# COMMISSIONER OF INCOME-TAX, BANGALORE v. C. M. JAFFAR KHAi~ (DECEASED) REPRESENTED BY HIS WIDOW RAHAMATHUNNISA BEGUM

- **Citation:** [1972] 1 S.C.R. 908
- **Court:** Supreme Court of India
- **Decided:** 1971-09-24
- **Bench:** C. A. Vaidialingam, P. Jaganmohan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-bangalore-v-c-m-jaffar-khai-deceased-represented-by-5486
- **Pages:** 8

## Headnote

Mysore IncomNax Act 1923, s. 48-Refund granted by Income-tax
Officer under section is an 'assessment'-Jnco1ne
profits and
gains for
previous year ending 31st March 1949 asses1ed under Mysort Act not
liable to be assessed under IndiGn Income-tax Act 1922 by virtue of Pan B
States (Taxation Concession) Order 1950, Paragraph 5 ( l )-Section 34
of Indian Aco has no applicability to income covered by said paragraph--
Words 'such income profits and gains' in pc.ragraph, interpretation of.
The assessee was a partner in a registered firm.
The firm filed its
income-tax return for the period ending 30-6-1949 under the
Mysore
Income-tax Act 1923 and an assessment was made thereunder.
On
15-3-1950 the as!e.,ee filed his return in respect of his individual income
including his share of income from the aforesaid firm for the accounting
year ending J0-6-1949. This return was also made under the Mysore Act.
By an order dated 20-3-1950 the Income-tax Officer directed a refund
of Rs. 641-3-0 to the assessee due to the difference in .the rate of tax
applicable to him and the maximum rate.
In the course of proceedings
for the assessment years 1951-52 and 1952-53 the Income-tax Officer was
of the opinion that the asscssee's income had escaped ass~sment in the
accounting yei!r ending 30-6-1949 and he therefore issued a notice to
hil)l under s. 34 of the Act.
The a"essee objected to the reopening of
the assessment on the ground that he had already been a"e"ed for the
said period under the Mysore Act and that according to paragraph 5 ( l)
of the Part· B States (Taxation Conce5Sion) Order 1950 an assessment
under ·the Indian Income-tax Act 1922 would be possible only if, before
the appointed day namely on 1-4-1950 the ass .. see had not been assessed
under the Mysore Act.
Since the refund order had been i'5ued to him
he claimed to have been assessed under the Mysore Act.
The Incometax Officer rejected this contention and made an assessment under s. 34
of the Indian Act on 6-3-1955.
The Appellate Assistant Commissioner
held that the assessment under •· 34 was not valid.
The Appellate Tri·
bunal was of the view that the refund granted by the income-tax Officer
under s. 18 of the Mysore Act was not an assessment as contemplated
under s. 23 of the Indian Act, and that the \.Vords 'such income profits
and gain•' used in paragraph 5 ( 1) of the Part B States (Taxation Concession) Ofder 1950 referred to identity of income or sources and that
it is only in cases wherein income has been as·M:Med under the Mysore
Act that the Income-tax Officer is prohibited from taking any further
action thereon.
On this view the Tribunal restored the order of the
Income-tax Officer.
In reference the High Court held that the refund
order which was made on assessee's return was an order of asse·ssment.
On appeal by the Revenue in this Court,
HELD : (i) The refund order given by the Income-tax Ollicer on
the return filed bv the assessee was an as.e.,ment within the meaning of
paragraph 5 of the Order. The asse.,ment of both the firm as well as
the individual had been made under the Mysore Act for the year ending
30th June 1949 in respect of income of that year. As such it clearly fell
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C.l.T. v. JAFFAR KHAN (Jaganmohan Reddy, J.)
909
within the provisions of sub-paragraph ( !) of paragraph 5 of the Order
which makes the Act applicable to such assessments. [913 A-B; 914 Bl
Esthuri Aswathiah v. Income Tax Officer, Mysore State, 41 l.T.R. 539,
relied on.
It is also provided in sub-paragraph (2) of paragraph 5 that where
income profits and gains have not been assessed under the State law
they shall be assessed under the Indian Act for the year ending 31-3-1951
which is the assessment year 1950-51 in respect of which the tax payable has been specified therein.
Thelre can be no doubt that for the
assessment year 1950-51 for which the accounting year is the previous
year I st April 1949 to 3 !st March 1950, the Act applies and asoessments
would be made there

## Text

908
COMMISSIONER OF INCOME-TAX, BANGALORE
v.
C. M. JAFFAR KHAi~ (DECEASED) REPRESENTED BY HIS
WIDOW RAHAMATHUNNISA BEGUM
September 24, 1971
(C. A. VAIDIALINGAM AND P. JAGANMOHAN REDDY, JJ.]
Mysore IncomNax Act 1923, s. 48-Refund granted by Income-tax
Officer under section is an 'assessment'-Jnco1ne
profits and
gains for
previous year ending 31st March 1949 asses1ed under Mysort Act not
liable to be assessed under IndiGn Income-tax Act 1922 by virtue of Pan B
States (Taxation Concession) Order 1950, Paragraph 5 ( l )-Section 34
of Indian Aco has no applicability to income covered by said paragraph--
Words 'such income profits and gains' in pc.ragraph, interpretation of.
The assessee was a partner in a registered firm.
The firm filed its
income-tax return for the period ending 30-6-1949 under the
Mysore
Income-tax Act 1923 and an assessment was made thereunder.
On
15-3-1950 the as!e.,ee filed his return in respect of his individual income
including his share of income from the aforesaid firm for the accounting
year ending J0-6-1949. This return was also made under the Mysore Act.
By an order dated 20-3-1950 the Income-tax Officer directed a refund
of Rs. 641-3-0 to the assessee due to the difference in .the rate of tax
applicable to him and the maximum rate.
In the course of proceedings
for the assessment years 1951-52 and 1952-53 the Income-tax Officer was
of the opinion that the asscssee's income had escaped ass~sment in the
accounting yei!r ending 30-6-1949 and he therefore issued a notice to
hil)l under s. 34 of the Act.
The a"essee objected to the reopening of
the assessment on the ground that he had already been a"e"ed for the
said period under the Mysore Act and that according to paragraph 5 ( l)
of the Part· B States (Taxation Conce5Sion) Order 1950 an assessment
under ·the Indian Income-tax Act 1922 would be possible only if, before
the appointed day namely on 1-4-1950 the ass .. see had not been assessed
under the Mysore Act.
Since the refund order had been i'5ued to him
he claimed to have been assessed under the Mysore Act.
The Incometax Officer rejected this contention and made an assessment under s. 34
of the Indian Act on 6-3-1955.
The Appellate Assistant Commissioner
held that the assessment under •· 34 was not valid.
The Appellate Tri·
bunal was of the view that the refund granted by the income-tax Officer
under s. 18 of the Mysore Act was not an assessment as contemplated
under s. 23 of the Indian Act, and that the \.Vords 'such income profits
and gain•' used in paragraph 5 ( 1) of the Part B States (Taxation Concession) Ofder 1950 referred to identity of income or sources and that
it is only in cases wherein income has been as·M:Med under the Mysore
Act that the Income-tax Officer is prohibited from taking any further
action thereon.
On this view the Tribunal restored the order of the
Income-tax Officer.
In reference the High Court held that the refund
order which was made on assessee's return was an order of asse·ssment.
On appeal by the Revenue in this Court,
HELD : (i) The refund order given by the Income-tax Ollicer on
the return filed bv the assessee was an as.e.,ment within the meaning of
paragraph 5 of the Order. The asse.,ment of both the firm as well as
the individual had been made under the Mysore Act for the year ending
30th June 1949 in respect of income of that year. As such it clearly fell
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C.l.T. v. JAFFAR KHAN (Jaganmohan Reddy, J.)
909
within the provisions of sub-paragraph ( !) of paragraph 5 of the Order
which makes the Act applicable to such assessments. [913 A-B; 914 Bl
Esthuri Aswathiah v. Income Tax Officer, Mysore State, 41 l.T.R. 539,
relied on.
It is also provided in sub-paragraph (2) of paragraph 5 that where
income profits and gains have not been assessed under the State law
they shall be assessed under the Indian Act for the year ending 31-3-1951
which is the assessment year 1950-51 in respect of which the tax payable has been specified therein.
Thelre can be no doubt that for the
assessment year 1950-51 for which the accounting year is the previous
year I st April 1949 to 3 !st March 1950, the Act applies and asoessments
would be made thereunder. This would be a hardship because under the
concerned tax law of a Part B State an as"essee in that State may have
been taxed already.
It is in cirder to remove this hardship that the
Order was i5'ued under Section 60A of the Act. [914 C-D]
Further, any omission to give information, or failure to file a return
or failure to disclose truly and fully all material facts which are a condition of the re-opening of assessments under s. 34 of the Act do not
appertain to the Income-tax Officer under the Act but to the Income-tax
Officor under the Mysore Act.
Even on this reading it would appear
that Section 34 of the Act would have no application., [914 El
(ii) The finding of the Tribunal that an assessment under s. 34 could
be made in the present case because the assessee's income from property
and ot:-tcr s'ources had not been assessed under the Mysore Act was wrong.
This reasoning would lead to the startling conclusion and would imply
that there would be two assessments in respect of the
inco·me
of an
assessee during one assessment year, i.e., while assessment made under
the Mysore Act in respect of income reported by the assessee
cannot
be reopened, the income not disclosed by him would be liable to be
assessed under the Act.
Moreover if that reasoning is co_rrect it would
not be a case of reassessment under s. 34 but assessinent under s. 23
of the Act. This was not the stand taken by the Revenue at any stage.
The appeals must accordingly be dismissed. [914 G-915 Al
CIVIL APPEAL JURISDICTION: Civil Appeals Nos. 1306 and
1307 of 1967.
Appeals by special leave from the judgment and order dated
February 4, October 5, 1966 of the Mysore High Court
in
I.T.R.C. No. 4 of 1964 and S.C.L.A.P, No. 214 of 1966.
B. Sen and R. N. Sachthey, for the appellant (in both the
appeals).
The reipondent did not appear.
The Judgment of the Court was delivered byP. Jaganmohan Reddy, J.
The High Court of Mysore in a
u reference under Sec. 66 ( 1) of the Indian Income Tax Act 1922
(hereinafter called lthe Act') had held against the Revenue on
the question : ( 1) whether in the circumstances of the case the
refund granted by Income Tax Officer under Sec. 48
of
the
910
SUPREME COURT REPORTS
[l 972p S.C.R.
Mysore Income Tax. Act 1923 (hereinafter called 'the Mysore
Act') amounted to an assessment and, (2) whether the interpretation placed by the Income Tax Tribunal on the words 'such
income profits and gains' in paragraph 5 ( 1) of the Part B States
(Taxation Concession)
Order 1950
(hereinafter called 'the
Order') is correct ? On the first question its answer was in the
afiirmative and on the second in the negative.
Against this Judgmen~ two appeals have been filed by special leave by the Comm1ss1oner of Income Tax, Mysore.
The facts which gave rise to the reference before the High
Court are that a regj.stered Jinn of partnership known as C. M.
Jaffar Khan & Co., Bangalore of which the assessee was a partner filed a return in respect o.f its income for the period ending
30-6-49 under the Mysore Act and an assessment was made thereon in a sum of Rs. 3376-7-0 which was duly paid. On 15-3-50
the assessee filed his return in respect of his individual income in-
.eluding his share of income from the partnership firm for the
accounting year ending 30-6-49. This return was also made
under the Mysore Act and it appears that in respect of this return,
by an order dated 20-3-1950 the Income Tax Officer directed a
refund of Rs. 641-3-0 to the assessee due to the difference in the
rate of tax_ applicable to him and the maximum rate.
It further
·appears that in the course of the proceedings for the assessment
years 1951-52 and 1952-53 the Income Tax Officer was of. the
opinion that the assessee's income had escaped assessment in the
accounting year ending 30-6-49 and he therefore issued a notice
to him under Sec. 34 of the Act
The assessee objected to the
reopening of the assessment on the ground that he had already
been assessed in respect of the income for the year ending 30-6-49
under the Mysore Act; that a refund of tax had been given to him,
as such the Income Tax Officer has made an assessment under the
Mysore Act; and that according to paragraph 5 of the Order an
assessment under the Act would be possible only if, before the
appointed date namely on 1-4-1950 the assessee had not been
assessed under the Mysore Act.
The Income Tax Officer rejecled
these contentions on the ground that the assessment made on the
firm could not be regarded as an assessment made on the assessee
individually and completed the assessment for the years 1950-51
on 6-3-55 on a total income of Rs. 3,21,821.
The assessee appealed to the Income tax Appellate Assistant
Commissioner and raised similar contentions to those raised before
the Income Tax Officer.
The Income Tax Officer on the o"ther
hand contended that as the respondent assessee had disclosed only
a share income from the firm 'C. M. Jaffar Khan & Co.' and as the
income from the property and other sources was not disclosed
such profits and j!ains had not been assessed under the Mysore
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C.I.T. v. JAFFAR KHAN (Jaganmohan Reddy, J.)
911
Act and, therefore, action under Sec. 34 of the Act was fully
justified.
The Appellate Assistant Commissioner however, rejected the contention of the Income Tax Officer and held that
the re-assessment under Sec. 34 of the Act was not valid. In
this view he set aside the assessment made by the Income Tax
Officer.
The Department filed an appeal to the Income Tax Tribunal against the order of the Appellate Assistant Commissioner.
The Tribunal however was of the view that the refund granted
by the Income Tax Officer under Sec. 18 of the Mysore Act was
not an assessment as contemplated under Sec. 23 of the Act and
that the words 'such income profits and gains' used in paragraph
5 (I ) of the Order referred to identity of income or sources and
that it is only in cases wherein income has been assessed under the
Mysore Act, that the Income Tax Officer is prohibited from taking any further action thereon.
The appeal was therefore allowed
and the assessment made by the Income tax Officer restored.
The High Court following the decision of this Court in Esthuri
Asmathiah v. Income Tax Officer, Mysore State('), held that
as th~ Income Tax Officer had given a refund on the return filed
by the assessee for the year in question, that order of refund
amounted to an· assessment on the assessee.
On the second question as to the meaning to be given to the word 'such income profits
and gains' occurring in paragraph 5 of the Order the· Bench rejected the reasoning of the Tribunal and accepted that of the
Appellate Assistant Commissioner, for, as Hegde, J, as he then
was observed :·
"Otherwise, what would happen is that there
would be two assessments in respect of the income ol an assessee
during one assessment year".
The contentions of the learned Advocate for the Revenue follow much on the same lines as were the contentions before the
High Court of Mysore namely that as the assessee did not disclose his personal income except that of the income of the firm,
that income would not have been assessed under the Mysore Act,
as such, it is open to the Income Tax Officer to make an assessment under Sec. 34 of. the Act.
He further contends .that the
object of the Order was to give relief from double taxation becauie
of the financial integration of Part B States of which Mysore was
one. the assessment of income, profits and gains of the previous
year endnig after 31-3-49 which is a previous year for 'the ~aid
assessment year 1949-50, had to be assessed under the Act for
!he year ending on 31-3-51, but this could be done "if and only
1f, such income profits and gains have not before the appointed
day been assessed under the State Law''.
It is therefore sub!
mitted that as 1this order was made in exercise of the pov1ers conferred under Sec. 60(A) of the Act, any income profits and
(1) 41 !TR 539.
912
SUPREME COURT REPORTS
[1972] 1 S.C.R.
A
gains which have not been assessed under the Staie law will become a;:>essable under the Act.
Paragraph 5 of the Order and
Sec. 34 of the Act are as follows :-
Paragraph 5 (1)
"The income, profits and gains of any previous
year ending after the 31st day of March 1949, which
is a previous year for the State assessment year 1949-50,
shall be assessed under 'the Act for the year ending on
the 31st day c{ March 1951, if and only if, such income, profits and gains have not, before the appointed
day been assessed under the State law".
( 2) Where the income, profits and gains referred
to in sub-paragraph (I) have not Ileen assessed under
the State law. they shall be assessed under lhe Act for
the year ending o~ the 31st day of March, 1951, and
the tax payable thereon shall be determined as hereunder-
( 3) In this paragraph the State asi;e!lsment year
1949-50 means the assessment year which commences
on any date between the !st April, 1949 and the 31st
December, 1949.
Sec. 34 "(!) If-
(a) the Income-tax Officer has reason to believe
that by reason of the omission or failure on the part of
an as~essee to make a return of his income undet Section 22 for any year or to disC!ose fully and truly all
material facts necessary for his assessment for that year.
income, profits or gains chargeable to iscome-tax have
escaped assC10sment for that year, or ....
(b) nowi'thstanding 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 Qossession reason to believe· that
income, profits or gains chargeable to income-tax have
escaped _assessment for any year. . . . he may in caSe5.
falling urider clause (a) at any time within eight years
and in cases falling under clause (b) at any time within
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c.r.T. v. JAFFAR KHAN (Jaganmohan Reddy, J.)
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four years of the end of• that year,
serve on the
assessee . . . . "
On the admitted facts which are not in dispute it is apparent
that the refund order given by the Income Tax Officer on the
return filed by the assess.ee is an assessment within the meaning
of paragraph 5 of the Order. It was so held in Esthuri A.swathiah
case (1) where on the facts of that case the assessee who had
filed his return for the assessm~nt year 1950-51 disclosiqg that
there was no assessable income contended that as it had been
assessed for the accounting year ending June 30, 1949 under the
Mysore Act there was no assessable income for that year and
that only the income for the next accounting y·~ar ending on June
30, 1950 was assessable for the year 1951-52. The, Income Tax
Officer passed an order "no proceeding" and closed the assessment.
This decision is not helpful as it did not deal with the
question that arises before us. In 'that case a notice under Sec.
22 of the Act was served on the assessee requiring it to submit
its return of income for the assessment year 1950-51. It is in
respect of that notice th.at a return was filed by the assessees to
which we have made a reference showing that there was no assessable income. For the next assessm~nt year 1951-52 the assessees
filed a return· and in the course of those assessment proceeding
account books were produced by them which disclosed an opening
cash credit balance of Rs. 1,87,000/- as on 1st July 49. When
the Income tax Officer called for the books of the earlier year
the books were not produced by the assessees. In the circumstances
a sum of Rs. 1,37,000/- out of the opening balance as on 1-7-49
was treated as income from undisclosed sources for the year
1951-52.
But on appeal the Appellate Assistant Commissioner
held that the fjnancial year ending 31-3-50 ought to be 1aken as
the previous year for the income from undisclosed sources.
In
the meantime the appellant submitted a fresh
return for
the
assessment year 1950-51 on which no action was taken but on
October 15, 1957 the Incom~ tax Officer served a· notice
of
reassessment under Sec. 34 of the Aot calling upon the Appellant
to. submit a fresh reiurn. That order was challenged in a Writ
Petition before the High Court on the ground that the Income
Tax Officer had no jurisdiction to issue a notice of ~eassessment.
That petition was dismissed by the High Court. In an appeal
by certificate this Court held that since the Income-tax Officer
had passed an order thereon 'no proceeding', it mean~ that he
had accept~d the return submitted by the Appellant, and assessed
the income as nil and if thereafter he had reason to belive that
the Appellants had failed to disclose fully and truly all material
facts necessary for assessment for that yeat, it was open to him
(I) 41 I.T.R. 539.
914
SUPREME COURT REPORTS
(1972] l S.C.R.
to issue a notice for reassessment under Sec. 34. It was further
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held that the Appellant was liable ito be assessed under the Indian
Income-tax Act 1922 and not under the Mysore Income-tax Act
for the year 1950-51.
·
The facts in these appeals before us are dilferent in that th;
assessme!Jlt of both the firm as well as of the individual had been
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made under the Mysore Act for the war ending 30th June, '49
in respect of income of that year. As such, it ~!early falls within
the provision of sub-paragraph (J ) of paragraph 5 of the Order
which makes the Act inapplicable to such assessments. It is also
provided in sub-paragraph (2) of Paragraph 5 •that wb.ere income,
profits and gains have not been assessed_ under the State law they
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shall be assessed under the Act for the year ending 31-3-51 which
is the assessment year 1950-51, in respect of which the tax payable
has been specified therein.
There can be no doubt that for th·~
assessment year 1950-51, for which the accoun•ting year is the
previous year 1st April 1949 to 31st March 1950, th~ Act applies
and assessments would be made thereunder.
This would be a o
hardship because under any of the concerned tax law of a Part
B State an assessee in that State may have been taxed already. It
is in order to remove this hardship that the order was issued
under Sec. 60 A of the Act. This apart it may also be nQ)iced
that any omission to give information, or failure to file a return
or failure to disclose truly and fully all material facts which are E
a condition of the reopening of ass·~ssments under Sec. 34 of the
Act do not appertain to the Income Tax Officer under the Act
but to the Income Tax Officer under the Mysore Act. Even on
this reading it appears to us that Sec. 34 of the Act would have
no applicatim1.
The learned counsel for the Revenue was not
abl·~ to meet this point.
The Tribunal thought that there was
some substance in the Departmental representative's contention
on the second question, that the words 'such income' profits and
gains u'ed in paragraph 5 ( I ) of the order 'refer to identity of
income or sources; that it is only in cases where the income had
been assessed under the Mysore Act; that the Income-tax Officer
is prohibited from taking further action thereon' and as such 'it
cannot be said that the assessee had been assessed on incomes
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such as property income and income under other sources',
and
it is these that have been brought to assessment under Sec. 34
of the Income-tax Act".
As rightly pointed out by the High
Court that this reasoning would lead to startling conclusions and
would imply that there would be two assessments in respect of
the income of an assessee during one assessment year i.e. while
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assessment made under the Mysore .Act in respect of income reported by the assessee cannot be reopened, the income not disclosed to him would be liable to be assessed under the Act. Apart
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C.I.T. v. JAFFAR KHAN (Jaganmohan Reddy,!.)
915
from the incongruity in this reasoning poin~~d out by the .High
Court it appears to us that if that reasoning is correct it would
not be a case of reassessment under Sec. 34 but assessment under
Sec. 23 of the Act. This is ce~tainly not the stand t~ken bv the
Revenue eit!J.~r before the High Court or before us.
In the circumstances the answers returned by the High Court do. not require
any interference and the appeals are accordingly dismissed. There
will be no order as to costs since the respondents are ex-parte.
G.C.
Appeals dismissed.