1963 PLP 4 (PTD)

Income‑tax Act (XI of 1922), S'. 34 (I) (a)‑Re‑assessment‑ Notice‑Omission or failure to disclose material facts‑Limitation- Eight years torn assessment year. A notice under section 34 (1) (a) of the Income‑tax Act. 1922, for assessment of income escaping assessment by reason of the omission or failure on the part of the assessee to make a full and true disclosure of all material facts, may be issued within eight years of the end of the assessment year to which the escaped income pertains and not within 8 years of the end of the relevant previous year. The words "any year" in clause (a) of section 34(1) of the Income‑tax Act, 1922, and the words "that year" in clause (ii) of the proviso to section 34(l) have reference to the assessment year to which income escaping assessment pertains and not the previous year. H. N. S. Iyengar v. First Additional Income‑Tax Officer, Mysore City (1960) 38 I T R 109 (Mys.) dissented from. Calcutta Discount Co. Ltd. v. Income‑tax Officer, Calcutta (1961) 41 I T R 191; Chatturam v. Commissioner of Income‑tax (1947) 15 I T R 302 ; Commissioner of Income‑tax v. Nawal Kishore Kharaiti Lal (1938) 6 I T R 61 (P C) ; Commissioner of Income -tax v. Robert J. Sas (1958) 34 I T R 222 ; Gopiram Agarwalla v. First Additional Income‑tax Officer (1959) 37 I T R 493 ; II. N. S. Iyengar v. First Additional Income‑tax Officer, Mysore Citys(1960) 38 I T R 109 (Mys.) ; Income‑tax Officer, Calcutta v. Calcutta Discount Co. Ltd. (1953) 23 I T R 471 ; Rajendranath Mukherjee v. Commissioner of Income‑tax (1934) 2 I T R 71 ; Seethai Achi v. Income‑tax Officer, Coimbatore (1960) 40 I T R 170 ; Spencer v. Income‑tax Officer, Madras (1957) 31 I T R 107; Viswanathan Chettiar v. Commissioner of Income‑tax (1954) 25 I T R 79 and Wallace Brothers & C o. Ltd. v. Commissioner of Income‑tax (1948) 16 I T R 240 ref: BASI REDDY, J.‑‑‑(5th May 1959).‑The question that falls for determination in this writ petition is whether for purposes of section 34 (1) (a) of the Income‑tax Act, in computing the period of limitation, it is the accounting year or the assessment year that should form the basis. The Madras High Court has taken the view that it is the assessment year whereas in a recent case the Mysore High Court has taken the view that it is the accounting year. As this is a question of some importance and may arise frequently, I think it desirable that this question should be decided by a Bench. Post this writ petition before a Bench. JUDGMENT CHANDRA REDDY, C. J.‑The point that falls for determina tion in this petition is whether in computing the period of limita tion under section 34 (1) (a) of the Indian Income‑tax Act, it is the accounting year or the assessment year that should form the basis. The essential facts lie within a short compass and may be stated thus. The assessee submitted his return for the assessment year 1950‑51 and the assessment was completed on March 31, 1950. The proper Income‑tax Officer issued a notice dated March 5, 1959, under section 34, requiring the assessee to send his return for the assessment year 1950‑51 as he had reason to believe that the assessee's income assessable to tax had escaped assessment. The assessee challenged the right of the department to proceed under section 34 on the ground that the notice was not valid having been issued eight years after the expiry of the accounting year. As this objection did not prevail with the concerned officer, the assessee invoked the jurisdiction of this Court under Article 226 of the Constitution. Basi Reddy, J., before whom the petition came up for hearing, referred it to a Bench in view of the divergence of judicial opinion on this topic. Since the solution of the problem posed here is to be lurid in section 34, it is necessary to extract it here so far as it is of immediate relevance, It reads; (a) the Income‑tax Officer has reason to believe that b. reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for hip assessment for that year, income profits or gains chargeable to income‑tax have escaped assessment for that year, or have beers under‑assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income -tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income‑tax have escaped assessment for any year, or have been under‑assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (ca) at any time and in cases falling under clause (b) at any time within four year:. of the end of that year, serve on the assessee, or if the assesses: is a company, on the principal officer :thereof, a notice contain ing all or any of the requirements which may be included in a notice under subsection (2) of section ::2 and may proceed to assess or reassess such income, profits or gains or re-compute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice under that subsection; Provided that the Income‑tax Officer shall not issue a notice under clause (a) of subsection (1) (i)‑ (ii) for any year, if eight years have elapsed after the expiry of that year, unless the income, profits or gains chargeable to income‑tax which have escaped assessment or have been under assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to, or arc likely to amount to, one lakh of rupees or more in the aggregate, either for that year, or for that year and any other year or years after which or after each of which eight years have elapsed, not being a year or years ending before the 31st day of March 1941 ; . . . . " Since section 22 of the Act also plays an important part in this enquiry, we may well quote that section in so far as it is material. It recites; "(1) The Income‑tax Officer shall, oil or before the 1st day of May in each year, give notice, by publication in the press and by publication in the prescribed manner, requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income‑tax to furnish, within such period not being less than sixty days as play be specified in the notice, a return, in the prescribed form and verified in the prescribed manner; setting forth (along with such other particulars as may be required by the notice) his total income and total world income during that year : . . . " We are here concerned only with section 34(l) (a) for the reason that this is a case of income which has escaped assessment by reason of the omission or failure on the part of an assessee to make a full disclosure of his income. Now, what is the denotation of the words "that year" occurring in section 3‑1(l) (a) and in clause (ii) of the proviso to that section ? It is urged by Sri Rama Rao, learned counsel for the assessee, that the section contemplates only the accounting year and not the assessment year and that consequently the notice issued eight years after the end of the accounting year cannot be sustained. The basis of his contention is the judgment of the Mysore High Court in H. N. S. Ivengar v. First Additional Income‑tax Officer, Mysore City ((1960) 38 I T R 109 (Mys.)). It was laid down in that case that the starting point of limitation under section 34 was the expiry of the accounting year for which the return of income was to be made under section

22. The learned Judges constituting the Bench thought that since the return under section 22 had to set forth the income and total world income in the previous year, the expression "that year" occurring therein could have reference only to the previous year, i.e., the accounting year. Das Gupta C. J., who spoke for the Court, observed thus (1960) 38 I T R 109, 111 (Mys.) "The return mentioned in clause (a) of subsection (1) of section 34 is the return of the income under section 22 for any year. It seems to me, reading the said clause along with the provisions of section 22 that `any year' mentioned therein would be the `previous year', and the return of the income referred to therein would be the return of the income of the previous year." This decision supports tile contention of the petitioner. We are unable to subscribe to the principle enunciated therein. It is true that the words "during that year" occurring in section 22 relate to the previous year since in section 22 the assessee is called upon to disclose all the income reaped in the previous year. But they do not throw any light on the interpretation of the words "that year" employed in section

34. It cannot also he ignored that the return to be furnished under section 22 is not for the accounting year but is for the assessment year. The income of an accounting year is charged to tax in the year follow ing it, which is variously called in the Income‑tax Act as the "assessment year", "financial year" or "tax year". The question does not present much difficulty if it is re membered that section 34 authorises the, Income‑tax Officer to serve the notice if he has reason to believe that any assessee has failed to make a return for any year. That the return is only for the assessment year could be seen from the words "necessary for his assessment for that year" following the expression "any year". Therefore, the assessee has to set out full particulars of his income in the previous year to enable the concerned officer to make the assessment in the following year. The words "escaped assessment for that year" convey the thought that it is the assessment year that was in the contemplation of the legis lature. There can be no question of the income escaping assess ment earlier than the assessment year. It could not be premised that it had escaped assessment in the year of account. Thus, there cannot be much room for doubt that the expression "that year" occurring at that place in section 34 has reference only to the year of assessment. If that were the real position, the words "that year" in the clause "after the expiry of that year" in section 34, proviso (ii) have the same meaning. This position is apparent from rule 19 of the rules framed under section 59 of the Indian Income‑tax Act read with Form A. That rule enacts; "The return of total income and total world income required under subsection (1) or subsection (2) or subsection (2‑A) of section 22 shall be :‑ (i) in the case of persons, not being a company, who derive income from any sources, which include business, profession or vocation, in Form A annexed to this rule ; (ii) in the case of persons not being a company who derive income from sources other than business, profession or vocation (not being a share as a partner in a firm or as a member of an association of persons), in Form B annexed to this rule ; and (iii) in the case of a company in Form C annexed to this rule, and shall in each case be verified in the manner indicated in the appropriate form." Form A is in the following words; "Form of return of total income and total world income under subsection (1) or subsection (2) or subsection (2‑A) of section 22 of the Indian Income‑tax Act, 1922, for persons who derive income from sources, including business, profession or vocation. Income‑tax year 19...19....... Statement of total income and total world income during the previous year ended . . . . . . " It is immediately plain from this form that return is to be submitted in regard to the to the income made in the previous year. It is seen that it is the income‑tax year or the assessment year that is designated as the year. This rule and the form prescribed thereunder have the same force as any of the provisions of the Indian Income‑tax Act, having regard to section 59(5) of the Income‑tax Act which says; "Rules made under this section shall be published in the Official Gazette and shall thereupon have effect as if enacted in this Act." This opinion of ours is reinforced by section 3 which is in these words; "Where any Central Act enacts that income‑tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually." Section 2 (11) defines "previous year" thus; " `Previous year' means‑ (i) . . . (a) the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then, at the option of the assessee, the year ending on the date to which his accounts have been so made up : . . . . ." It is manifest from the above sections that the assessment year is talked of as "the year" while the accounting year is shown as the "previous year". Similarly, in section 55 the words used are "income‑tax charged for any year" and "in respect of the total income of the previous year". Similarly section 34 (1) (a) makes a distinction between "the year" which is shown as being equivalent to the assessment year and the "previous year". Proviso (ii) to section 34 (1) also gives the same indication. It is worthy of note that throughout the Act, the accounting year is mentioned as the previous year and it is only the assessment year that is mentioned as the year. The Mysore High Court thought that though the expression "that year" occurring in clause (b) may have reference to the assessment year, that stands on a different footing because clause (a) and clause (b) of section 34 deal with two different subject matters and with two different periods of limitation. We are not persuaded that this serves as a distinguishing feature so far as the starting period of limitation is concerned. There does not seem to be any basis for this distinction. We are not shown any indication in the language of either of the subsections that the expression "that year" used in the subsections is intended to have different meanings. It is a well‑settled rule of construction of laws that the same words should be given the same meanings, unless the context justifies a contrary intention. Merely because the two clauses deal with two different subject‑matters and two different periods of limitation are laid down, it does not follow that the same words bear two different meanings. It should be remembered that both the clauses, (a) and (b), contemplate escapement of assessment for any year. While clause (a) deals with the escapement of assessment owing to the omission of the assessee to make a full disclosure of his income, clause (b) bears on the escapement of assessment not due to any failure on the part of the assessee but on account of other factors envisaged by clause (b). We, therefore, feel that the considerations that are relevant in the context of clause (b) as regards the starting point of limitation are also material in regard to clause (a) in that behalf. The pronouncement of the Privy Council in Wallace Bros. v. Commissioner of Income‑tax ((1948) 16 I T R 240 (P C)) called in aid by the learned counsel for the petitioner does not really come to his rescue. That only lays down the proposition that the charge for tax created by section 3 is in respect of the "previous year" arid not a charge in respect of the income of the year of assessment and that it arises not later than the close of the previous year, though the qualification of the amount payable is postponed. Nor does Chatturam v. Commissioner of Income‑tax ((1947) 15 I T R 302 (F C)) carry the petitioner any further. This contains a proposition similar to that enun ciated in Wallace Bros. v. Commissioner of Income‑tax. These two rulings, therefore, do not afford us any guidance in the resolution of the question raised in this petition. Section 34 of the Income‑tax Act, the predecessor of the present section, was the subject of judicial scrutiny. In Rajendranath Mukherjee v. Commissioner of Income‑tax ((1934) 2 I T R 71 (P C)) their Lordships of the Judicial Committee observed that, under section 34, if a notice was served within one year after the expiry of the tax year, the subsequent assessment or re‑assessment could be made at any time after service of the notice and not necessarily within the year following the tax year. This was reiterated at more than one place in the judgment. Under section 34 as it then stood, resort could be had to it only within one year after the expiry of the assessment or the tax year. The only material change effected in the present section in this behalf is with regard to the period of limitation. In many of the cases it was assumed that limitation starts from the end of the assessment year. In Commissioner of Income tax v. Nawal Kishore Kharaiti Lal ((1938) 6 I T R 61, 66 (P C)) the learned Judges observed; "The notice of 13th February 1928, was served before the expiry of one year from the end of the financial year 1926‑

27. Subject therefore to the merits of the case and to .the answer to be given to the second of the three questions referred, the notice of 13th February was a valid initiation of proceedings to assess the respondent firm as an agent under section 43 and in respect of the year of assessment 1926‑27." The same assumption was made in Viswanathan Chettiar v. Commissioner of Income‑tax ((1954) 25 I T R 79, 85 (Mad.)). Another instance of this is to be found in Commissioner of Income‑tax v. Robert J. Sas ((1958) 34 I T R 222 (Bom.)). In Seethai Achi v. Income‑tax Officer ((1960) 40 I T R 170 (Mad.)) it was conceded on behalf of the assessee that limitation commenced from the expiry of the assessment year. [See also Income‑tax Officer v. Calcutta Discount Co. ((1953) 23 I T R 471 (Cal.)) and Gopiram Agarwalla v. First Additional Income‑tax Officer ((1959) 38 I T R 493 (Cal.))]. Though all these cases arose under section 34 of the Indian Income‑tax Act as it stood prior to the present amendment, there was no change worth the name in regard to the question posed in this petition, as rightly observed by the Mysore High Court in H. N. S. Iyengar v. First Additional Income‑tax Officer ((1960) 38 I T R 109 (Mays.)), if we may say so with respect. A Bench of the Madras High Court had to discuss the scope of section 34 (1) (b) in Spencer v. Income‑tax Officer ((1957) 31 I T R 107 (Mad.)). The learned Judges expressed the opinion that it was clear from the context of the section itself that the year referred to therein was the assessment year and had no reference to the accounting year. It was definitely stated that the expression "any year" had the same meaning and that in both the cases limitation had to be computed from the end of the assessment year. Their Lordships pointed out that there could be an escape from assessment only when there was an assessment and the assessment could only be in what is normally referred to as the assessment year. In Calcutta Discount Co. Ltd. v. Income tax Officer ((1961) 41 I T R 191 (S C)) Shah J. of the Supreme Court, who delivered the dissenting judgment, also assumed that what is contemplated by section 34 (1)(a) is the year of assessment and not the accounting year. Section 34 (1)(a) of the Income‑tax Act fell to be interpreted recently by the Calcutta High Court in Appeal No. 146 of 1958. Lahiri C. J. and Bachawat J. discussed this matter elaborately and came to the conclusion that the expression "that year" occurring in section 34 (1)(a) denoted the year of assessment and not the accounting year. The learned Judges adduced very pertinent reasons, if we may say so with respect, in support of their opinion. All the relevant cases bearing on the topic have been referred to by Bachawat J. in his judgment. The learned Judges were not prepared to share the view of the Mysore High Court in H. N. S. Iyengar v. First Additional Income‑tax Officer. In our opinion the construction placed upon section 34 (1) (a) in the cited case is a sound one and is in accord with the intend ment and scheme of section

34. We assent to the propositions laid down in this case and dissent from the doctrine of H. N. S. Iyengar v. First Additional Income‑tax Officer. For all these reasons, we hold that the notice in question cannot be successfully impugned. In the result, the writ petition is dismissed with costs. Advocate's fee Rs.

100. Petition dismissed.