Pannalal Nandlal Bhandari Vs. The
Commissioner of Income-Tax, Bombay City, Bombay [1960] INSC 172 (18 October
1960)
SHAH, J.C.
DAS, S.K.
HIDAYATULLAH, M.
CITATION: 1961 AIR 446 1961 SCR (2) 35
CITATOR INFO :
RF 1962 SC 478 (9)
ACT:
Income-tax--General notice--Non-resident
liability to submit return--Period of Limitation--Indian Income Tax Act, 1922
(XI of 1922), s. 22(1) & (2), s.34(1)(a) & (b).
HEADNOTE:
The appellant, a non-resident for the
purposes of the Indian Income-tax Act, did not submit returns of certain
dividend income accruing to him within the taxable territory. The Income-tax
Officer served upon him notices under S. 34 read with S. 22(2) of the Act for
assessment of tax in respect of those years. The notices in question were
issued within eight years from the end of the years of assessment and were
within the period prescribed by s. 34(i)(a). The appellant contended that
notices for assessment were governed by cl.
(i)(b) of S. 34 and not by cl. (i)(a), even
though the appellant had not made a return of his income for the years in
question as a general notice under s. 22(1) did not give rise to a liability to
submit a return and his inaction did not amount to omission or failure to
submit a return as he was a non-resident, and the assessment proceedings were
barred by limitation.
Held, that the expression "every person
" in s. 22 (1) of the Indian Income-tax Act, 1922, includes all persons
who are liable to pay tax and non-residents are not exempted from liability to
submit a return pursuant to the general notice there under.
Once a notice is given by publication in the
prescribed manner under s. 22(i), every person whether resident or nonresident
whose income exceeds the maximum amount exempt from tax is obliged to submit a
return and if he does not do so, 36 it will be deemed that there was omission
on his part to make a return within the meaning of S. 34(i)(a) of the Indian
Income tax Act. Section 34(1)(b) applied only to those cases where there was no
omission or failure to make a return of the income or to make a full and true
disclosure of facts material to the assessment.
In the instant case the proceedings for
assessment were properly commenced within the period of limitation prescribed
by s. 34(1)(a).
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 408 of 1957.
Appeal by Special Leave from the Judgment and
Order dated the 28th September, 1955, of the former Bombay High Court in
Income-tax Reference No. 5 of 1955.
Sanat P. Mehta, S. N. Andley, J. B. Dadachanji,
Rameshwar Nath and P. L. Vohra, for the appellant.
A. N. Kripal, R. H. Dhebar and D. Gupta, for
the respondent.
1960. October 18. The Judgment of the Court
was delivered by SHAH J.-To the appellant who was a non-resident for the
purposes of the Indian Income Tax Act, 1922, had accrued in the assessment
years 1943-44, 194445, 1946-47 and 1947-48 certain dividend income within the
taxable territory of British India, but the appellant did not submit returns of
his income for those assessment years. In exercise of his powers under s. 34 of
the Indian Income Tax Act, 1922, the Income Tax Officer, Bombay City, served
upon the appellant notices under s. 34 read with s, 22(2) of the Act for
assessment of tax in respect of those years. The notice for the year 1943-44
was served on the appellant on March 27, 1952, for the year 1944-45 on February
16, 1953, for the year 1946-47 on April 4, 1951 and for the year 1947-48 on
April 2, 1952. The Income Tax Officer completed the assessments in respect of
the years 1943-44, 1944 45 and 1947-48 on May 6, 1953 and for the year 1946-47
on March 19, 1952. The orders of assessment were confirmed by the Appellate
Assistant Commissioner and by the Income Tax Appellate Tribunal. At the
instance of 37 the appellant, the Income Tax Appellate Tribunal drew up a
statement of the case under s. 66(1) of the Income Tax Act and submitted to the
High Court of Judicature at Bombay the following two questions:
(I). Whether the notices issued under s.
22(2) of the Act read with s. 34 of the Act for the assessment years 1943-44,
1944-45, 1946-47 and 1947-48 were served after the period of limitation
prescribed by s. 34 of the Act? (2) If the answer to Question No. 1 is in the
affirmative, whether the assessments for the years in question were invalid in
law? The High Court answered the first question in the negative and observed
that on that answer, the second question " did not arise ". With
special leave under Art. 136 of the Constitution, this appeal is preferred by
the appellant against the order of the High Court.
The only question which falls to be
determined in this appeal is whether the proceedings for assessment were
commenced within the period of limitation prescribed for serving notice of
assessment under s. 34(1)(a) of the Act.
At the material time, by s. 34 (1)(a), the
Income Tax Officer was invested with power amongst others to serve at any time
within eight years from the end of any year of assessment notice of assessment
if he had reason to believe that income, profits or gains had escaped
assessment by reason of omission or failure on the part of the assessee to make
a return of his income under s. 22 for that year, or to disclose fully and
truly all material facts necessary for his assessment of that year. In those
cases where the Income Tax Officer had in consequence of information in his
possession reason to believe that income, profits or gains had escaped
assessment even though there was no omission or failure as mentioned in el.
(a), he could under cl. (b) within four years from the end of the year of
assessment serve a notice of assessment. Admittedly, the notices issued by the
Income Tax Officer for the years in question were issued within eight years
from the end of the years of assessment and if el. (1)(a) of s. 34 applied, the
assessment was not barred by the law of limitation.
38 But the appellant contended that the
notices for assessment were, even though he had not made a return of his income
for the years in question, governed not by cl. (1)(a) of s. 34, but by cl.
(1)(b) of s. 34. He contended that being a resident outside the taxable
territory in the years of , assessment, a general notice under s. 22(1) did not
give rise to a liability to submit a return, and his inaction did not amount to
omission or failure to submit a return, inviting the applicability of s.
34(1)(a). He submitted that omission or failure to make a return can only arise
qua a non-resident, if no return is filed after service of an individual notice
under s. 22(2). In other words, the plea is that a notice under s. 22(1)
imposes an obligation upon persons resident within the taxable territory and
not upon non-residents, and support for this argument is sought to be obtained
from s. 1 sub-s. (2) which extended the Income Tax Act at the material time to
British India.
The expression " every person whose
total income during the previous year exceeded the maximum amount which is not
chargeable to income-tax " in s. 22(1) includes all persons who are liable
to pay tax and there is nothing in the section or in its context which exempts
non-residents from liability to submit a return pursuant to a notice there under.
The fact that a non-resident assessee may not come to know of the general
notice issued under s. 22(1) is not a ground for not giving effect to the plain
words used in the section. In terms, the clause read with r. 18 requires every
person who has taxable income to submit his return, and if he fails to do so,
under s. 34 of the Act the Income Tax Officer may commence proceedings for
assessment within the period prescribed by cl. (1)(a). Section 34(1)(b) applies
only to those cases where there is no omission or failure to make a return of
the income or to make a full and true disclosure of facts material to the
assessment. To the appellant though non-resident income bad admittedly accrued
in the taxable territory and that income exceeded the maximum amount not
chargeable to income-tax., The appellant not having submitted a return in
pursuance of the notice issued under s. 221 the Income Tax 39 Officer was
competent under s. 34(1)(a) to issue notice at any time within eight years of
the end of the year of assessment for assessing him to tax. Once a notice is
given by publication in the press and in the prescribed manner under s. 22(1),
every person whose Th. income exceeds the maximum amount exempt from tax is
obliged to submit a return and if he does not do so, it will be deemed that
there was omission on his part to a make a return within the meaning of s.
34(1)(a). There is no warrant for the submission that s. 22(1) applies to
residents only and that an obligation to make a return on the part of a
nonresident can only arise if a notice under sub-s. (2) is served. Under sub-s.
(2) it is open to the Income Tax Officer to serve a special notice upon any
person requiring him to furnish a return in the prescribed form, but that
provision does not derogate from the liability arising under sub-s. (1) to
submit a return.
The Income Tax Act extends by s. 1(2) to the
taxable territory and not beyond; but within that territory, the Income Tax
Officer has power to tax income which accrues, arises or is received, and that
is not disputed by the appellant. If power to tax be granted, it is difficult
to appreciate the ground on which the plea that the general provision imposing
liability upon persons receiving taxable income is subject to an unexpressed
limitation that it is to apply only to residents and not to non-residents. The
submission that a person liable to pay tax but resident outside the taxable territory
must be served with a special notice under s. 22(2) before his inaction in the
matter of making a return may be deemed omission within the meaning of s. 34(1)
is without force. There is no such express provision made by the statute and
none can be implied from the context.
The High Court was therefore right in holding
that the proceedings for assessment were properly commenced within the period
of limitation prescribed by s. 34(1)(a) from the close of the year of
assessment. The appeal fails and is dismissed with costs.
Appeal dismissed.
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