1. The petitioner whose assessments for the assessment years 45-46, 46-47 and 48-49 were re-opened by the Income-tax Officer, Urban Circle, Bangalore under Section 34, Mysore Income-tax Act, has made these three applications to this Court under Arc, 226 of the Constitution. The history of these applications may briefly be stated as follows. The income of a firm called Rajmal Kapurchand & Company of which the petitioner claimed to be a partner was assessed under the Mysore Income-tax Act of 1923 lor the assessment years 45-46, 46-47, 47-48 and 48-49. The firm paid the taxes so determined. The Deputy Commissioner of Income-tax, Bangalore issued notices on 3-2-1949 and 14-12-49 to the Firm under Section 34, Mysore Income-tax Act for the purpose of assessing the income that had escaped assessment when the assessments were made as aforesaid.
2. The petitioner states that the Deputy Commissioner made an order on 31-3-1950 adding a sum of Rs. 15,000/- to the income of the Firm for the assessment year 47-48 and dropping the proceedings for the remaining three years on the ground that no income of the Firm for these years had escaped assessment. The petitioner proceeds to state that although the proceedings relating to the years 45-46, 46-47 and 48-49 had come to an end in that way, the Income-tax Officer, Urban Circle, Bangalore who is the second respondent in these petitions took them up again more than a year after their determination as if they were still pending and made fresh orders under Section 34 of the Mysore Income-tax Act.
3. The petitioner appealed against these orders and the Appellate Assistant Commissioner dismissed the appeal relating to the assessment year 46-47. and modified the order relating to the year 45-46, The other appeal, it is stated, is still pending.
4. The petitioner contends that the proceedings conducted by the Income-tax Officer and his orders therein and the orders passed in the appeals preferred against them are without jurisdiction or authority and are liable to he quashed. The learned counsel for the petitioner argued that the Deputy Commissioner of Income-tax had on 31-3-1950 finally disposed of all the proceedings started by him for reassessing under Section 34 of the Act and submitted that the Income-tax Officer who more than a year later continued those proceedings as if they were still pending acted without jurisdiction and in excess of his powers.
It is pointed out on behalf of the petitioner that the proceedings under Section 34 relating to all the four years were clubbed and conducted together and that as shown by the notices issued to the petitioner the Deputy Commissioner of Income-tax who was the Income-tax Officer under the Mysore Income Tax Act, posted the hearing peremptorily to - 29-3-1950. It is urged that on account of the impending financial integration between the State of Mysore and the Union of India which later came into effect on 1-4*1950 the Deputy Commissioner who was reluctant to keep these proceedings pending on the date of integration heard and finally disposed of them before that date.
5. The respondents in their affidavit have disputed the petitioner's statement that the Deputy Commissioner completed these proceedings under Section 34. The petitioner thereupon produced an affidavit deposed to by his counsel, Sri K. B. Parthasarathy, who appeared before the Deputy Commissioner. Sri Parthasarathy in his affidavit has stated;
'On that day., that is, on 29-3-1950 I was present with my client Kapurchand (the assesses), and the assessee gave a statement in continuation of the previous statement in connection with the enquiry for all the four assessment years as per notices received. I also argued on behalf of the assessee for all the four assessment years in question and the Deputy Commissioner expressed his agreement and satisfaction with my client's contentions and said that he would add back a sum of Rs. 15,000/- for the assessment year 47-48 and pass orders for that year only under Section 34. Regarding the proceedings for the other three years he informed us that he accepted the explanations offered by my client and then ordered that the proceedings under Section 34 for three years be dropped'.
The. respondents' Advocate produced before us during the hearing an order made by the Deputy Commissioner of Income-tax on 31-3-1950. The order reads thus:
'The proceedings u/s, 34 for the years 1945-46. 1946-47 & 1948-49 will be dropped as the profit in question related to the assessment year 1947-48 only. The question of assessment to Excess Profits Tax does not also arise as the profit related to the year of account 1941-42, though realised between November 1945 and June 1946. The Assessment for 1947-48 will now be assessed under Section 34 read with Section 23(3).'
6. It is argued for the petitioner that the above order of the Deputy Commissioner related to all the four years and as stated therein the Deputy Commissioner who found that no income for the years 45-46, 46-47 and 48-49 had escaped assessment dropped the proceedings relating to those years. It is contended for the Respondents that although the Deputy Commissioner might have intended to drop the proceedings for these three years, he did not as a matter of fact do so. It is argued that the Deputy Commissioner only stated that the proceedings for those years 'will be dropped' and that the words 'will be dropped' did not have the effect of actually terminating the proceedings. We find it difficult to read the order in that way. The order of the Deputy Commissioner was made by him in the proceedings relating to all the four years which were conducted and heard together.
The Deputy Commissioner after discussing the evidence and materials relating to each of those years came to the conclusion that there was no justification for thinking that any income had escaped assessment during any year except the assessment year 1947-48. He therefore proceeded further to state that the proceedings relating to the years 45-46, 46 47 and 48-49 'will be dropped'. That being so, on a reading of the order it will be impossible for any one to suggest that the proceedings under Section 34 relating to those assessment years did not come to an end and were somehow still incomplete and kept pending. The respondents sought support for their contention from certain entries or rather the absence of entries in a register produced by them during the hearing. The register is described as Demand Register in which the Income-tax authorities have to enter particulars of the taxes demanded.
It is pointed out that in some cases the two letters 'N. D.' indicating that there was no demand had been written and that the register contained no entry by the Deputy Commissioner to the effect that there was no demand so far as the petitioner was concerned. It is sought to be made out from this that although he might have intended to drop the proceedings for the 3 years in question he did not actually do so. We are unable to accept this argument in the first place the order of the Deputy Commissioner leaves in our mind no doubt that the proceedings for those three years were dropped then and there. Secondly, as rightly pointed out for the petitioner, the Demand Register which contains printed columns for the record of certain particulars contains no column for recording the completion of proceedings under Section 34 and so the existence or otherwise of an entry for recording which the register is not maintained has no significance.
7. it is pointed out by the respondents that the Deputy Commissioner after making his order on 31-3-1950 and affixing the signature to it proceeded on the same day to re-assess the income of the petitioner for the year 47-48 but did nothing about the remaining three years. It is argued from this circumstance that all the proceedings before him must be considered to have been still pending even after he made this order. We cannot accede to the soundness of this argument. The action taken by the Deputy Commissioner on the contrary is consistent with the interpretation we have placed on his order. The affidavit of Sri Parthasarathy, the counsel who appeared for the assessee before the Deputy Commissioner, negatives the contention urged for the respondents. If the proceedings for the years 45-46, 46-47 and 1948-49 were dropped by the Deputy Commissioner on 31-3-1950 it is clear and it is not disputed that the second respondent could not again lake up those proceedings as he did make an order assailed in these petitions. His proceedings are therefore in our opinion without jurisdiction and in excess of his powers and must therefore be quashed.
8. it is contended on behalf of the petitioner that the impugned proceedings are liable to be quashed for some other reasons as well. It is argued that with the enactment of the Indian Finance Act which repealed with effect from 1-4-1950 the Mysore Income-tax Laws it was incompetent for the respondent to continue the proceedings commenced by the Deputy Commissioner even though they had been pending on that day. It is also argued that the continuation of such proceedings were forbidden by the terms of the agreement executed between the Rajpramukh. of Mysore and the President of India on 20-2-1950 read with the relevant recommendations of the Indian Finance Inquiry Com-mittee. It is further contended that the 2nd respondent acted in excess of his jurisdiction in making the assessment order against the petitioner in proceedings for the re-assessment of the income of his Firm. In the view we have taken that the proceedings against the petitioner under Section 34 relating to the assessment years 45-46, 46-47 and 48-49 were decided on their merits and dropped by the Deputy Commissioner on 31-3-1950, we deem it unnecessary to express our opinion on these other questions referred to above.
9. The petitioner is entitled to the writs prayed for and we direct them to issue. The proceedings of the respondents against the petitioner under Section 34 and in appeal and the orders made by them will be quashed. Petitioner will get his costs. Advocate's fee Rs. 100 only.
10. Petition allowed.