a) being the notice under section 22(2), the impugned notice was valid, since the notice under section 22(2) mentioned the correct assessment year, namely, 1950-51. It is this decision of the Tribunal which is now challenged before us on the present reference.

2. It is necessary to mention at this stage that the question that is referred to us relates to the validity to notices for two assessment years, namely, 1950-51 and 1951-52. We have already referred to the facts relating to the assessment year 1950-51 and it will be obvious from what is stated above that the question does arise in regard to the validity of the notice for that assessment year. But the question in regard to the validity of the notice for the assessment year 1951-52 seems to be based on a wrong assumption, namely, that as in the case of the assessment year 1950-51, so also in this case, the notice headed under section 34(1) (a) set out the wrong assessment year, namely, 1950-51, and the correct assessment year, namely, 1951-52, was mentioned only in the notice headed under section 22(2). This assumption is obviously incorrect for it is clear from the notices under sections 34(1) (a) and 22(2) which have been put in by the learned Advocate-General on behalf of the revenue and which by consent of parties have been taken as part of the statement of case before us, that both the notices, one headed under section 34(1) (a) and the other headed under section 22(2) related to the correct assessment year, namely, 1951-52, and there could, therefore, be no scope for the argument that no valid notice under section 34(1) (a) was issued by the Income-tax Officer before making assessment of escaped income for the assessment year 1951-52. This position was frankly conceded by Mr. Kaji on behalf of the assessee and the question referred to us must, therefore be confined only to the validity of the notice for the assessment year 1950-51.

3. Now, in order to arrive at a proper determination of this question, it is necessary to refer to section 34(1) which provides for reopening of assessment of an assessee in certain specified cases. Where the conditions set out in clause (a) or clause (b) of section 34(1) are satisfied and the Income-tax Officer proposes to initiate proceedings for assessment of escaped income of an assessee, the Income-tax Officer is required to issue a notice containing all or any of the requirements which may be included in a notice under section 22(2). This notice, it is now well-settled, is a condition precedent to the validity of any assessment or reassessment made under either clause of section 34(1). The notice prescribed by section 34(1) is not a mere procedural requirement; it is only if the notice is served on the assessee as required that the Income-tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid, the validity of the proceedings of an invalid notice would be illegal and void (see the decision of the Supreme Court in Narayana Chetty v. Income-tax Officer Nellore). The question which, therefore, arises is whether the notice issued in the present case was a valid notice under section 34(1). Now there is no standard form prescribed for a notice under section 34(1) nor is it necessary that a notice under that section should assume any particular form. The only requirement of the statute is that the notice must contain all or any of the requirements of a notice under section 22(2). It is evident from this requirement and also implicit from the nature of the notice that it must specify with clearness and particularity the assessment year for which the assessment is sought to be reopened for which, in the opinion of the Income-tax Officer, income has escaped assessment or has been under-assessed and in respect of which the assessee is required to file a return of his total income and total world income during the previous year. This condition must be clearly satisfied if the notice is to be a valid notice. This much indeed was conceded by the learned Advocate-General on behalf of the revenue, but this requirement, it was argued, did not create any difficulty in the way of the revenue, since the impugned notice did satisfy this condition. The argument of the learned Advocate-General was that the impugned notice consisted of two documents, one headed notice under section 34 and the other headed notice under sections 22(2) and 38 and in order to determine the validity of the impugned notice, it was necessary to read both the documents together and, if they were so read, it was clear that the impugned notice was for the assessment year 1950-51 and there was no defect in the impugned notice. Mr. Kaji, on behalf of the assessee, however, contended that there were two notices sent by the Income-tax Officer to the assessee, one under section 34(1) (a) relating to the assessment year 1949-50 and the other under section 22(2) relating to the assessment year 1950-51 and the notice under section 34(1) (a) being a complete document by itself satisfying the requirements of section 34(1) (a), it was not competent to the revenue to say that, though the notice under section 34(1) (a) was a notice for the assessment year 1949-50, it should be read a notice for the assessment year 1950-51, since the other notice under section 22(2) which accompanied the notice under section 34(1) (a) mentioned the assessment year 1950-51. According to Mr. Kaji a notice under section 34(1) must necessarily consist of a single document and the notice headed under section 34, containing as it did all the requirements of section 34(1), was therefore a complete notice under section 34(1) (a) and the notice headed under section 22(2) was a superfluous and unnecessary document which could not be utilised by the revenue for the purpose of construing the notice under section 34(1) (a) and in the notice under section 34(1) (a). Mr. Kaji also contended in the alternative that, in any event, even if the two notices were read together, the notice under section 34(1) (a) could not be regarded as a notice for the assessment year 1950-51 and that there being no valid notice under section 34(1) (a) for the assessment year 1950-51, the assessment or reassessment made by the Income-tax Officer under section 34(1) (a) was invalid. These were the rival contentions urged before us and they raised a question as to what, on the facts of the present case, constituted the notice under section 34(1) (a) and what was the assessment year for which such notice could be said to be issued.

4. We may point out at the outset that we do not think Mr. Kaji is right in his contention that a notice under section 34(1) (a) must consist of a single document and cannot be split up into more than one document. A notice under section 34(1) may in a given case be found to consist of two or more documents and all the documents may in such a case have to be read together in order to ascertain what the notice is. To take only one example, a notice which is expressly headed under section 34(1) may incorporate by reference another document such as a notice headed under section 22(2) or may state that such other document is attached or annexed to the notice in which case such other document would necessarily have to be read as part of the notice under section 34(1) (a) such other document should be left out of account. It may be that the notice headed under section 34 contains all the requirements which may be included in a notice under section 22(2) and is, therefore, a complete document by itself so far as the requirements of section 34(1) are concerned, but merely from this circumstance it would not be correct to conclude that in no case can another document such as a notice headed under section 22(2) which is served along with the first mentioned notice be referred to for the purpose of ascertaining what is the real notice under section 34(1) (a). The two notices may be so related to each other ask to show that they were intended to form part and parcel of one single notice under section 34(1) (a) and it that be so they would have to be read together for the purpose of determining the true of the revenue runs into difficulties. When we turn to the two notices, one headed under section 34 and the other headed under section 22(2), we find that there is no indication in either of the two notices to show that they are related to each other or are intended to form part and parcel of a single notice. The notice headed under section 34 is a complete document by itself containing all the requirements of section 34(1) (a) so far as the assessment year 1949-50 is concerned and there is no deficiency or incompleteness about it for which the assessee might be required or expected to refer to the notice headed under section 22(2). There is also nothing in the notice headed under section 34 to indicate that the notice headed under section 22(2) was intended to be supplementary or complementary to the notice headed under section 34 so as to constitute the two notices as part and parcel of a single notice. There is in fact no reference to the notice headed under section 22(2) in the notice headed under section 34 and vice versa. The two notices are issued under different sections and are for different assessment years and there is nothing to show even as much as a tenuous connection between the two notices. One is a notice under section 34(1) (a) for the assessment year 1949-50, while the other is a notice under section 22(2) for the assessment year 1950-51. We are, therefore, of the view that the revenue is not entitled to rely on the notice headed under section 22(2) for the purpose of contending that the assessment year mentioned in the notice headed under section 34 was a mistake and that notice was in fact a notice for the assessment year 1950-51. We may, however, point out that even if the revenue were right in its contention that the two notices must be read together as forming part of a single notice, it would still be impossible to take the view that the notice under section 34(1) (a) constituted of these two notices was clearly and unequivocally for the assessment year 1950-51. There being a clear and patent contradiction between the two constituent parts of the notice under section 34(1) (a) in regard to the assessment year, there would be nothing to show as to which part of the notice mentioned the correct assessment year, the one headed under section 34 or the other headed under section 22(2). The notice under section 34(1) (a) was, therefore, clearly defective inasmuch as it was not a notice for the assessment year 1950-51 for which the assessment was sought to be reopened by the Income-tax Officer and the notice being an invalid notice, the assessment or reassessment made by the Income-tax Officer under section 34(1) (a) was bad.

5. Our answer to the question referred to us, therefore, is that the notice under section 34(1) (a) for the assessment year 1950-51 is not valid in law. So far as the notice for the assessment year 1951-52 is concerned, as we have pointed out above, the question does not survive in view of the fact that both the notices, the one headed under section 34(1) (a) and the other headed under section 22(2), mentioned the correct assessment year, namely, 1951-52, and, therefore, whichever way the matter be looked at, the notice under section 34(1) (a) was a valid notice. The commissioner will pay the costs of the reference to the assessee.


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