Pannalal Nandlal Bhandari v. The Commissioner of Income-tax, Bombay City, Bombay

2 S.C.R. SUPREME COURT REPORTS 35 requirements of s. 57 of the Bombay Police Act, must be made _bona fide,_ taking into account a conviction which is tmfficiently proximate in time. Since no absolute rule can be laid down, each case must depend on its own facts. In the result, we set aside the acquittal, and remit the case to the High Court for disposal on the other points urged before it and in the light of observations ma.de here by us. _Appeal allowed._ _Hidayatullah_ _]._ _October_ _I8._ _The_ _Stale_ _of_ _M aharas/itra_ v. _Vishnu_ _Ramchandra_ PANNALAL NANDLAL BHANDARI _v._ THE COMMISSIONEE OF INCOME-ll' AX, BOMBAY CITY, BOMBAY. (S. K. DAS, M. HIDAYATULLAH and J. c. SHAH, JJ.) _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). The appellant, a non-resident for the purfoses of the Indian Income-tax Act, did not submit returns o 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(1)(a). The appellant contended that notices for assessment were governed by cl. (1)(b) of s. 34 and not by cl. (1)(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 thereunder. Once a notice is given by publication in the prescribed manner under s. 22(1), 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, The appellant, a non-resident for the purfoses of the Indian Income-tax Act, did not submit returns o 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(1)(a). The appellant contended that notices for assessment were governed by cl. (1)(b) of s. 34 and not by cl. (1)(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 thereunder. 36 SUPREME COURT REPORTS [1961] _'96°_ it will be deemed that there was omission on his part to make a _N_, ~. _P_ _anna a_ _1 1_ _".""a_ 1 _1_ tax [retuArn ] ct. Section 34(1)(b) applied only to those cases where [within the meaning ][of ] [s. 34(1)(a) of the Indian Income-] _**Bhandari**_ **there was no omission or** **failure** **to make a return of the income** v. or to make a full and true disclosure of facts material to the _**The**_ _Couunissioner_ **assessment.** _P_ _1 1_ _0_ _!_ _Income-I.ax,_ In the instant case the proceedings for assessment were pro_Bombay City,_ perly commenced within the period of limitation prescribed by _Bombay_ s. 34(1)(a). _Shah_ _]._ CIVIL APPELLATE JURISDICTION: Civil Appeal No. 408 of 1957. Appeal by Special Leave from the Judgment and Order dated t.he 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 Incom" 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 ### .. · 2 S.C.R. SUPREME COUHT REPORTS 37 .-., the appellant, the Income Tax Appellate Tribunal _i96o_ drew up a. statement of tbhe .ca.edse undher sH. ~6h(l ) of thef Income Tax Act and su mitt to t e 1g 0ourt o _Bombay_ _City,_ _Bon1bay_ _Shah_ _]._ t ## • drew up a. statement of tbhe .ca.edse undher sH. ~6h(l ) of thef _Pannai-::i-Nandlal_ Income Tax Act and su mitt to t e 1g 0ourt o _Bhandari_ Judicature at Bombay the following two questions: v. (1) Whether the notices issued under s. 22(2) of the _Thi_ _Commissioner_ Act read with s. 34 of the Act for the assessment _of Ineome-tax,_ years 1943-44, 1944-45, 1946-47 and 1947-48 were _Bombay_ _City,_ served after the period of limitation prescribed by _Bon1bay_ s. 34 of the Act ? _Shah_ _]._ ##### (2) If the answer to Question No. 1 is in the affirm ative, whether the assessments for the yea.rs in question were invalid in law? The High Court answered the first qnestion in the negative and observed that on that answer, the second question "did not a.rise". With special leave under Art. 136 of the Constitution, this appeal is preferred by the appellant age.inst 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(l)(a) of the Act. At the material time, by s. 34 (l)(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 asse~see 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 infor. mation 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 cl. (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 cl. (l)(a) of s. 34 applied, the assessment was not barred by the law of limitation. 38 SUPREME COURT REPORTS [1961] _'96°_ But the a.ppella.nt contended that the notices for as _p anna a_ 1 [- ] 1 _[N ]_ _an dl a_ 1 sessment were, even though he had not f h" . " h - - ma.de a. return d _Bhandari_ - IS mcome 1or t e yea.rs m quest10n, governe not v. by cl. (l)(a.) of s. 34, but by cl. (l)(b) of s. 34. He _Th•_ _Commission"_ contended that being a. resident outside the taxable _0_ _!_ _Incomda•._ territory in the yea.rs of assessment, a genera.I notice _Bo";bay City._ under s. 22(1) did not give rise to a liability to submit _ombay_ a. return, and his inaction did not a.mount to omission _Shah_ _J._ or failure to submit a. return, inviting the a.pplica.bility of s. 34(l)(a). He submitted that omission or failure to make a. return can only a.rise qua. a. non-resident, if no return is filed after service of a.n individual notice under· s. 22(2). In other words, the plea. is that a. notice under s. 22(1) imposes a.n obligation upon persons resident within the ta.xa.ble territory and not upon non-residents, and support for this argument is sought to be obtained from s. I sub.s. (2) which extended the Income Tax Act a.t the material time to British India.. The expression " every person whose tote.I income during the previous year exceeded the maximum a.mount which is not cha.rgea.ble to income-tax " in s. 22(1) includes a.11 persons who a.re 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 thereunder. The fa.ct that a. non-resident a.ssessee 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. (l)(a.). Sect.ion 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 had 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. 22( 1 ), the Income Tax .; l ·~ # • 2 S.C.R. SUPREME COURT REPORTS 39 Officer wa.s competent under s. 34(l)(a.) to issue notice _1960_ a.tf a.ny time W~hin eigh~ yeha.~S of the end of the ye.ar _Pannalal Nandlal_ - assessment ior assessmg 1m to tax. 0 nee a notice _Bliandari_ is given by publication in the press and in the pres- v. cribed manner under S• 22(1), every person whose _The Commissioner_ income exceeds the maximum amount exempt from _of_ Income-t~:r, tax is obliged to submit a. return and if he does not _Bombay_ _City,_ do so, it will be deemed that there was omission on _Bombay_ his pa.rt to a. make a. return within the meaning of _Shah_ _1._ s. 34(l)(a). There is no wa.rra.nt for the submission tha.t s. · 22(1) applies to residents only and that an -obligation to make a. return on the pa.rt of a. nonresident can only a.rise 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 tha.t provision does not derogate from the liability a.rising 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, a.rises or is received, and that is not ##### disputed by the appellant. If po\Ver to tax be grant ed, 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 a.n 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 uo 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(l)(a) from the close of the year of assessment. The appeal fails and is dismissed with costs. _Appeal dismissed ._