# Esthuri Aswathiah v. Income-tax

- **Citation:** [1967] 1 S.C.R. 685
- **Court:** Supreme Court of India
- **Decided:** 1966-10-03
- **Bench:** J. C. Shah, V. Ramaswamj, V. Bhargava
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/esthuri-aswathiah-v-income-tax-3902
- **Pages:** 10

## Headnote

Income-tax Act, 1922, ss. 5(7A), 34-Proceeding pursuant to notice
under s. 34 "filed" by Additional Income-tax Officer as another prloceeding for same year pending before Principal income-tax Officer-Latter
Issuing another notice under s. 34-Whether proceeding on first notice
still pending-Whether second notice and assessment thereafter val/4Whether transfer under s. 5(7A) only possible when proceedings pending-Notice under s. 34 iust before expiry of eight years-Assessment
completed within one year thereafter-Whether valid or barred by limit~
tion.
In proceedings pursuant to a notice under s. 34 of the Income-tax
Act, 1922, the Additional
Income-tax Officer passed an order to the
effect that the income should be taken in the assessment on a second return for the same year pending before the Principal Income-tax Officer,
for which tbete was another file and that the case was, therefore, "filed".
The Principal Officer, after issuing a n<>tice
under s. 34, passed an
assessment order, but in an appeal against that order, he himself pointed
out that he had no jurisdiction to make the order. The Appellate Assistant Commissioner therefore set aside the assessment order.
The Commissioner thereafter transferred the case from the Additional Officer to
the Principal Officer. The latter then issued another notice to the assessee
under s. 34 and in pursuance of that notice passed an assessment order.
The assessee appealed against this order to the Appellate Assistant
Commissioner on the grounds,
that (i) the notice under s. 34 of the
Principal Officer was invalid 'because the proceedings instituted on the
first notice by the Additional Officer were still. pending; and (ii) if tb.e
first n<>tice of the Additional Officer was still
effective, the assessment
made was barred by time. The Appellate Assistant Commissioner accepted these contentions and allowed the appeal but the Tribunal reversed this
decision. The High Court, on a reference held in faVC>ur of the assessee.
On appeal to this Court,
HELD : (i) In the circumstances of the case the word "filed"' in the
order of the Additional Officer was equivalent to "disposed of', so that
after that Qrder no proceedings on the basis of his notice remained pending. What the Additional Officer intended
and did, in effect, was
to
terminate the
proceedings before him without making
any order of
assessment on the ground that the order of assessment in respect of the
income in question would be made by the Principal Officer in the proceedings before him.
[690 G-691 A]
Esthuri Aswathiah v. Income-tax
Officer,
Mysore State, [1961] 2
S.C.R. 911; 41, I.T.R. 539 and Ha;i Mohamed Main v. C.l.T. Calcutta,
(Calcutta High Court, Income-tax
Reference
No. 128 of 1961, judgment dated Feb. 23, 1955), referred to.
685
686
SUPRBMI! COURT REPORTS
(1967] I S.C.R.
P. T. Ank/esaria and Ors. v. CJ.T., Bombay Sout/1,
35 !.T.R. 532,
A
distinguished.
Even if the order of the Additional Officer were to be regarded "" invalid; its effect could not be that the proceedings
before him must be
held to have continued after that order was made. by him.
Even an invalid order terminating proceedings has the effect of terminating them;
and in such a. case the appropriate method for correcting the illegality
committed is to have that order vacated by appellate or other higbel'
authorities having jurisdiction to intervene. [692 E-F]
The High Court erred in holding that the proceedings on the notice
issued by the Additional Officer were pending
on the view that unless
there was a case pending, there could be
no transfer of s case under
s. 5(7A). The word "case" in s. 5(7A) is used
in a comprehensive
•ease including both pending proceedings
as well as proceedings to be
instituted in future.
[693 B-D]
(ii) The order of assessment was not barred
by time.
The notice
having been validly issued by the Principal Officer within the period of
eight years prescribed by s. 34( 3), the actual order of assessment could
be made vahdly before the expi

## Text

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COMMISSIONER OF INCOME-TAX, CALCUTTA
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BIDHU BHUSHAN SARKAR (DEAD) 'fllJlOUGH HIS
LEGAL REPRESENTATIVE MIHIR KUMAR SARKAR
October 3, 1966
( J. C. SHAH, V. RAMASWAMJ AND V. BHARGAVA, JJ.]
Income-tax Act, 1922, ss. 5(7A), 34-Proceeding pursuant to notice
under s. 34 "filed" by Additional Income-tax Officer as another prloceeding for same year pending before Principal income-tax Officer-Latter
Issuing another notice under s. 34-Whether proceeding on first notice
still pending-Whether second notice and assessment thereafter val/4Whether transfer under s. 5(7A) only possible when proceedings pending-Notice under s. 34 iust before expiry of eight years-Assessment
completed within one year thereafter-Whether valid or barred by limit~
tion.
In proceedings pursuant to a notice under s. 34 of the Income-tax
Act, 1922, the Additional
Income-tax Officer passed an order to the
effect that the income should be taken in the assessment on a second return for the same year pending before the Principal Income-tax Officer,
for which tbete was another file and that the case was, therefore, "filed".
The Principal Officer, after issuing a n<>tice
under s. 34, passed an
assessment order, but in an appeal against that order, he himself pointed
out that he had no jurisdiction to make the order. The Appellate Assistant Commissioner therefore set aside the assessment order.
The Commissioner thereafter transferred the case from the Additional Officer to
the Principal Officer. The latter then issued another notice to the assessee
under s. 34 and in pursuance of that notice passed an assessment order.
The assessee appealed against this order to the Appellate Assistant
Commissioner on the grounds,
that (i) the notice under s. 34 of the
Principal Officer was invalid 'because the proceedings instituted on the
first notice by the Additional Officer were still. pending; and (ii) if tb.e
first n<>tice of the Additional Officer was still
effective, the assessment
made was barred by time. The Appellate Assistant Commissioner accepted these contentions and allowed the appeal but the Tribunal reversed this
decision. The High Court, on a reference held in faVC>ur of the assessee.
On appeal to this Court,
HELD : (i) In the circumstances of the case the word "filed"' in the
order of the Additional Officer was equivalent to "disposed of', so that
after that Qrder no proceedings on the basis of his notice remained pending. What the Additional Officer intended
and did, in effect, was
to
terminate the
proceedings before him without making
any order of
assessment on the ground that the order of assessment in respect of the
income in question would be made by the Principal Officer in the proceedings before him.
[690 G-691 A]
Esthuri Aswathiah v. Income-tax
Officer,
Mysore State, [1961] 2
S.C.R. 911; 41, I.T.R. 539 and Ha;i Mohamed Main v. C.l.T. Calcutta,
(Calcutta High Court, Income-tax
Reference
No. 128 of 1961, judgment dated Feb. 23, 1955), referred to.
685
686
SUPRBMI! COURT REPORTS
(1967] I S.C.R.
P. T. Ank/esaria and Ors. v. CJ.T., Bombay Sout/1,
35 !.T.R. 532,
A
distinguished.
Even if the order of the Additional Officer were to be regarded "" invalid; its effect could not be that the proceedings
before him must be
held to have continued after that order was made. by him.
Even an invalid order terminating proceedings has the effect of terminating them;
and in such a. case the appropriate method for correcting the illegality
committed is to have that order vacated by appellate or other higbel'
authorities having jurisdiction to intervene. [692 E-F]
The High Court erred in holding that the proceedings on the notice
issued by the Additional Officer were pending
on the view that unless
there was a case pending, there could be
no transfer of s case under
s. 5(7A). The word "case" in s. 5(7A) is used
in a comprehensive
•ease including both pending proceedings
as well as proceedings to be
instituted in future.
[693 B-D]
(ii) The order of assessment was not barred
by time.
The notice
having been validly issued by the Principal Officer within the period of
eight years prescribed by s. 34( 3), the actual order of assessment could
be made vahdly before the expiry of one year from the date of the notice.
t693 HJ
CIVIL APPELLATE ]URISDJrTION : Civil Appeal No. 401 of
1965.
Appeal from the judgment and order dated January 10, 1962
of the High Court at Calcutta in Income-tax Reference No. 22 of
1960.
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S. V. Gupte, Solicitor-General, N. D. Karkhanis and R. N.
Sacht/Jey, for the appellant.
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A. K. Sen, P. K. Mukherjee and S. K. Bane1jee, for the respondent.
The Judgment of the Court was delivered by
Bbargua, J.- --
The assessee in the proceedings out of which
this appeal has arisen was Bidhu Bhushan Sarkar, who died and
is now represented in these proceedings through his leg-<1l representative. The assessee used to be assessed by the Income-tax
Officer of District 24
Parganas in Bengal.
For the assessment
year 1947-48,
the assessee filed a voluntary return before the
Income-tax Officer on December 22, 1947, showing a net loss of
Rs. 330/-. This return was filed without
any notice under s.
22(2) of the Income-tax Act having been served on him. Before
any proceedings could be completed on that return,
there was
change in territorial jurisdiction and as a result,
the asscssee's
place of busines• came within the jurisdiction of the Income-tax
Officer District 1(2), Calcutta. In this Income-tax Office,
there
were a number of Income-tax Officers. The senior-most Incometax Officer used to be designated as Income-tax Officer, District 1(2),
and was treated as the principal Income tax Officer (hereinafter
referred to as "the P.l.T.0."). Since there were a number of AddiG
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c.I.T. v. BIDHU BHUSHAN (Bhargava, !.)
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tional Income-tax Officers, there was distribution of jurisdiction.
and the case of the assessee fell within the jurisdiction of the 8th
Additional Income-tax Officer, District 1(2) (hereinafter referred
to as "the A.l.T.0."), and consequently, came up before him.
On January 16, 1949, the A.l.T.O. started departmental proceedings with the object of taking proceedings under s. 34, presumably
because he considered the voluntary ;eturn declaring a loss of
Rs. 330/- as invalid.
He then:after issued a notice under s. 34
on February 23, 1950. In the meantime, on March 31, 1949;
the assessee had filed another voluntary return for the same assessment year in respect of his income from military contracts before the P.I.T.O., and in this return be declared a loss of
Rs. 11,33,940/-. The proceedings pending before the A.I.T.0.
in pursuance of his notice dated 23rd February, 1950 came up
before him on the 4th February, 1952. On that date, he passed
the following order which may, for convenience, be reproduced
in full, as this case turns mainly upon the interpretation of this
order:-
"Mr. Kalipada Bose, constituted attorney, appears
and submits that the old return already submitted may
be treated to be suBmitted in response to notice under
s. 34(1)(a). The income should be taken in the assessment of the military contract income for which there is
another file. The case is, therefore, filed."
The proceedings before the P.I.T.O. on th~ voluntary return
filed by the assessee on the 31st March, 1949, were continuing,
and in those proceedings he issued a notice under. s. 23(2) on !st
August, 1950. Subsequently, on 12th February, 1952, he cancelled those proceedings on the view that a voluntary return of
loss was not valid, took proceedings under s. 34, and issued a
notice under that section on the same day. These proceedings
under s. 34 culminated in an order of assessment by the P.J.T.O.
under s. 34(4) passed on 31st January, 1953. The assessee filed
an appeal against that order of assessment and when the appeal
came up, the P.I.T.O. himself drew the attention of the Appellate
Assistant Commissioner to the fact that he had no jurisdiction
over the assessee as them was already a file of the asses see with the
A:.J.T.O. He, therefore, requested that the assessment should be
set aside as it was void ab initia. The Appellate Assistant Commis-.
sioner accepted this request of the P.I.T.O., set aside the assessment
on 7th December, 1955, and made a direction that the assessment
could be completed according to law by the officer having proper
jurisdiction over the case.
Thereafter, on the 30th December,
1955, the Commissioner of Income tax made .an order transferring the case ofthe-assesste from the A.I.T.O. to the P.I.T.O. There
was an appeal by the assessee against the direction of the Appellate
Assistant Commissioner that the assessment should be completed
688
SUPIUIMB COUltT RBPORts
(1967] I S.C.R.
by the
officer having proper jurisdiction over the case. That
appeal. was allowed by the Income-tax Appe!late Tribunal on the
23rd April,
1957, and the direction of the Appellate Assistant
Commissioner was set aside. In the meantime, in pursuance of
the direction of the Appellate Assistant Commissioner contained
in his order dated 7th December, 1955, and the order of transfer
by the Commissioner made on 30th December, 1955, the P.l.T.O.,
on 11th February, 1956, issued a fresh notice under s. 34 to the
assessee, and in pursuance of that notice, made an assessment on
2nd May, 1956.
Against this assessment dared 2nd May, 1956, there was an
appeal to the Appellate Assistant Commissioner challenging the
assessment on various grounds, one of which was that the notice
dated 1 lth February, 1956 was invalid, because the proceedings
instituted on the notice under s. 34 dated 23rd February, 1950
were still pending, and while these proceedings had not terminated,
another fresh notice under s. 34 could not be validly issued. A
further ground was that if the notice dated 23rd February, 1950
is considered as still effective, when the assessment was made on
2nd May, 1956, that assessment was barred by time.
These pleas
were accepted by the Appellate Assistant Commissioner, but the
Income-tax Appellate Tribunal, on appeal, reversed
his decision
and decided both the points against the a~sessee and in favour of
the department. On an application under s. 66(1), the Tribunal
then referred the following two questions for opinion of the Cal-
;:utta High Court :-
"(!) Were the notice u/s. 34 issued by the Principal Income-tax Officer on I Ith February, 1956 and the assessment raised in pursuance thereof, valid in law,
in view of the fact that the proceedings commenced
by the 8th Addi. Income-tax Officer u/s. 34 on
the basis of notice dated 23rd February, 1950 were
"filed" ?
(2) Whether on the facts and circumstances of the case,
the assessment dated 2nd May,
1956 made by the
Principal (main) Income tax Officer, Distt. 1(2) was
barred by time ?"
The High Court disagreed with the view of the Tribunal and
held that the notice dated 23rd
February, 1950 was valid and
proceedings on it were continuing, so that the revenue authorities
could not extend the period of limitation by
assessing after the
expiry of eight years by issuing a second notice on the eve of the
expiry of eight years to obtain a period of one additional year
from the date of the service of the second notice. The assessment
was, therefore, held to be barred by limitation on the ground that
it should have been completed by 31st March, 1956. This appeal
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c.r.T. v. BIDHU BHUSHAN (Bhargava, /.)
689
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has now
been brought up to this Court by the Commissioner
of Income-tax, Calcutta, on a certificate granted under s. 66A(2)
by the High Court.
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It appears in this case that at one stage there was a contest
between the parties as to whether the notice dated 23rd February,
1950 was validly issued under s. 34 or not. Even before the High
Court it seems that some attempt was made on behalf of the assessee
to raise the question that the notice dated 23rd February,
1950 under s. 34 was invalid on the ground that it was issued without completing the assessment on the voluntary returns subtnitted
on December 22, 1947 and March 31, 1949. On behalf of the Commissioner, the contention before the High Court was that on the
question referred to the Court it was not open to the assessee to
raise this contention. The objection raised by the Commissioner
was rightly accepted by the High Court. lt is· plain from the two .
questions referred to the High Court that the High Court was
not called upon to. express any opinion about the validity of the
notice dated 23rd February, 1950. The first question only invited the opinion of the High Court on the limited point whether,
in view of the fact that proceedings commenced by the A.l.T.O.
on the basjs of notice dated 23rd February,
1950 were merely
filed, the notice under s. 34 issued by the P.I.T.O. and the assessment based on it were valid in law. The only other question was
whether the order of assessment dated 2nd May, 1956 made by the
P.I.T.O. was barred by time. Neither of these questions enlarged
the scope of the reference before the High Court so as to permit
it to examine the validity of the notice dated 23rd February,
1950, and the Court, therefore, was right in refusing·to go into this
question.
In this appeal, consequently, we are only concerned with the
correctness of the answer returned
by the High Court to the
two questions referred to it by the Tribunal. The answer given
by the High Court to the two questions referred to it is clearly
based on the view taken by that Court that the order of the A.l.T.O.
dated 4th February, 1952, did not terminate or put an end to the
proceedings which were going on before him in pursuance of the
notice under s. 34 dated 23rd February, 1950, and it is the correctness of this view of the High Court that has to be examined.
Learned Solicitor-General, appearing on behalf of the Commissioner, urged before us that in interpreting the effect of the order
made by the A.I.T.O. on the 4th February, 1952, we should try
to discover what was the real intention of the A.I.T.O. when he
ordered that the case is "filed". The intention has to be inferred
from all the surrounding circumstanoes in which the order was
made. At the time when this case came up before him on 4th
February, 1952, the A.l.T.O. was expecting a return to be filed by
69P
SUPRJ!MB COUllT llBPOllTS
(1961] l S.C.R.
the assessee in response to the notice which had been issued by him
under s. 34. A constituted attorney appeared
for the assessee
and requested that the return already filed on the 22nd December,
1947 may be treated as the return submitted in response to the
notice. The A.I.T.O., noted this fact.
Further, it appears that
he was already aware that another proceeding on the basis of a
voluntary return was pending before the P.I.T.O., and consequently
in his order he recorded his opinion that the income (referring to
the income to which the voluntary return dated 22nd December,
1947 related) should be taken in the assessment of the military
contract income for which there was another file.
This remark
recorded by him in his order gives clear indication that he felt
at that .stage that it would not be right for him to continue the
proceedings which were pending before him, obviously because another
proceeding for assessment of the same assessee was pending before his senior Officer, . viz., the P.l.T.O. He, therefore, ordered the
case to be filed. Jn making this order, the only intention the A.l.T.O
could have was that the proceedings before him should no longer
remain in existence as being unnecessary proceedings. The very
income which he was called upon to assess to tax was to be taken
into account by his senior officer and, therefore, he felt that he
should not
continue
simultaneous proceedings for the same
purpose as the proceedings before his senior Officer. In ordering
that the case be filed, therefore, he clearly intended that the proceedings before him should be terminated or dropped. There.
is no indication in the order that what the A.l.T.O. intended was
that the proceedings before him should continue to remain pending
and should be dealt with by him at subsequent stage. In fact,
if the A.I.T.0. had thought that those proceedings before him had
to conUnue and he did not want any conflict with his senior officer,
the order that he would have made in the circumstances before
him was that these proceedings be also submitted to the P.I.T.O.
He seems to have considered it unnecessary to do so, because his
opinion was that, in the assessment proceedings going on before
the
P.l.T.O., the income to which the proceedings before
him related would also be included, so that there was no need for
any proceedings remaining in existence before him. The intention,
thus, clearly was to drop the proceedings and not to continue them
any further. Of course, he could have expressed his intention more
clearly by saying that he was cancelling the proceedings before
him, or was terminating them. We think that the learned counsel
for the Commissioner has rightly contended that, in the circumstances of this case, the word "filed" should be interpreted as being
equivalent to "disposed of", so that after that order, no proceedings on the basis of notice dated 23rd February, 1950 remained
pending before the A.l.T.O. In effect,
therefore, what he did
was to terminate the proceedings before him without making any
order of assessment, on the ground that the order of assessment
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in respect of the income in question would be made by the P.I.T.O.
in the proceedings before him. ·
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An order in language not contemplated by the Income-tax
Act in proceedings on a notice under s. 34(1) came for interpretation before this Court in Esthuri Aswathiah
v.
Income-tax
Officer, Mysore State.(!) In that case, the assessee had submitted
a
return showing that he had no assessable income. Thereupon, the Income-tax Officer made an order "no proceedings."
Subsequently, when a notice under s. 34(1) for reassessment
was issued, an objection was taken that the notice was incompetent, because proceedings on the return filed were still pending.
This Court held that the submission that the previous return "had
not been disposed of" and until the assessment pursuant to that
return was made, no notice under s. 34(1) for reassessment could
be issued, had no substance. It was further held that the Incometax Officer had passed the order "no proceeding" and such an
order, in the circumstances of the case, meant that the Income"
tax Officer accepted the return and assessed the income as 'nil'.
In that case, thus, the order "no proceeding" was interpreted in
the light of the circumstances in which that order was passed.
In the case before us, the order directing that the case be filed has
to be similarly interpreted in the circumstances in which if was
passed; and as we have indicated above, the only proper interpretation is that the A.I.T.O. intended to conclude the pr.oceedings
before himself in view of th€' fact that proceedings were going on
before his senior officer.
Our attention was also drawn to a decision of the Calcutta
High Court in Income-tax Reference No. 128 of 1961-Haji
Mohamed Mian v. The Commissioner of Income-tax, Calcutta in
which judgment was delivered on February 23 1965. In that
case also, proceedings had begun on the basis of a notice under
s. 22(2) of the Income-tax Act, and, at a latter stage, the Incometax Officer ordered that the proceedings he filed on the ground
that no return had been filed by the assessee in response to the
notice. The order of the Income-tax Officer was interpreted as
amounting to dropping of the proceedings, and it was further held
that the dropping of the proceedings meant the termination thereof without any order of assessment. In that case also, therefore,
the subsequent issue of notice under s. 34 was held to be valid and
not vitiated on the ground that proceedings for assessment in
pursuance ·of the notice under s. 22(2) were still going on.
Mr. A. K. Sen, on behalf of the assessee, urged before us that
once proceedings had been started under s. 34 by issue of the notice
dated 23rd February, 1950, the proceedings brought into existence
, (I) [1961) 2 S.C.R. 911
692
SUPRBMB COURT REPORTS
[1967) I S.C.R.
could not be dropped,
because the scheme
of the Income-tax
Act is that such proceedings must end in some final order of a~sess
mcnt, even though that order may be to the effect that there is
no taxable income and no tax
is determined as
payable.
He
relied on a decision of the 'Bombay High Court in P. T. Anklesaria
and others v. Commissioner of Income-tax, Bombay South(') in which
the Income-tax Officer received a voluntary return, though without
any notice under s. 22(2), issued a notice under s. 23(2), and again,
after obtaining
the permission of the Commissioner to issue a
notice under s. 34, he issued a notice under s. 23(2), and failed to
issue any notice under s. 34.
Thereafter, the Income-tax Officer
made the following order :-
"Return has been filed under s. 34 claiming a loss of Rs.
74,140/- only.
Since I find that no income has escaped
assessment, proceedings under section 34. are dropped."
In these circumstances, the High Court held that as there was a
valid return voluntarily filed by the assessee, the order of the Incometax Officer was invalid and bad in law.
There was no provision
by which the Income-tax Officer could refuse to assess the loss
shown in the return, especially when he had actually issued a notice
under s. 23(2) after the return had been made.
It was urged before us that, on the principle laid down in that case, the order
made by the A.l.T.C. directing that the case be filed must be held
to be an invalid order as it was es.ential that he should have passed
m order assessing the income and then determining the tax payible under s. 23, even if the result of the determination was that
the tax payable was nil.
Even if it be accepted that the order
made by the A.I.T.O. in the present case was invalid, its effect
cannot be that the proceedings before the A.l.T.O. must be held
to have continued after that order was made by him.
Even an
invalid order terminating proceedings has the effect of terminating
them; and in such a case, the appropriate method for correcting
the illegality- committed is to have that order vacated by appellate
or other higher authorities having jurisdiction to intervene. As
long as tbe order is not set aside, it remains in force and takes full
effect. The order was not totally without jurisdiction; at best, it was
an order not contemplat~d by law and it could not be treated as a
non-existent order.
In the present case also, the order of the
A.l.T.0. directing that the case be filed could have been set right
on appeal, or by a reference to the High Court, in case the Tribunal refused to correct it.
While it wa~ not set aside, the only
conclusion possible is that the proceedings before the A.I.T.O.
terminated and did not any longer continue to remain pending.
The High Court, in dealing with this question, proceeded on
the further basis that when the order of transfer was made by the
(I) 35 l.T.R. 532.
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Commissioner of Income-tax on 30th December, 1956, this proceeding must have been treated as pending, because, otherwise,
the order of transfer would not relate to any pending case at all.
The High Court•held: "Therefore, when the transfer of the case
was made under s. 5 (7 A), it cannot be said that the notic~ issued
by the Additional Officer had been wiped out or did not remain
alive. If there was no case, there could not be any transfer of
the case." We are unable to accept the view of the High Court
that an order of transfer could not have been made unless some
specific proceeding for assessment of the assessee to tax was actually
pending. The explanation to s. 5(7A) makes it clear that the word
"case", in relation to any person whose name is specified in the
order of transfer, means all proceedings under the Act in respect
of any year which may be pending on the date of the transfer,
and also includes all proceedings under the Act which may be commenced, after the date of the transfer in respect of any year. The
word "case " is thus used in a comprehensive sense of including
both pending proceedings as well as proceedings to be instituted
in future. Consequently,
an order of transfer csn be validly
made even if there be no proceedings pending for assessment of
tax and the purpose of the transfer may simply be that all future
proceedings are to take place before the officer to whom the case
of the assessee is transferred. Jn the present case, the proceedings
on the notice dated 23rd February, 1950, had already been terminated by the A.I.T.O. by his order directing that the case be filed.
Consequently, the effect of the order of transfer was that all the
records relating to the assessment of the assessee had to be sent
to the P.I.T.O., and this was with the object that, in future, all
proceedings relating to assessment of this assessee were to be taken
by the P.I.T.O. and not the A.I.T.0.
The order does not necessarily indicate that those proceedings which the A.I.T.O. had actually
terminated were still to be treated as pending and to stand ttansferred as pending proceedings.
Since the case of the assessee was transferred to the P.I.T.O ..
at the stage when no proceeding was pending before the A.I.T.O.,
the P .I. T. 0. became seized of the jurisdiction to take any proceedings
against the assessee which the law permitted. It was clearly in
exercise of this jurisdiction that the P.I.T.O. issued the subsequent
notice dated 11th February, 1956. That notice was, therefore,
competently issued by him and was also valid, because it was issued
before the expiry of eight years from the end of the relevant assessment year 1947-48. The notice having been issued validly within
the period of limitation permitted by s. 34(3), the actual order
of assessment could be made validly before the expiry of the period
of one year from the date of the notice. The order of assessment
dated 2nd May, 1956, was consequently a valid order and was
not barred by time ..
691
SUPREME COURT llEPORTS
(1967] l S.C.R.
In the circumstances, the answer returned by the High Court
A
to the two questions referred to it has to be held to be incorrect.
Both the questions have to be answered against the assessec and in
favour of the Commissioner of Income-tax, so that the answer
returned by the High Court to the two questions is set aside. the
first question is answ~ red in the affirmative. and the second in
the negative. The appeal is accordingly allowed with costs in this
B
Court as well as in the High Court.
R.K.P.S.
Appeal Allowed.