1984 PLP 438 (PTD)

Provided that..................: Provided further that ..................: Provided further that..................: (2) No order of assessment under section 23 or of assessment or re assessment under subsection (1) of this section shall be made after the expiry (in any case in which the assessee has concealed the particulars of his income or deliberately furnished incorrect particulars of such income) of eight years, and in any other case, of four years from the end of the year in which the income profits or gains were first assessable: Provided that nothing contained .in this subsection shall apply to a re assessment made in pursuance of an order under section 31, section 33 (section 33‑A), section 66, or section 66‑A: (Provided further fiat nothing contained in this section limiting the wine within which any action may be taken or any order, assessment or re‑assessment racy be triage, shall apply. to an assessment or re assessment, as the case may tae, made on the assessee or any person in consequence of, or to give effect to, any finding or direction con tained in an order under (section 33, section 33‑A) section 66 or section 66‑A): Revised Text of section 34 as contained in the Pakistan Code, Vol. VII modified up to 15th May, 1966. 34.‑(1) If (for any reason) income, profits or gains chargeable to income‑tax (have escaped assessment in any year, or have been under assessed, or have been assessed at too, low a rate, or have been subject of excessive relief under this Act), the Income‑tax Officer (in any case in which he has reason to believe that the assessee (or another person on his behalf) has (not filed any return under sub section (1) or subsection (2) of section 22 or concealed the. particulars of his income or deliberately furnished inaccurate particulars thereof (or omitted or failed to disclose all material facts necessary for the assessment for that year), at any time and in any other case at any time within four years) of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or, in the case of a company, on the Principal Officer thereof, a notice containing all or any of the requirements which may be included in a notice under subsection (2) of section 22, and may proceed to assess or re‑assess such income, profits or gains, 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 .................. Provided further that ............ Provided further that ............ (2) No order of assessment under section 23 of assessment or reassess ment' under subsection (1) of this section shall be made after the expiry, (in any case in which the assessee has (not filed any return under subsection (1) or subsection (2) of section 22 or concealed the particulars of his income or deliberately furnished incorrect particulars of such income) (or omitted or failed to disclose all material facts necessary for the assessment for that year), of four years from the end of the year in which the income, profits or gains were first assessable: Provided that where a notice under subsection (1) was issued within (one year before the expiration of) the time‑limit specified in that subsection, the assessment or re‑assessment, as the case may be, may be made in pursuance of such notice within one year from the date of service of such notice): provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or re‑assessment may be made shall apply to an assessment or reassess ment, as the case may be, made on the assessee or any person in consequence of, or to give effect to, any finding or direction contained in an order under suction 31, section 33, section 33‑A, section 34‑A, section 66 or section 66‑A or in the case of a firm, to an assessment made on a partner of the firm in consequence of an assessment made on the firm under this section). Explanation I.‑Whereby an order under sections 31, 33, 33‑A, 34‑A, 66 or 66‑A, any income is excluded from the total income of the assessee for an assessment year, an assessment of such income for another assessment year shall, for purposes of this section, be deemed to be one made in consequence of, or, to give effect to, any finding or direc tion contained in the said order. Explanation II.‑Whereby an order under sections 31, 33, 33‑A, 34‑A, 66 or 66‑A any‑income is excluded from the total income of one person and held to be the income of another person, an assessment of such income on such other person, shall, for purposes of this section, be deemed to be one made in consequence of or to give effect to, any finding or direction contained in the said order. (2‑A) A notice under subsection (1) may, where the Income‑tax Officer has reason to believe that the assessee, or any other person on his behalf, has not filed any return under .subsection (1) or subsection (2) of section 22 or concealed the particulars of his income or deliberately furnished inaccurate particulars thereof, be issued at any time not withstanding that at the time of the issue of such notice the period of eight years specified in the said subsection before its amendment had expired and no assessment or re‑assessment made or any other proceeding taken in consequence of such notice or any assessment or re‑assessment made‑under subsection (2‑B) or any other proceeding taken in consequence of such any notice issued for that purpose shall be called in question in any Court, tribunal or other authority merely on the ground that, at the time the notice was issued or at the time the assessment or re‑assessment was made, the time, within which such notice should have been issued or the assessment or re‑assessment should have been made under this section as in force before its amendment, had expired: Provided that no notice under subsection (1) shall be issued in respect of income, profits and gains which were received or are deemed to have been received, or which accrued or arose or are deemed to have accrued or arisen to an assessee before the fortieth day of August, 1947. (2‑B) Notwithstanding anything in subsections (1) and (2) limiting the time within which any notice may be issued or any assessment or re assessment made or any action taken such notice may be issued, assessment or re‑assessment made or action taken as respects the assessment (including re‑assessment) for any year ending at any time between the thirty‑first day of March, 1955, and the thirtieth day of June, 1959 (both days inclusive) on or before the thirty‑first day of December, 1965. .

4. The learned counsel for the applicant strenuously urged that the applicant was assessed for the assessment years 1956‑57, 1957‑58 and 1958‑59 and notice under section 34(1) of the Income‑tax Act, 1922, could be issued within tight years of the assessment year if it was a case of the income having escaped assessment or it had been under assessed or had been assessed at too low a rate or had been subject of excessive relief on account of concealment of particulars of the income by the assessee or any other person on his behalf or furnishing of inaccurate particulars thereof, and in any other case within four years of the end of that year. He, therefore, advanced the argument that the notices issued on 19‑4‑1969 were beyond the period of limitation prescribed under the section. The learned counsel for the applicant further urged that the assessment of the applicant for the aforesaid period did not fall within the exceptions provided in section

34. According to him, the second proviso to subsection (2) of section 34 of the Income‑tax Act, 1922, was not attracted in the applicant's care as the notices could not be deemed to have been issued in consequence of or to give effect to any finding or direction contained in an order under sections 3'3, 33‑A, 66 or 66‑A. He also urged that it was riot a case of concealment of income or furnishing of inaccurate particulars as to have attracted the provisions of section

34. He contended that it could be, at the most, a case of exclusion of certain income ‑from the total income of Odeon Cinema and its assignment to the applicant as an individual but even provisions of explanation II to subsection (2) of section 34 could not be pressed into aid in the applicant's case as it was inserted in the year 1965 be much after the period the applicant was assessed for. ‑ On the other hand, the learned counsel for the Department has contended that the time limit specified under section 34 of the Income‑tax Act did not operate in the appellant's case as it fell under the exception provided for the cases in which action is taken in consequence of or in order to give effect to any finding or direction made under sections 31, 33, 33‑A, 34, 66 and 66‑A of the Income‑tax Act. According to him, the notices under section 34 of the Income‑tax Act to the appellant were issued in consequence of the order of Appellate Assistant Commissioner under the provisions of section 31 of the Income‑tax Act. 4‑A. The question of limitation raised in the reference involves the scope of section 34 and its applicability to the assessment of the appellant. It is evident from the statement of facts furnished by the appellant herself that her investments assessed to Income‑tax were disclosed in the Income‑tax 'Return filed by her for Odeon Cinema for the accounting year having closed on 31st December, 1958 (she Assessment year 1959‑60), Assessment order was passed and he was assessed to income‑tax as an individual. She preferred an appeal before ‑the Appellate Assistant Commissioner, who disposed it of by his order dated 8‑1‑1968, the operative part of which for the purpose of this appeal, reads: "Accordingly I hold that the appellant was wrongly assessed as an individual. As such the assessment is set aside on this score. The present Income‑tax Officer is directed to look into this point afresh and then assign the proper status, other than that of an individual. Regarding the quantum of income assessed it is observed that the appellant returned a loss of Rs. 1,64,118 whereas income assessed was Rs. 23,272 after writing back certain inadmissibles and by making a huge addition of Rs. 1,80,000 as appellant's income from undisclosed sources. The appellant invested Rs. 2,75,000 in this business out of which the Income‑tax Officer treated an amount of Rs. 1,80,000 as unexplained. However, as I have already held above this is not a case of an individual and so the addition in question could be made only in appellant's own case as an individual. Since the assessment has been set-aside on this point the merits or demerits of this addition will not come up for discussion in this appeal. However, with the proper status to be assigned the addition in dispute shall automatically be excluded from the total income as assessed for this year and for this business."

5. It would appear from the order of the Appellate Assistant Commissioner dated 8‑1‑196$, reproduced above, that there was clear observation therein that a sum of Rs. 1,80,000 held by this Income‑tax Officer to be income from undisclosed sources could not be taken into consideration in the return for the income of the Odeon Cinema but it could be tape as income of the appellant in her individual capacity. 1t is obvious that the notices to the appellant for filing return of her income for the aforesaid three years were issued in consequence of the observations made in the order of the Appellate Assistant‑ Commissioner. Accordingly the time limit prescribed in section 34 for obtaining return of income‑tax did not apply to the case of the appellant. The learned counsel for the appellant next argued that even if it were construed that the notices for the filing of returns could be issued in consequence of the order of the Appellate Assistant Commissioner, the provisions of explanations to subsection (2) of section 34 of Income‑tax Act, which axe intended to meet such situation were inserted later in the year 1965, and they could not be pressed into aid for issuing notice for the assessment years 1956‑57, 1957‑58 and 1958‑

59. In other words, he maintained that the explanations did not have retrospective effect, This argument seems to have weighed with the Income‑tax Appellate Tribunal and the Tribunal proceeded on the assumption that an identical provision existed in section 34 in the form of second proviso to subsec tion (2) thereof at the relevant time and notices could be issued irrespective of the expiry of the time limit. The explanations t and 2 to subsection (2) of section 34 of‑ the Income‑tax Act were inserted by Act 5 of 1965 which came into effect from 1st July, 1965. But the notice to the appellant was issued in the year 1968 when both the explanations were on the statute book. Notices could, therefore; be issued for the assessment of income of the preceding period in the light of the explanations referred to above. It would be wrong to assume that the provisions of the explanations 1 and 2 referred to above would extend only to the cases arising after their insertion in the statute. The second proviso to subsection (2) of section 34 pressed into aid by the learned Income‑tax Appellate Tribunal was deleted from the statute by Finance Act of 1969 and this provision, which was inserted in the year 1956 Act (No. 30 of 1956) was on the statute Book at the: tune of the assessment years and it was subsisting at the time notices under section 34(1) of the Income‑tax Act were issued to the applicant. Accord ingly, answer to questions Nos. 1 and 2 is in the affirmative.

6. The question No. 3 was not elucidated before us and no answer can be given therefore. Questions Nos. 4 and 5 are essentially questions of fact and no question of law arises for answer. The‑ Question No. 6 relates to ii onus of proof of the income liable to tax. It was urged by the learned counsel for the applicant that the Income‑tax Authorities have wrongly placed on the applicant the onus of proving the source of investment made by her. According to him, the Department has to establish that the income of the assessee is taxable. He has placed reliance on (1965) 57 I T R 532 = A I R 1965 S C 1905, (1967) 66 I T R 462 ‑A I R 1965 S C 1905 and (1956) 29 I T R

194. On the other hand, the learned counsel for the respondent contended that burden of proving the sources of the income lies on the assessee. He cited (1963) 47 I T R 516, (1963) 49 I T R 703 and (1958) 34 I T R 807.

7. In this case, the applicant herself disclosed investment of a sum of Rs. 2,75,

000. According to her, she had raised this sum by selling her jewellery she had brought to Pakistan on her migration from Delhi. She furnished evidence to the extent of sale of jewellery of Rs. 95,000 but he could not furnish evidence for the procurement of Rs. 1,80,

000. However, she was given allowance of Rs. 25,000 on the basis of entry in the account books. In the case Gobindara Gulu Moudalir v. Commissioner of Income‑tax, Hyderabad (1958) 34 I T R 807, it was held that there an assessee failed to prove satisfacto rily the sources and nature of certain amount of cash received during the accounting year the Income‑.tax Officer was entitled to draw inferences of the receipts to be of assessable nature. Similar view was taken in a case Hazari Lal v. The Commissioner of Income‑tax Andhra Pradesh (1963) 47 I T R 516, and also in a case Orient Trading Company Ltd. v. Commissioner of Income‑tax (Central), Calcutta (1963) 49 I T R

723. The question of burden of proof was considered by the Supreme Court of India in a case Parimisetti Seetha and R. Namma v. The Commissioner of Income‑tax, Andhra Pradesh and it was held as under: "By sections 3 and 4 the Act imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by the person must be regarded as income liable to tax. In all cases in which receipt is sought to be taxed as income the burden lies upon Department to prove that it is within the taxing provision. Where however, a receipt is of the nature of income, the burden of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee". In the instance case, the applicant disclosed to the Income‑tax Authority that the funds invested by her were diverted from the sale‑proceeds of jewellery and she furnished evidence of the jewellery worth about Rs. 95, and she was not taxed therefore. She could not give account of the invest ment of the sum of Rs. 1,55,

000. In such circumstances, the burden o proving the nature of the income lay upon the applicant. Consequently answer to the question is in affirmative.

8. For the reasons recorded above, the answer to Questions Nos. 1, 2 and 6 is in affirmative while the Questions Nos. 3, 4 and 5 do not call for any answer. All the three references are disposed of accordingly with no order as to costs. M. Z. M. Reference answered.