# PANNALAL NANDLAL BHANDARI v. THE COMMISSIONEE OF INCOME-ll' AX

- **Citation:** [1961] 2 S.C.R. 35
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal No. 408 of 1957
- **Bench:** S. K. Das, M. Hidayatullah, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pannalal-nandlal-bhandari-v-the-commissionee-of-income-ll-ax-2235
- **Pages:** 5

## Headnote

Income-tax-General notice-Non-resident liability to submit
return-Period of Limitation-Indian Income Tax Act, 1922 (XI of
1922), s. 22(1) & (2), s. 34(1)(a) & (b).
The appellant, a non-resident for the purfoses of the Indian
Income-tax Act, did not submit returns o certain dividend
income accruing to him within the taxable territory. The
Income-tax Officer served upon him notices under s. 34 read
with s. 22(2) of the Act for assessment of tax in respect of those
years. The notices in question were issued within eight years
from_ the end of the years of assessment and were within the
period prescribed by s. 34(1)(a). The appellant contended that
notices for assessment were governed by cl. (1)(b) of s. 34 and
not by cl. (1)(a), even though the appellant had not made a
return of his income for the years in question as a general notice
under s. 22(1) did not give rise to a liability to submit a return
and his inaction did not amount to omission or failure to submit
a return as he was a non-resident, and the assessment proceedings were barred by limitation.
Held, that the expression "every person" in s. 22(1) of the
Indian Income-tax Act, 1922, includes all persons who are liable
to pay tax and non-residents are not exempted from liability to
submit a return pursuant to the general notice thereunder.
Once a notice is given by publication in the prescribed
manner under s. 22(1), every person whether resident or nonresident whose income exceeds the maximum amount exempt
from tax is obliged to submit a return and if he does not do so,
The Stale of
M aharas/itra
v.
Vishnu
Ramchandra
Hidayatullah ].
October I8.
36
SUPREME COURT REPORTS
[1961]
'96°
it will be deemed that there was omission on his part to make a
P
1 1
N
,
1 1 retuArn within the meaning of s. 34(1)(a) of the Indian Income-
~.
anna a
".""a tax ct. Section 34(1)(b) applied only to those cases where
Bhandari
there was no omission or failure to make a return of the income
v.
or to make a full and true disclosure of facts material to the
The Couunissioner assessment.
0! Income-I.ax,
In the instant case the proceedings for assessment were proBombay City, perly commenced within the period of limitation prescribed by
Bombay
s. 34(1)(a).
Shah ].

## Text

2 S.C.R. SUPREME COURT REPORTS
35
requirements of s. 57 of the Bombay Police Act, must
be made bona fide, taking into account a conviction
which is tmfficiently proximate in time. Since no
absolute rule can be laid down, each case must depend
on its own facts.
In the result, we set aside the acquittal, and remit
the case to the High Court for disposal on the other
points urged before it and in the light of observations
ma.de here by us.
Appeal allowed.
PANNALAL NANDLAL BHANDARI
v.
THE COMMISSIONEE OF INCOME-ll' AX,
BOMBAY CITY, BOMBAY.
(S. K. DAS, M. HIDAYATULLAH and J. c. SHAH, JJ.)
Income-tax-General notice-Non-resident liability to submit
return-Period of Limitation-Indian Income Tax Act, 1922 (XI of
1922), s. 22(1) & (2), s. 34(1)(a) & (b).
The appellant, a non-resident for the purfoses of the Indian
Income-tax Act, did not submit returns o certain dividend
income accruing to him within the taxable territory. The
Income-tax Officer served upon him notices under s. 34 read
with s. 22(2) of the Act for assessment of tax in respect of those
years. The notices in question were issued within eight years
from_ the end of the years of assessment and were within the
period prescribed by s. 34(1)(a). The appellant contended that
notices for assessment were governed by cl. (1)(b) of s. 34 and
not by cl. (1)(a), even though the appellant had not made a
return of his income for the years in question as a general notice
under s. 22(1) did not give rise to a liability to submit a return
and his inaction did not amount to omission or failure to submit
a return as he was a non-resident, and the assessment proceedings were barred by limitation.
Held, that the expression "every person" in s. 22(1) of the
Indian Income-tax Act, 1922, includes all persons who are liable
to pay tax and non-residents are not exempted from liability to
submit a return pursuant to the general notice thereunder.
Once a notice is given by publication in the prescribed
manner under s. 22(1), every person whether resident or nonresident whose income exceeds the maximum amount exempt
from tax is obliged to submit a return and if he does not do so,
The Stale of
M aharas/itra
v.
Vishnu
Ramchandra
Hidayatullah ].
October I8.
36
SUPREME COURT REPORTS
[1961]
'96°
it will be deemed that there was omission on his part to make a
P
1 1
N
,
1 1 retuArn within the meaning of s. 34(1)(a) of the Indian Income-
~.
anna a
".""a tax ct. Section 34(1)(b) applied only to those cases where
Bhandari
there was no omission or failure to make a return of the income
v.
or to make a full and true disclosure of facts material to the
The Couunissioner assessment.
0! Income-I.ax,
In the instant case the proceedings for assessment were proBombay City, perly commenced within the period of limitation prescribed by
Bombay
s. 34(1)(a).
Shah ].
CIVIL APPELLATE JURISDICTION:
Civil Appeal
No. 408 of 1957.
Appeal by Special Leave from the Judgment and
Order dated t.he 28th September, 1955, of the former
Bombay High Court in Income.tax Reference No. 5 of
1955.
Sanat P. Mehta, S. N. Andley, J.B. Dadachanji,
Rameshwar Nath and P. L. Vohra, for the appellant.
A. N. Kripal, R.H. Dhebar and D. Gupta, for the
respondent.
1960. October 18. The Judgment of the Court
was delivered by
SHAH J.-To the appellant who was a non-resident
for the purposes of the Indian Income Tax Act, 1922,
had accrued in the assessment years 1943-44, 194445, 1946-47 and 1947-48 certain dividend income
within the taxable territory of British India, but the
appellant did not submit returns of his income for
those assessment years. In exercise of his powers
under s. 34 of the Indian Income Tax Act, 1922, the
Income Tax Officer, Bombay City, served upon the
appellant notices under s. 34 read with s. 22(2) of the
Act for. assessment of tax in respect of those years.
The notice for the year 1943-44 was served on the
appellant on March 27, 1952, for the year 1944-45 on
February 16, 1953, for the year 1946-47 on April 4,
1951 and for the year 1947-48 on April 2, 1952. The
Incom" Tax Officer completed the assessments in
respect of the years 1943-44, 1944.45 and 1947-48 on
May 6, 1953 and for the year 1946-47 on March 19,
1952. The orders of assessment were confirmed by
the.Appellate Assistant Commissioner and by the Income Tax Appellate Tribunal. At the instance of
..
·-
t •
2 S.C.R. SUPREME COUHT REPORTS
37
.-.,
the appellant, the Income Tax Appellate Tribunal
i96o
drew up a. statement of tbhe .ca.edse undher sH. ~6h(l
0
) of thef Pannai-::i-Nandlal
Income Tax Act and su mitt
to t e
1g
ourt o
Bhandari
Judicature at Bombay the following two questions:
v.
(1) Whether the notices issued under s. 22(2) of the Thi Commissioner
Act read with s. 34 of the Act for the assessment of Ineome-tax,
years 1943-44, 1944-45, 1946-47 and 1947-48 were
served after the period of limitation prescribed by
s. 34 of the Act ?
(2) If the answer to Question No. 1 is in the affirmative, whether the assessments for the yea.rs in question were invalid in law?
The High Court answered the first qnestion in the
negative and observed that on that answer, the second
question "did not a.rise". With special leave under
Art. 136 of the Constitution, this appeal is preferred
by the appellant age.inst the order of the High Court ..
The only question which falls to be determined in
this appeal is whether the proceedings for assessment
were commenced within the period of limitation
prescribed for serving notice of assessment under
s. 34(l)(a) of the Act. At the material time, by s. 34
(l)(a), the Income Tax Officer was invested with power
amongst others to serve at any time within eight
years from the end of any year of assessment notice
of assessment if he had reason to believe that income,
profits or gains had escaped assessment by reason of
omission or failure on the part of the asse~see to make
a return of his income under s. 22 for that year, or to
disclose fully and truly all material facts necessary
for his assessment of that year. In.those cases where
the Income Tax Officer had in consequence of infor.
mation in his possession reason to believe that income,
profits or gains had escaped assessment even though
there was no omission or failure as mentioned in
cl. (a), he could under cl. (b) within.four years from
the end of the year of assessment serve a notice of
assessment. Admittedly, the notices issued by the
Income Tax Officer for the years in question were
issued within eight years from the end of the years
of assessment and if cl. (l)(a) of s. 34 applied, the
assessment was not barred by the law of limitation.
Bombay City,
Bon1bay
Shah ].
38
SUPREME COURT REPORTS
[1961]
'96°
But the a.ppella.nt contended that the notices for asp
1- 1 N
dl 1 sessment were, even though he had not ma.de a. return
anna a
an a f h" .
"
h
•
·
d
Bhandari
o
IS mcome 1or t e yea.rs m quest10n, governe not
v.
by cl. (l)(a.) of s. 34, but by cl. (l)(b) of s. 34. He
Th• Commission" contended that being a. resident outside the taxable
0! Incomda•. territory in the yea.rs of assessment, a genera.I notice
Bo";bay City. under s. 22(1) did not give rise to a liability to submit
ombay
a. return, and his inaction did not a.mount to omission
Shah J.
or failure to submit a. return, inviting the a.pplica.bility of s. 34(l)(a). He submitted that omission or
failure to make a. return can only a.rise qua. a. non-resident, if no return is filed after service of a.n individual
notice under· s. 22(2). In other words, the plea. is that
a. notice under s. 22(1) imposes a.n obligation upon persons resident within the ta.xa.ble territory and not
upon non-residents, and support for this argument
is sought to be obtained from s. I sub.s. (2) which
extended the Income Tax Act a.t the material time to
British India..
The expression " every person whose tote.I income
during the previous year exceeded the maximum
a.mount which is not cha.rgea.ble to income-tax " in
s. 22(1) includes a.11 persons who a.re liable to pay tax
and there is nothing in the section or in its context
which exempts non-residents from liability to submit
a. return pursuant to a. notice thereunder. The fa.ct
that a. non-resident a.ssessee may not come to know of
the general notice issued under s. 22(1) is not a ground
for not giving effect to the plain words used in the
section. In terms, the clause read with r. 18 requires
every person who has taxable income to submit his
return, and if he fails to do so, under s. 34 of the Act
the Income Tax Officer may commence proceedings for
assessment within the period prescribed by cl. (l)(a.).
Sect.ion 34(1)(b) applies only to those cases where there
is no omission or failure to make a. return of the income or to make a full and true disclosure of facts
material to the assessment. To the appellant though
non.resident income had admittedly accrued in the
taxable territory and that income exceeded the maximum amount not chargeable to income-tax. The
appellant not having submitted a return in pursuance
of the notice issued under s. 22( 1 ), the Income Tax
.;
l
•
·~
2 S.C.R. SUPREME COURT REPORTS
39
Officer wa.s competent under s. 34(l)(a.) to issue notice
1960
a.tf a.ny time W~hin eigh~ yeha.~S of the end
0
of the ye.ar Pannalal Nandlal
o assessment ior assessmg 1m to tax.
nee a notice
Bliandari
is given by publication in the press and in the presv.
cribed manner under S• 22(1), every person whose The Commissioner
income exceeds the maximum amount exempt from
of Income-t~:r,
tax is obliged to submit a. return and if he does not Bombay City,
do so, it will be deemed that there was omission on
Bombay
his pa.rt to a. make a. return within the meaning of
Shah 1.
s. 34(l)(a). There is no wa.rra.nt for the submission
tha.t s. · 22(1) applies to residents only and that an
-obligation to make a. return on the pa.rt of a. nonresident can only a.rise if a notice under sub-s. (2) is
served. Under sub-s. (2) it is open to the Income Tax
Officer to serve a special notice upon any person requiring him to furnish a return in the prescribed form,
but tha.t provision does not derogate from the liability
a.rising under sub-s. (1) to submit a return.
The Income Tax Act extends by s. 1(2) to the taxable territory and not beyond; but within that territory, the Income Tax Officer has power to tax income
which accrues, a.rises or is received, and that is not
disputed by the appellant. If po\Ver to tax be granted, it is difficult to appreciate the ground on which
the plea. that the general provision imposing liability
upon persons receiving taxable income is subject to
a.n unexpressed limitation that it is to apply only to
residents and not to non-residents. The submission
that a. person liable to pay tax but resident outside
the taxable territory must be served with a special
notice under s. 22(2) before his inaction in the matter
of making a return may be deemed omission within
the meaning of s. 34(1) is without force.
There is uo
such express provision made by the statute and none
can be implied from the context.
'The High Court was therefore right in holding that
the proceedings for assessment were properly commenced within the period of limitation prescribed by
s. 34(l)(a) from the close of the year of assessment.
The appeal fails and is dismissed with costs.
Appeal dismissed .