# COMMISSIONER OF INCOME·TAX, MADRAS v. S. RAMAN CHETTIAR

- **Citation:** [1965] 1 S.C.R. 883
- **Court:** Supreme Court of India
- **Decided:** 1964-10-27
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-madras-v-s-raman-chettiar-3273
- **Pages:** 7

## Headnote

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COMMISSIONER OF INCOME·TAX, MADRAS
v.
S. RAMAN CHETTIAR
October 27, 1964
(K. SUBBA RAo, J. c. SHAH AND s. M. Snoo JI.)
Indian Income-tax Act (11 of 1922), ss. 22(3) and 34-Invalid notice
under s. 34--Return submitted-Subsequent proceedings under s. 34-If
can be taken ignoring return.
Jn response to a notice dated 3rd April 1948, under s. 34 of the Indian
Income-tax Act, 1922, the assessee submitted returns for the assessment
years 19-14-45 and l 9~5-46. The Income-tax Officer dropped proceedings
[or the former year and determined the net taxable income for the latter
year. The assessee appealed first to the Appellate Assistant Commissioner
ar.d then to the Appellate Tribunal. The Tribunal allowed the appeal in
part, held that a portion of the profit determined was assessable in the
assessment y~ar 1944-J5 and observed, that the Income-tax Officer was at
liberty to take appropriate action.
The InCome-tax Officer again issued
a notice under s. 34 after obtaining the sanction of the Commissioner, as
required by the Amending Act 48 of 1948 (passed on 8th September 1948,
but !!1'•.le retrospective from 30th March 1948), in respect of the assess·
ment year 1944-45.
He brought to tax, the amount determined by the
Tribunal as the profit of the year. The assessee's appeals to the Appellate
Assistant Commissioner and the Appellate Tribunal were unsuccessful. The
High Court, on a reference, held in favour of the assessee holding tha<thc
reassessment under s. 34 for the year 1944-45 was not valid. The Commissioner appealed to the Supreme Court.
HELD : The first return submitted by the assessce was a \'lllid return
under s. 22(3).
The Department could not therefore, ignore it and
issue nolice under s. 34 on the assumption that there had been an omission
or failure on the part of the assessce to make a return under s. 22. [884 B-C;
887 CJ
Section 22(3) permits an assessee to furnish a return at any time before
the assessment is made, that is, before the time mentioned in s. 34(3). It
need not be a voluntary return in the sense that it must be. suo motu. If
the first notice under s. 34 was held to be bad because the Commissioner's
sanction was not obtained as required by the amendment of 1948, it did
not follow that a return made in pursuance of it must also be treated ..
bad. If a return otherwise valid is filed by an assessee before the receipt
of a valid notice under s. 34, it has to be treated as a valid return within
s. 22(3).
[886 F-H; 889 C-D, Fl
Commiss!oner of Income-tax) Bihar and Orissa v. Mahara}a Pratap Singh
Bahadur of Gidhaur, (1961) 411.T.R. 421, distinguished.
Commissioner of Income-tax, Bombay City. v. Ranchodda.v Karsondas,
(1959) 36 l.T.R. 569, referred to.
;.
R. K. Das & Co. v. Commissioner of Income-tax, West Bengal, ( 1956)
30 l.T.R. 439. overruled.

## Text

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COMMISSIONER OF INCOME·TAX, MADRAS
v.
S. RAMAN CHETTIAR
October 27, 1964
(K. SUBBA RAo, J. c. SHAH AND s. M. Snoo JI.)
Indian Income-tax Act (11 of 1922), ss. 22(3) and 34-Invalid notice
under s. 34--Return submitted-Subsequent proceedings under s. 34-If
can be taken ignoring return.
Jn response to a notice dated 3rd April 1948, under s. 34 of the Indian
Income-tax Act, 1922, the assessee submitted returns for the assessment
years 19-14-45 and l 9~5-46. The Income-tax Officer dropped proceedings
[or the former year and determined the net taxable income for the latter
year. The assessee appealed first to the Appellate Assistant Commissioner
ar.d then to the Appellate Tribunal. The Tribunal allowed the appeal in
part, held that a portion of the profit determined was assessable in the
assessment y~ar 1944-J5 and observed, that the Income-tax Officer was at
liberty to take appropriate action.
The InCome-tax Officer again issued
a notice under s. 34 after obtaining the sanction of the Commissioner, as
required by the Amending Act 48 of 1948 (passed on 8th September 1948,
but !!1'•.le retrospective from 30th March 1948), in respect of the assess·
ment year 1944-45.
He brought to tax, the amount determined by the
Tribunal as the profit of the year. The assessee's appeals to the Appellate
Assistant Commissioner and the Appellate Tribunal were unsuccessful. The
High Court, on a reference, held in favour of the assessee holding tha<thc
reassessment under s. 34 for the year 1944-45 was not valid. The Commissioner appealed to the Supreme Court.
HELD : The first return submitted by the assessce was a \'lllid return
under s. 22(3).
The Department could not therefore, ignore it and
issue nolice under s. 34 on the assumption that there had been an omission
or failure on the part of the assessce to make a return under s. 22. [884 B-C;
887 CJ
Section 22(3) permits an assessee to furnish a return at any time before
the assessment is made, that is, before the time mentioned in s. 34(3). It
need not be a voluntary return in the sense that it must be. suo motu. If
the first notice under s. 34 was held to be bad because the Commissioner's
sanction was not obtained as required by the amendment of 1948, it did
not follow that a return made in pursuance of it must also be treated ..
bad. If a return otherwise valid is filed by an assessee before the receipt
of a valid notice under s. 34, it has to be treated as a valid return within
s. 22(3).
[886 F-H; 889 C-D, Fl
Commiss!oner of Income-tax) Bihar and Orissa v. Mahara}a Pratap Singh
Bahadur of Gidhaur, (1961) 411.T.R. 421, distinguished.
Commissioner of Income-tax, Bombay City. v. Ranchodda.v Karsondas,
(1959) 36 l.T.R. 569, referred to.
;.
R. K. Das & Co. v. Commissioner of Income-tax, West Bengal, ( 1956)
30 l.T.R. 439. overruled.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1096 of
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1963.
Appeal by special leave from the judgment dated January 3,
1961 of the Madras High Court in Caso Referred No. 114 of 1956.
L2Sup/6S-13
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884
SUPREMI!
COURT REPORTS
[ 1965] I S.C.R.
K. N. Rajagopala Sa.<tri, R. Ii. Dhebar and R. N. Sachthry, for
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the appellant.
S. Swaminathan and R. Gopalakrishnan, for the respondent.
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The Judgment of the Court was delivered by
Sikri J.
This is an appeal by special leave directed against n
the judgment of the Madras High Court answering the question
"whether the reassessment under s. 34 (of the Indian Income Tax
Act, I 922) completed on 30th June, 1953 for the year I 944-45 is
valid' in the negative. The relevant facts are as follows :
The respondent, hereinafter referred to as the assessee is
a
Hindu undivided family.
For the assessment years 1944-45 and
1945-46, the assessee filed no returns under s. 22 of the Indian
Income Tax Act, hereinafter referred to as the Act, nor were any
notices issued under s. 22(2) of the Act.
On April 3, 1948. the
Income Tax Officer issued notices under s. 34 for both the assessc
uu:nt years.
At that lime it was not necessary to obtain sanction
0
of the Commissioner of Income Tax and none was obtained. The
asscssee filed a return for the assessment year 1944-45 on Septemhcr 4, 1948, showing an income of Rs. 4,053 which was below
the HUf' taxable limit of Rs. 7.200.
The assessee also filed a
return for the assessment yeaf 1945-46.
It appears that
the
Income Tax Officer dropped proceedings for 1944-45 as infructuE
ous. but for the assessment year 19-15-46, he passed an order on
October 27,
1950. determining the net
taxable
incom~ as
Rs. 1,20,603. · The "'"cssec aprealcd to the Appellate Assistant
Commissioner and then appealed to the Appellate Tribunal.
On
November 19, 1952. the Appellate Tribunal allowed the appeal in
p:1rt.
It held that our of a total profit of Rs. 79,760 arising
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from the sale of certain properties. only Rs. 33.000 was as.;essable in the asse<smcnt year 1945-46 and Rs. 46.760 was assessable in the ass"ssment year 1944-45.
The Appellate Tribunal
ob<ervcd thus in the order:
"The Income Tax Officer is at liberty to take such
action as he may be advised about the assessee's liability
for the earlier year 1944-45."
On Fehruary 27, 1953. after having obtained the sanction of
the Commissioner. the Income Tax Officer issued a notice purpNtG
in!! to he under s. 34 of the Act in respect of the assessment year
1944-45.
It is the validity of this notice that is now in question.
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The Income Ta't Officer passed an order on June 30, 1953, assessing the total income as Rs. 51,523.
The Appellate Assistant
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C.I.T, V. RAMAN CHETTIAR (Sikri J.)
885
A Commissioner affirmed the order.
He held that the action of the
Income Tax Officer in starting proceedings under s. 34(1) (a) was
valid.
He further held that in view of the finding of the Appellate
Tribunal that the Income Tax Officer would be at liberty to take
action about the assessee's, liability to tax for 1944-45 assessment,
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the second proviso to sub-s. (3) of s. 34, as amended by Amendment Act of 1953, was applicable and consequently the time-limit
specified in s. 34 would not be applic<tble.
The Appellate Tribunal, without going into the question whether s. 34(1)(a) could
be invoked by the Revenue, affirmed the assessment on the ground
that the second proviso to s. 34(3) of the Act, as amended,
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applied.
At the instance of the assessee, the Appellate Tribunal referred
the question set out in the beginning of the judgment. The High
Court, as already stated, answered the question in the negatjve.
It held that notwithstanding that the return filed by the assessee on
D September 4, 1948, was the result of an invalid notice, the return
itself could not be ignored or disregarded by the Department, and
the Department cannot issue a further notice under s. 34( 1) (a) of
the Act on the assumption that there had been an omission or failure on the part of the assessee to make a return of his income under
s. 22. It further held that the .ratio of the decision of this Court in
E Commissioner of Income-tax v. Ranchhodas Karsondas(') governed the present case.
Mr. Rajagopala Sastri, the learned counsel for. the appellant,
submits that the return was not voluntary and as it was made in
pursuance of an invalid notice, must also be treated as invalid~
He says that no assessment could be made on its basis.
He further
F says that the case of Ranchhodas Karsondas(') is distinguishable.
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The learned counsel for the assessee raises an objection to this
new point being urged at this stage.
He points out that in the
statement of the case, filed in this Court on behalf of the appellant,
one proposition of law is put thus:
"The notice issued on 3rd April 1948 and return filed
on 4th September 1948 being valid the proceedings thus
initiated came to an end on 27th October, 1950, and
there were no proceedings pending when the second
notice was issued on 27th February, 1953."
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This proposition, he says, admits that the .return was valid.
On
the merits he has supported the reasoning of the High Court and
(I} [1960 I S.C.R. 114.
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886
SUPREME
COURT
REPORTS
[i 965) I S.C.R.
added that in this case assessment could have been made by the
Income Tax Officer till March 31, I 949. under s. 23, tre,:ting the
return as one made under s. 22.
In our opinion the appellant is not raising ar1y new point.
It
is true that in the above cited proposition the appellant says that
\I" return is valid but this foUows the assertion that the notice
i';sued on April 3, 1948 is valid.
In another part of the statement
of the case, however, the appellant states that "the return was not
a voluntary return and. thcrdorc. could not
b·~ rc·g:irded as a
return on which valid assessment could be made, the case was one
where no return had been filed and was abo one where income had
escaped asses>1ncnt.
Clause (a) of section 34 ( 1 ) was therefore
applicable and the second notice under settion 34 was given within
the period allowed hy law".
The short question which arises in this case is whether the
return da:ed September 4, 1948, can be treated as valid return
under s. 22 ( 3) of the Act.
Section 22 ( 3) is in the following
terms:
"22(3). If any person has not furnished a return
within the time allowed by or under sub-section (I) or
sub-section (2), or having furnished a return under either
of those sub-sections, distovcrs any omission or wrong
statement therein, he may furnish 3 relurn or a revi<cd
return. as the case may be, at any iimc before the assessment is made."
,Section 22 ( 3) permits an assessee to furnish a return at any time
before the assessment is made.
By virtue of s. 34(3), as it stood
in 1949, assessment could ha\'e been made at least up to March
31. 1949, if the return was valid.
Therefore, it may be implied,
as laid down in S. Santosha Nadar v. First Additional Income-Tax
Of]icrr. T11ticori11 ( 1 ) and' Commi.uioner of Income-Tax Bombay
City II v. Bhagwandas Amersey(') that tile return must be filed
before the time mentioned in s. 34(3 ).
This condition is, however. satisfied in this case.
Mr. Sastri says that it is further implicit ins. 22(3) that the return must be voluntary.
We arc unable
to appreciate that every return made unde1 s. 22(3) must be a
voluntary return, in the sense that it must be suo motu.
If a
return is made in pursuance to a general notice under s. 22( 1 ). or
a special notice under s. 22(2), it is a return made voluntary but
not suo motu.
It is a return made in response to a public notice
or a special notice. lf no return is made in response to notices
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(ll (1961) L2 I .T.R. 715
(2) (1963) 50 l.T.R. 239
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C.I.T. v. RAMAN CHETTIAR (Sikri J.)
887
under s. 22(1), ands. 22(2), the Act attaches certain penalti6S.
In our view, it is not correct first to describe a return made under
s. 22(3) in response to a notice under s. 22(1) ors. 22.(2) as
voluntary, and then say that a return made in response to a notice
under s. 34 is not voluntary just because it warns the assessee that
some income has escaped assessment.
In our opinion, both types
of returns are under s. 22(3) of the Act. In the first type of
cases it is directly under s. 22(3). In case of a notice under
s. 34, it is deemed to be notice under s .. 22(2) and the return
deemed to be a return under s. 22(3). From the language of
s. 22 ( 3), we are unable to say that the return dated September 4,
1948; was not a return withins. 22(3).
Mr. Sastri. however, says that this Court proceeded on a contrary view in Commissioner of Income-tax Bihar and Orissa v.
Maharaja Pratap Singh Bahadur of Gidhaur(').
Let us then see
what was decided by this Court.
Shortly stated, the facts in that
case were that the Maharajah had agricultural income and interest
received by him on arrears of rent for the four assessment years
1944~45 to 1947-48.
The Income Tax authorities did not include
in his assessable income interest received by him on arrears of rent
o;i the ground that it was agricultural income.
This view was
held to be wrong by the Privy Council.
The Income Tax Officer
issued notices under s. 34 on August 8, 1948, without obtaining
the approval of the Commissioner:
Section 34 was amended by
the Income-Tax Business Profits Tax (Amendment) Act, 1948
(XL VllI of 1948).
Asse;~ments were made on the basis of the
above notices dated August 3, 1948. The question referred to the
Hi~h Court was: "Whether in the circumstances of the case assess•
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m;nt proceedings were validly initiated under s. 34 of the Indian
Income Tax Act".
This Court held that:
"As the Amending Act repealed the original section
34 not from the day it was promulgated but from an
earlier date, March 30, 1948, and substituted in its place
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the re-enacted section containing the proviso, and provided that the re-enacted section shall be deemed to have
come into force with retrospective effec;t on March 30,
1948, the application of section 6 of the General Clauses
Act was excluded. As the notices were all issued on
August 8, 1948, at a time when on the statute book must
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be deemed to be existing a provision enjoining a duty
upon the Income Tax Officer to record his reasons and
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(l) lt96l] 2 S.C;R. 760.
888
SUPREME COURT REPORTS
(1965] I S.C.R.
submit for the approval of the Commissioner before issuing notic:e under section 34, unless that approval was
obtained . the notices could not be issued.
The notices
issued by the Income-Tax Officer without
complying
with the conditions laid down in the proviso to section
34 ( I ) as re-enacted were invalid, and the entire proceedings for reassessment were illegal."
In view of the question referred to the High Court, this Coult was
not really concerned with the validity of the returns made, but
Mr. Sastri relies on certain observation made by the High Court
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anJ this Court.
When the reference was before the Patna High
Court in Commissioner of Income-Tax, Bihar and Orissa v. Maha·
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raja Pratap Singh Bahadur('), the learned counsel h,id contended
that it was physically impossible for the Income Tax Officer to
comply with the requirements of the amended s. 34 on August 8,
1948.
The High Court, regarding this contention, observed that
"the argument is correct, but the Income Tax Department was not D
prejudiced because notices under s. 34 could be re-issued after the
8th of September, the date of the Amending Act, and after complying with the requirements of the amended section 34". This Court,
in the appeal from the above decision, after holding that the
notices were invalid, observed:
"Indeed, there was time enough for fresh notices to
have been issued, and we fail to see why- the old notices
were not recalled and fresh ones issued."
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These observations certainly show that this Court assumed that
fresh notices could have been issued in that case. Mr. Sastri says
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that the Department has done exactly what the Supreme Court
indicated in that case should be done.
But, apart from the fact
that there is no discussion on the qQestion of the validity of the
return, it is possible to say that on th:\ facts in that case fresh
notices could have been issued. In Mahwaja/1 Pratap Singh's(')
case, the Maharajah had filed returns for four assessmtnt years
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1944-45 to 1947-48 under s. 22, and assessments had been made
but the income of the assessee with rel!llrd to interest on arrears of
rent was not included .• His returns in pursuance to a notice under
s. 34 could not be treated ~s a return under s. 22 ( 3) bec.ause he
had already filed returns-.ap.d was not purporting to revise his _previous returns.
But in the present case the assessee had never filed
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a return under s. 22.
The first return he filed was in response to
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(!) (1956] 30 I.T.R. 484.
(2) (t961] 2 S.C.R. 760.
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C.l.T. V. Tu\MAN CHETTIAR (Sikri J.)
889
A· a notice under s. 34, but he could have filed this return even with·
out a notice under s. 34, for the four years prescribed bys. 34(3)
had not expired.
This Court in Commissioner .of Income-tax Bombay City v.
Ranchhoddas Karsondas ( 1) held that a return showing income
B below taxable limit was a good return and the Income Tax Officer
could not choose to ignore the. return and issue a notice under
s. 34, Hidayatullah J., speaking for the Court, observed that "it is
a little difficult to understand how the existence of a return can be
ignored once it is filed".
But this case is not of much help in
determining whether the return in this. case is a good return within
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s. 22(3) of the Act.
Mr. Sastri further contends that if the notice under s. 34 is held
to be bad, it must follow. that the return made in pursuance of it
must also be treated as bad We are satisfied that there is no
substance in this contention. The decision of the Calcutta High
D Court in R. K. Das & Co. v. Commissioner of Income-Tax West
Bengal(') certainly supports Mr. Sastri's contention but, with
respect, we are unable to agree with the ·reasoning of the High
·Court.
Apart from the fact that this Court did not approve of
this decision in Ranchhoddas Karsondas' s case ( 1), we are unable
to appreciate that if the Income Tax Officer had based his assess·
E ment on the return treating it to be a return under s. 22(3), the
assessmen~ wouJd not stand a moment's scrutiny.
We think that some confusion has crept into this branch of the
Income Tax Law by the use of the words 'voluntary return' and a
'non-voluntary return'.
Section 22(3) does not use this expresF
sion and whatever the impelling cause or motive if a return otherwise valid is filed by an assessee before the receipt of a valid notice
under s. 34, it is to be treated as a return within s. 22(3) for it
falls within the language of the sub-section.
In the result we agree with the High Court that the question
referred to the High Court must be answered in the negative.
G Accordingly we dismiss the appeal with costs.
Appeal dismissed.
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(I) [1960] I S.C.R. 114.
(2) [19S6] 30 I T.R. 439.