1. These four cases relate to the same assessee, namely, the Industrial Trust Limited, Jaipur, a limited company (hereinafter called 'the company'), and raise similar questions of law and they are, therefore, disposed of by this judgment.
2. The first three cases are references made by the Income-tax Appellate Tribunal, Delhi Bench 'B' (hereinafter called 'the Tribunal'), under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter called 'the Act'). The Income-tax Reference No. 27 of 1964 relates to the assessmentyear 1946-47 while Income-tax Reference No. 25 of 1964 and No. 26 of 1964 relate to the assessment years 1947-48 and 1949-50, respectively. The statement of the cases submitted with these references by the Tribunal are practically the same.
3. The company was incorporated in the erstwhile State of Jaipur on 10th March, 1943, under the Jaipur Companies Act. Its registered office was originally at Pilani, but it was transferred to Jaipur on 24th July, 1943. After some time it was again re-transferred to Pilani and finally it was transferred back to Jaipur on 5th, February, 1953. The company had issued 5,000 ordinary shares of Rs. 10 each, which were mainly subscribed by the two parties. The company took large amounts of loan from various banks and invested the borrowed moneys mostly in shares of joint stock companies in India. The main banker of the company was Gwalior Industrial Bank Ltd., but it had dealings also with the Imperial Bank of India, Jaipur, United Commercial Bank Ltd., Jaipur, and Bank of Jaipur Ltd., Jaipur. The company earned income from dividends, properties and also from the transactions of purchase and sale of shares and other speculative transactions. In these four cases, we are concerned with the income realised by the company from dividends. There is no dispute that, under the provisions of the Act, the company was a 'non-resident person'. The Income-tax Officer, Ajmer, after obtaining the sanction of the Commissioner of Income-tax, issued notices under Section 34 of the Act to the company for the assessment years1946-47, 1947-48 and 1949-50. The company while filing replies to these notices challenged the jurisdiction of the said officer for issuing the notices and his competence to make any assessment. On 11th August, 1953, the company submitted three returns under protest showing its dividend income for each year. It appears that no further proceedings were taken by the Income-tax Officer, Ajmer, on the said return.
4. On 22nd February, 1955, the Income-tax Officer, Central Circle IV, Delhi, issued a notice under Section 34(1A) for the assessment year 1946-47 and two notices under Section 34(1)(a) of the Act for the assessment years1947-48 and 1949-50. On 2nd April, 1955, the company submitted that the original returns filed before the Income-tax Officer, Ajmer, may be deemed to be the returns submitted by the company under the new notices. In each of these cases, assessment orders were passed by the Income-tax Officer, Central Circle IV, Delhi, which were taken up in appeal by the company to the Appellate Assistant Commissioner, Range 'C', New Delhi. The said officer disposed of all the three appeals by one judgment confirming the assessment for the assessment year 1946-47 and affording some relief to the company for the assessment years 1947-48 and 1949-50. Three separate appeals were filed before the Tribunal. The main questions raised before the Tribunal by the company, so .s relevant for the purposes of these cases, were these :
(1) That the Income-tax Officer, Central Circle IV, Delhi, suffered from inherent lack of jurisdiction because no Income-tax Officer could assess the pre-integration income of the company; and
(2) That no notices could be issued for assessment under Section 34(1A) in the case of assessment year 1946-47 and under Section 34(1)(a) for the assessment years 1947-48 and 1949-50 by the Income-tax Officer, Central Circle IV, Delhi, as it had already submitted returns in pursuance of the notices under Section 34 of the Act by the Income-tax Officer, Ajmer.
5. The Tribunal decided the first point in favour of the department relying on Section 42 of the Act and Entry No. 78A of the Notification No. 48 I.T. dated 1st July, 1952, as amended by Notification No. 6, dated 24th January, 1955. It decided the second point in favour of the company relying on the authority of the Supreme Court in Commissioner of Income-tax v. Ranchhoddas Karsondas and the decision of the Madras High Court in S. Raman Chettiar v. Commissioner of Income-tax. On applications made by the Commissioner of Income-tax, the Tribunal referred to this court the following question relating to the assessment year 1946-47 :
'Whether, on the facts and in the circumstances of the case, a fresh action under Section 34(1A) could be initiated on 26th February, 1955, and an assessment made thereon (24th March, 1956) when a return dated 11th August, 1953, was already pending before the Income-tax Officer ?'
6. It appears that the date 26th February, 1955, is wrongly mentioned in the reference and the correct date is 10th March, 1955, as the original notice has been produced before us by the company in the writ application and it shows that it was issued on 10th March, 1955, but this discrepancy is immaterial.
7. Similar questions have been referred with regard to the assessment years 1947-48 and 1949-50 except that in the questions framed the dates were not correctly given and in one reference instead of Section 34(1)(a), Section 34(1A) has been inadvertently mentioned.
8. We first take up the Income-tax Reference No. 27 of 1964, which relates to the assessment year 1946-47. The contention urged by Mr. Sumer Chand Bhandari on behalf of the department is that, as is evident from the order of the Appellate Assistant Commissioner, the Income-tax Officer, Ajmer, had no jurisdiction to issue notice under Section 34 of the Act to the company and the return filed by the company under protest in pursuance of those notices could not result in any valid assessment of the company and, therefore, the return filed by the company in pursuance of that notice should be treated as non est in law and the Income-tax Officer, Central Circle IV, Delhi, who had jurisdiction to take proceedings against the company under Section 34 of the Act, could issue a fresh notice under Section 34(1A) and the companymust be deemed to have filed a fresh return before that officer on which valid assessment proceedings could be taken and the Tribunal was wrong in holding that the proceedings taken by the Income-tax Officer, Central Circle IV, Delhi, were invalid and that the assessment made by him was illegal. Mr. Bhandari has further contended that the return filed by the company before the Income-tax Officer was beyond four years and on such a return no valid assessment proceedings could be taken against the company by virtue of Section 34(3) of the Act and for this reason also a return filed by the company before the Income-tax Officer, Ajmer, must be ignored.
9. Learned counsel for the company has contended that the Income-tax Officer, Ajmer, had jurisdiction to issue notice to the company under Section 34 of the Act on 21st February, 1953, and valid assessment proceedings could have been taken by the officer on the return filed by the company in pursuance of such notice. It is further contended that, in spite of subsection (3) of Section 34 of the Act, assessment proceedings could have been taken on the return filed by the company even if the return was submitted after the expiry of four years from the end of the assessment year 1946-47, and as valid assessment could have been made on that return no further proceedings under Section 34 of the Act could; be taken by the Income-tax Officer, Central Circle IV, Delhi. It is further contended that even if the Income-tax Officer at Ajmer had no jurisdiction to: issue the notice under Section 34 of the Act, still the return filed by the assessee in pursuance of the notice issued by him could not be ignored.
10. We first take, up the contention whether the Income-tax Officer, Ajmer, had jurisdiction to issue the notice to the company under Section 34 of the Act on 21st February, 1953, on which date he had issued notice to it. The Central Board of Revenue in exercise of the power conferred by Sub-section(6) of Section 5 of the Act and in supersession of its Notification No. 13/I.T. dated the 12th February, 1949, issued Notification No. S.R.O. 1214 dated the 1st July, 1952, appointing officers under the Act in respect of persons specified in the corresponding entry in the second column of that notification. At Serial No. 77 is the entry, the relevant part of which is as follows :
InspectingAssistant Commissioner of Income-tax
AppellateAssistant Commissioner of Income-tax
*This item will apply only to pending assessments for period or periods before the integration or merger of the Indian State.
11. The foot-note clearly restricts this entry to pending assessments for period or periods before the integration of Jaipur in the United State of Rajasthan, that is, before 7th April, 1949. In this case, notice was issued to the company by the Income-tax Officer under Section 34 of the Act on 21st February, 1953, that is, after 7th April, 1949. Thus, as pointed out by the Appellate Assistant Commissioner of Income-tax, Delhi, the Income-tax Officer, Ajmer, had no jurisdiction to issue a notice to the company under Section 34 of the Act.
12. This was not challenged by the, company before the Tribunal and what was argued before the Tribunal was that in spite of this jurisdictional defect the return filed by the company in pursuance of such notice could not be ignored and in the presence of such return fresh proceedings could not be taken by any of the Income-tax Officers under Section 34 of the Act. The Tribunal placed reliance on Commissioner of Income-tax v, Ranchhoddas Karsondas. In that case, the question decided was whether a return showing income below the taxable limit submitted voluntarily in answer to the general notice under Section 22(1) of the Act was a good return and it was further held that where in respect of any year a return had been voluntarily submitted before assessment, the Income-tax Officer could not choose to ignore the return and any notice of reassessment and consequent assessment under Section 34 ignoring the return was invalid. It may be mentioned that the return in that case had been filed within four years of the end of the assessment year. Their Lordships of the Supreme Court approved the law laid down in the Bombay case that the notice under Section 34 of the Act was only necessary if at the end of the assessment year no return had been made by the assessee and the authorities wished to proceed under Section 22(2) of the Act but where the assessee himself chooses voluntarily to make a return, no question could arise of assessment escaping and, therefore, there is no necessity of serving any notice under Section 34 of the Act. It was also pointed out that it was difficult to understand how the existence of a return could be ignored once it had been filed. It was also pointed out that if the Income-tax Officer had acted on these returns and assessed the assessee before March 31, 1950, that is, within four years of the end of the assessment year, the assessment would have been valid. But, as he chose to ignore the return and served on the assessee a notice under Section 34(1), it was held that 'this notice was improper, because with the return already filed, there was neither an omission nor a failure on the part of the assessee, nor was there any question of assessment ' escaping '. The notice under Section 34(1) was, therefore, invalid and the consequent assessment, equally so.'
13. The Tribunal further relied on the judgment of the Madras High Court in S. Raman Chettiar v. Commissioner of Income-tax. The assessee in that case was a Hindu undivided family. The Income-tax Officer issued notices under Section 34 for the two assessment years 1944-45 and 1945-46 on April 3, 1948. The returns were filed by the assessee on September 4, 1948, declaring its income for the respective previous years. The assessee had earned Rs. 88,760 in certain land transaction in India in the previous year which were not disclosed in either of the two aforesaid returns for 1944-45 or 1945-46. The Income-tax Officer assessed the whole of the aforesaid profit in the year 1945-46 and did not take any action for 1944-45 as the income declared was below the exemption limit. This order was amended by the Appellate Assistant Commissioner on appeal by the assessee for the assessment year 1945-46 to a certain extent so far as the amount of profit was concerned. The assessee appealed to the Tribunal and the Tribunal took the view that the entire profit had accrued over the two assessment years 1944-45 and 1945-46 and held that only Rs. 33,000 was assessable in the year 1945-46 and the balance of Rs. 46,760 in 1944-45 itself, and assessment was ordered on that basis. Thereafter, the Income-tax Officer obtained sanction from the Commissioner of Income-tax and issued a notice on the assessee on February 7, 1953, under Section 34 for the assessment year 1944-45 in respect of the aforesaid sum of Rs. 46,760 treating it as escaped income. The Income-tax Officer completed the assessment on that basis and the assessee's appeal to the Appellate Assistant Commissioner was also dismissed. On appeal by the assessee, the Income-tax Appellate Tribunal also dismissed the appeal but referred the question whether the reassessment under Section 34 for the year 1944-45 was valid.
14. The Madras High Court held that:
'If the proceedings that were initiated on April 3, 1948, under Section 34 were invalid under the law as it obtained on that date for want of the prior sanction of the Commissioner, the submission of the return cannot be related to that notice. Notwithstanding that the return was the result of an invalid notice, the return itself cannot be ignored or disregarded by the department.'
15. After the reference has been made by the Tribunal in this case, an appeal against the judgment of the Madras High Court in that case was decided by the Supreme Court and that decision is reported in the case of Commissioner of Income-tax v. S. Raman Chettiar. The view taken by the Supreme Court is that, if a return otherwise valid is filed by an assessee before the receipt of a valid notice under Section 34, it is to be treated as a return within Section 22(3) for it falls within the language of the sub-section and that the first return filed by the assessee, though filed in response to a notice under Section 34, could have been filed by him without a notice under Section 34 for the four years prescribed by Section 34(3) had not expired, and that such return could not be ignored or discarded by the department.
16. Their Lordships of the Supreme Court further pointed out that, though Section 22(3) permitted an assessee to furnish a return at any time before the assessment is made, yet if it was to be a valid return, it must be filed before the time limit of four years fixed under Section 34(3) as it stood in 1949 expired. Their Lordships approved the law laid down in S. Santosha Nadar v. First Additional Income-tax Officer and Commissioner of Income-tax v, Bhagwandas Amersey in which it had been held that a return must be filed within the time limit mentioned in a notice under Section 54(3).
17. The cases relied on by the Tribunal, no doubt, lay down the law that if there is already a return filed by an assessee under Section 22(3) of the Act, then in the presence of such a return the proceedings under Section 34 cannot be taken because it cannot be said that by virtue of not filing of the return the income of the assessee had escaped assessment, but the rider is that there must be a valid return, that is, return must be such on which assessment proceedings could be taken and an assessee could be assessed according to law. If there is no such valid return on which assessment proceedings could be embarked upon according to law, then it cannot be said that proceedings under Section 34 could not be taken. It has been pointed out by their Lordships of the Supreme Court that it would not affect the validity of the return if such a return had been filed in pursuancee of a valid notice under Section 34 of the Act. Nonetheless, it must be a valid return in the sense that proceedings could be taken on such a return. Their Lordships in Commissioner of Income-tax v. S. Ramani Chettiar pointed out that the cases laying down that the return must be filed before the time laid down in Section 34(3) were correctly decided but that condition was satisfied in that case and, therefore, the return filed in that case was valid. Besides the two cases relied on by their Lordships of the Supreme Court on this point, it had been held in K.S. Ratnaswami v. Additional Income-tax Officer, Commissioner of Income-tax v. L.A. Patel and K. S, Firm v. Commissioner of Income-tax that the return filed after the period prescribed under Section 34(3) of the Act was not a valid return and assessment proceedings could not be taken on such a return, and if such proceedings were taken they were invalid.
18. Thus, the crux of the matter in this case is that whether the return filed by the company on 21st February, 1953, before the Income-tax Officer, Ajmer, in response to a notice under Section 34 of the Act issued by that officer could be taken to be a valid return. We have already pointed out that the Income-tax Officer, Ajmer, had no jurisdiction to take any assessment proceedings against the company. In our opinion, a return in orderthat it may be called a valid return must be filed before an officer who could have taken up assessment proceedings against the assessee filing the return, otherwise it is not a valid return. Section 22 of the Act contemplates filing of the return by an assessee in three ways, (1) it may be in pursuance of the general notice under Section 22(1) or (2), it may be filed in pursuance of an individual notice under Section 22(2) or (3), it may be filed in accordance with the provisions of Section 22(3) at any time before the assessment is made, but of course subject to the time limit laid down in Section 34(3) of the Act. It is necessary for a valid assessment that the return be filed before the competent Income-tax Officer and not before any other unconnected person. 'Income-tax Officer' has been defined under the Act as meaning a person appointed to be an Income-tax Officer under Section 5 of the Act. Thus, it is only before such an Income-tax Officer who has been appointed under Section 5 that a return should be filed, otherwise the return is not valid. For example, if an Income-tax Officer for a particular area is the Income-tax Officer of Jaipur, return cannot be filed before the Income-tax Officer of Bombay because the Income-tax Officer of Bombay has no jurisdiction to make an assessment on such a return. It cannot be successfully contended by a person who had filed a return before an Income-tax Officer who had no jurisdiction that that return should have been taken notice of by the competent Income-tax Officer when taking proceedings under Section 34 of the Act. The opening words of Section 34(1)(a) are that, if the Income-tax Officer has reason to believe that by reason of omission or failure on the part of an assessee to make a return of his income under Section 22 for any year, he may issue a notice as required under that section. The Income-tax Officer in order to have reason to believe that there has been a failure on the part of the assessee to make a return of his income has to search his own record and not the records of all the Income-tax Officers and if there is no return on his record filed by the assessee, it cannot be said that he had no reason to believe that there has been a failure on the part of the assessee to make a return because the assessee had filed a return before an unauthorised Income-tax Officer. In this view of the matter, we are of the opinion that the Tribunal was wrong in taking the view that because a return had been filed before the Income-tax Officer, Ajmer, the Income-tax Officer, Central Circle IV, Delhi, was barred to take any action under Section 34(1)(a) of the Act.
19. Our answer to the question referred to in this reference is, therefore, inthe affirmative and action could be taken against the company under Section 34(1 )(a) of the Act by the Income-tax Officer, Central Circle IV,Delhi, by issuing a notice and the return already filed by the company on11th August, 1953, before the Income-tax Officer, Ajmer, was no impedimentto taking such an action.
20. Precisely for the same reasons, our answers to the questions in the other two references are also in the affirmative.
21. So far as the writ petition is concerned, it is prayed that the order of reference in all the three cases may be set aside. We do not find any reason for granting such a relief to the company. The further prayer is that the Tribunal be directed to refer certain further questions which had not been referred by it. Such a relief cannot be granted by issuing a writ of mandamus when the company had already an alternative remedy by way of filing an application before the court under Section 66(2) of the Act. We have also examined the various points raised in the questions framed by the company which it seeks to be referred to this court by the Tribunal, and we do not find any reason for ordering the Tribunal to make a reference on the points mentioned in these questions. Practically, all the points raised are covered by our judgment in the reference.
22. At the time of argument, learned counsel for the company further urged that the company could not at all be taxed for the income of the dividend as it had no existence outside the former Jaipur State, but this argument has got no meaning in the face of Sections 4 and 42 of the Act.
23. The writ petition has, therefore, got no force and is dismissed with costs. We also allow the department costs in Reference No. 27 of 1964. No order as to costs in other references.