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Smt. Parbati Devi v. Commissioner Of Income Tax And Ors.
Concise Analytical Summary of the Opinion
Factual and Procedural Background
These four writ petitions under Article 226 challenge four assessment orders made under Section 143 of the Income-tax Act, 1961. The facts are similar across the four matters; the opinion sets out the facts of Writ Petition No. 3316 of 1968 (Smt. Parbati Devi).
Relevant facts for that petition: on June 26, 1952 the petitioner invested Rs. 22,000 as her share in a partnership (M/s. Shanker Iron Foundry). A notice under Section 34 of the Indian Income-tax Act, 1922, was issued to the firm for the assessment year 1953–54. On February 28, 1966 the petitioner filed a voluntary return for the assessment year 1953–54. The Income-tax Officer, Varanasi, passed an assessment order against the petitioner on April 1, 1966 and served a demand notice for Rs. 3,869.10. The petitioner’s revision was dismissed by the Commissioner of Income-tax; she then filed the present writ petition challenging (a) the assessment order dated April 1, 1966, (b) the Commissioner’s dismissal of her revision, and (c) the demand notice based on the assessment.
Legal Issues Presented
- Whether the assessment dated April 1, 1966, under Section 143 of the Income-tax Act, 1961, for the assessment year 1953–54 was barred by limitation.
- Whether a voluntary return filed on February 28, 1966 could validate an otherwise time-barred assessment by operation of Section 153(1)(c) read with Sections 139(4) and 139(5) of the Income-tax Act, 1961.
- Whether the petitioner is estopped from challenging limitation because she filed a voluntary return pursuant to a compromise with the department.
- Preliminary procedural questions: whether the writ petitions were time-barred by delay, and whether the petitioner had an alternative remedy (e.g., appeal to the Appellate Assistant Commissioner) that would require dismissal of the writ petitions.
Arguments of the Parties
Petitioner's Arguments
- The assessment for the year 1953–54 was barred by time: assessment was made on April 1, 1966 — twelve years after the end of the assessment year.
- Implicitly, the voluntary return filed in 1966 could not validate an assessment if the return itself was out of time under the statutory provisions governing returns.
Respondent / Advocate-General's Arguments (Revenue)
- The assessment is valid because Section 153(1)(c) of the Income-tax Act, 1961 permits an assessment within one year from the date of filing a return under Section 139(4) or (5); the assessment was passed within one year from the petitioner’s voluntary return filed in 1966.
- The petitioner cannot raise the question of limitation because she filed a voluntary return pursuant to a compromise between the parties — effectively arguing election/estoppel by conduct arising from the compromise.
- Preliminary objections: the writ petitions were filed late (the assessment date was April 1, 1966 but the writ was filed on September 18, 1968); and the petitioner had an alternative remedy (appeal to the Appellate Assistant Commissioner) which the petitioner did not pursue.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sardar Inder Singh v. Income Officer, Varanasi, [1969] 72 I.T.R. 349 | Held that if reassessment proceedings under Section 34 of the 1922 Act became barred by time, such proceedings cannot be commenced under the provisions of the Income-tax Act, 1961. | The court cited this case to support the proposition that time-barred proceedings under the 1922 Act are not revived merely because the 1961 Act later came into force. |
| J. P. Jani v. Induprasad Devshanker Bhatt, [1969] 72 I.T.R. 595 (S.C.) | Established that, unless expressly provided or necessarily implied, a statute should not be given retrospective operation to affect or destroy rights already acquired or to revive remedies lost by efflux of time. | The court relied on this principle in concluding that the 1961 Act should not be construed to revive time-barred assessments absent express or necessary implication. |
| Jivattal Purtapshi v. Commissioner of Income-tax, [1967] 65 I.T.R. 261 | Illustrated that a settlement made before an appellate authority (deleting an addition) could not be reopened before the Appellate Tribunal. | The case was cited when considering whether a settlement/compromise could preclude the petitioner from later challenging the assessment; the court distinguished the facts of the present case from that precedent. |
| Abdul Rahiman Sait v. Income-tax Officer, Alleppey, [1958] 33 I.T.R. 106 | Held that where the assessee agreed to a computation suggested by the Tribunal (withdrawing prior contentions), that point could not be reopened later. | Referenced by the court in the context of settlements and whether a point once abandoned as part of a settlement can be reopened; the court used it in distinguishing the present facts. |
| C. Beepathuma v. Kadambolithaya, A.I.R. 1965 S.C. 241 | Explained the doctrine of election: a person accepting a benefit under an instrument must adopt the whole instrument and cannot both approbate and reprobate. | The court cited the doctrine but examined the compromise terms and found no clear indication that the petitioner had agreed that the voluntary return would constitute a valid return under Section 139; thus the doctrine did not bar the petitioner from challenging limitation on these facts. |
| Seth Gopal Das Mohta v. Union of India, [1954] 26 I.T.R. 722 (S.C.) | Held that a person who entered into a voluntary settlement (agreeing to pay a sum) could not later challenge that settlement by invoking Article 32. | The court discussed this case, noted differences in constitutional remedy (Article 32 vs Article 226) and factual differences (in Seth Gopal Das Mohta the assessee had clearly agreed to pay a specified sum), and concluded the present facts are different so the precedent did not preclude the petition here. |
Court's Reasoning and Analysis
The court proceeded through a step-by-step statutory and factual analysis limited to the material in the opinion:
- Legal framework under the 1922 Act: Section 34(3) of the Indian Income-tax Act, 1922, ordinarily required assessment within four years (with certain circumstances extending to eight years) from the end of the year in which income was first assessable. For assessment year 1953–54 the maximum eight-year period expired on March 31, 1962.
- Chronology and change of law: The Income-tax Act, 1961 came into force on April 1, 1962. By that date, reassessment for 1953–54 was already time-barred under Section 34(3) of the 1922 Act.
- Statutory limit under the 1961 Act: Section 153(1) of the 1961 Act sets time limits for assessment under Sections 143/144 — (a) four years, (b) eight years in certain cases, and (c) one year from the date of filing of a return under Section 139(4) or (5), whichever is latest.
- The revenue relied on Section 153(1)(c) because the petitioner filed a voluntary return on February 28, 1966 and the assessment was dated April 1, 1966 (within one year). The court examined whether the voluntary return qualified under Section 139(4) or (5).
- Examination of Section 139: Section 139(5) allows a revised return where a person has previously furnished a return under subsections (1) or (2). The court noted there was no indication the petitioner furnished any return before 1966; therefore subsection (5) did not apply.
- Section 139(4) allows a person who has not furnished a return within the time allowed under subsection (1) or (2) to furnish such a return before the assessment is made, but only within four assessment years from the end of the assessment year to which the return relates. That meant a return for 1953–54 had to be filed within four years from March 31, 1954.
- The petitioner’s voluntary return, filed in 1966, was beyond the four-year period permitted by Section 139(4) and therefore invalid for purposes of Section 153(1)(c). Because the return was invalid, it could not support an assessment under Section 153(1)(c), and the assessment dated April 1, 1966 was thus beyond limitation.
- Compromise/estoppel argument: the revenue argued the petitioner could not question limitation because she filed the voluntary return pursuant to a compromise (the department would drop proceedings under Section 34 of the 1922 Act in return for voluntary returns by partners). The court examined the counter-affidavit and annexure describing the compromise and found no clear indication that the petitioner agreed the return to be filed would be a valid return under Section 139. Consequently, the court held the petitioner was not barred from asserting that the return and the assessment were time-barred.
- Preliminary objections were considered: (a) delay in filing the writ petitions — the petitioner explained she was prosecuting revision before the Commissioner; the Commissioner dismissed revision on May 21, 1968 and served the order on June 1, 1968; the writ petition was filed September 18, 1968 — the court found there was not much delay after communication of the Commissioner’s order; (b) alternative remedy — it was open to the petitioner to appeal to the Appellate Assistant Commissioner but, given she had pursued revision and the substantive point about jurisdiction of the Income-tax Officer to pass the assessment was made out, the court declined to dismiss on the short ground of availability of alternative remedy.
- Final legal conclusion: because the assessment orders were time-barred and invalid, the demand notices founded on those assessments were also invalid.
Holding and Implications
Holding: The four connected writ petitions were allowed. The court QUASHED the four assessment orders dated April 1, 1966 and directed that the opposite parties must not make any demand against the four petitioners on the basis of those assessment orders. Each petitioner is to receive Rs. 100 as costs from respondent No. 1.
Implications: The direct effects are (a) the specific assessment orders dated April 1, 1966 are invalid and quashed, (b) the corresponding demand notices are invalid, and (c) nominal costs were awarded. The opinion does not elaborate broader legal consequences beyond these direct effects; it does not state that any new binding precedent was laid down beyond the application of existing statutory construction and authorities cited.
This summary is based exclusively on the content of the provided opinion and does not add information not contained in that text.
1. These four petitions under Article 226 of the Constitution are directed against four orders of assessment under Section 143 of the Income-tax Act, 1961, hereafter referred to as the Act. The fact of the four cases are similar. These cases raise common questions of law. It will, therefore, be sufficient to refer to the facts of one of the four cases.
2. Smt. Parbati Devi is the petitioner in Writ Petition No. 3316 of 1968. On June 26, 1952, she invested a sum of Rs. 22,000 as her share in the capital of a certain partnership firm, which worked under the name and style of M/s. Shanker Iron Foundry. A notice under Section 34 of the Indian Income-tax Act, 1922, was issued against the firm for the assessment year 1953-54. On February 28, 1966, the petitioner filed a voluntary return of her own income for the assessment year 1953-54. On the basis of the petitioner's voluntary return the Income-tax Officer, Varanasi, passed an assessment order against the petitioner on April 1, 1966. On the strength of that assessment order, a notice was served upon her demanding a sum of Rs. 3.869.10 as income-tax for the assessment year 1953-54. The petitioner filed a revision against the assessment order dated April 1, 1966. The revision was dismissed by the Commissioner of Income-tax. Smt. Parbati Devi has, therefore, filed the present writ petition challenging the assessment order dated April 1, 1966, the order of the Commissioner of Income-tax dismissing the revision and the notice demanding payment of the sum of Rs. 3,869.10.
3. It has been urged for the petitioner that the assessment was barred by time. It has been pointed out for the petitioner that the assessment for the year 1953-54 was made as late as April 1, 1966--twelve years after the close of the assessment year.
4. The, Indian Income-tax Act, 1922, was in force during the year 1953-54. Sub-section (3) of Section 34 of the 1922 Act prescribed a rule of limitation as regards assessment. Section 34(3) of the 1922 Act ran thus :
" No order of assessment or reassessment, other than an order of assessment under Section 23 to which Clause (c) of Sub-section (1) of Section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1a) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable. ..."
5. It will be noticed that ordinarily assessment had to be completed within four years from the end of the relevant assessment year. Under special circumstances, the period of limitation might extend to eight years. The period of eight years from the end of 1953-54 expired on March 31, 1962. The Income-tax Act, 1961, came into force on April 1, 1962. By this time assessment had become barred by time under Sub-section (3) of Section 34 of the 1922 Act.
6. In Sardar Inder Singh v. Income Officer, Varanasi, [1969] 72 I.T.R. 349 it was held by us that if proceedings for reassessment under Section 34 of the 1922 Act became barred by time, such proceedings cannot be commenced under the provisions of the Income-tax Act, 1961.
7. In J. P. Jani, Income-tax Officer, Ahmedabad v. Induprasad Devshanker Bhatt, [1969] 72 I.T.R. 595 (S.C.) it was held by the Supreme Court that unless the terms of a statute expressly so provide, or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost by efflux of time.
8. The impugned assessment orders were all passed under Section 143 of the Income-tax Act, 1961. We may, therefore, proceed to consider the rule of limitation contained in the 1961 Act. Section 153 of the Act prescribes a time limit for completion of assessment and reassessment. Sub-section (1) of Section 153 of the Act states :
"No order of assessment shall be made under Section 143 or Section 144 at any time after-
(a) the expiry of four years from the end of the assessment year in which the income was first assessable ; or
(b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within Clause (c) of Sub-section (1) of Section 271; or
(c) The expiry of one year from the date of the filing of a return or a revised return under Sub-section (4) or Sub-section (5) of Section 139, whichever is latest."
9. In the present case, the assessment proceedings were clearly beyond time so far as Clauses (a) and (b) of Sub-section (1) of Section 153 are concerned. The learned Advocate-General, appearing for the department, relies upon Clause (c) of Sub-section (1) of Section 153 of the Act. He points out that, in the present case, the assessment order was passed within one year from the date of the filling of the voluntary return by the petitioner.
10. Clause(c) of Sub-secion (1) of Section 153 refers back to a return filed under Section 139 of the Act. It is, therefore, necessary to examine the pro visions of Section 139 of the Act. Section 139 provides for return of income.
For purposes of Section 153(1)(c) of the Act we are mainly concerned with Sub-sections (4) and (5) of Section 139. Sub-section (5) of Section 139 states :
" If any person having furnished a return under Sub-section (1) or Sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made"
11. In the present case there is no indication that the petitioner had furnished any return before 1966.
12. The case is not, therefore, covered by Sub-section (5) of Section 139 of the Act.
13. Sub-section (4) of Section 139 of the Act states :
"Any person who has not furnished a return within the time allowed to him under Sub-section (1) or Sub-section (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of four assessment years from the end of the assessment year to which the return relates, and the provisions of Sub-clause (iii) of the proviso to Sub-section (1) shall apply in every such case."
14. According to Sub-section (4) of Section 139, a return has to be filed within four years from the end of the relevant assessment year. According to this provision, the return had to be filed within four years, from March 31, 1954. In the Instant case, the voluntary return was filed by the petitioner in the year 1966. The voluntary return was filed beyond the period of limitation mentioned in Sub-section (4) of Section 139 of the Act.
15. We have seen that under Section 154(1)(c) of the Act, assessment may be made within one year from the date of the filing of a return under subsection (4) of Section 139 of the Act. This provision contemplates a valid return under Sub-section (4) of Section 139 of the Act. In the present case the voluntary return filed by the petitioner was beyond limitation, and was, therefore, invalid. If the return was itself invalid, the return could not support an assessment order under Section 153(1)(c) of the Act The assessment itself would be beyond limitation. The petitioner is right in his contention that the assessment order dated April 1, 1966, was beyond limitation.
16. The learned Advocate-General urged before us that the petitioner cannot raise the question of limitation in these writ petitions, because she filed a voluntary return in pursuance of a compromise between the parties. A number of counter-affidavits have been filed on behalf of the opposite parties. The circumstances under which parties entered into a compromise have been detailed in the counter-affidavit filed by Sri Shri Ram, Income-tax Officer, Varanasi. In paragraph 13 of the counter-affidavit it was pointed out that the petitioner invested a sum of Rs. 22,000 as her share in the capital of fhe firm M/s. Shanker Iron Foundary. In paragraph 14 of the counter-affidavit it was stated that the income-tax Officer initiated proceedings under Section 34 of the Indian Income-tax Act, 1922, against the firm. Each of the partners submitted his or her explanation regarding the nature and source of deposits. The Income-tax Officer was not satisfied with those explanations. He was about to assess the firm under Section 34 of the 1922 Act. The partners approached the Inspecting Assistant Commissioner for a compromise and succeeded in persuading the department to drop proceedings under Section 34 of the 1922 Act, and to accept voluntary returns from the partners disclosing amounts of deposits as their income in their respective returns. In paragraph 16 of the same counter-affidavit it is mentioned that, in pursuance of the compromise between the parties, the petitioner addressed a letter to the department. Annexure A to the counter-affidavit is a copy of the letter written on behalf of the petitioner to the Income-tax Officer, Varanasi. In that letter it was stated that the petitioner was submitting a return on compromise basis. The learned Advocate-General urged that, in view of the fact that the voluntary return had been file 1 on a compromise basis, the petitioner could not urge before the court that either the return or the assessment order was barred by time.
17. In Jivattal Purtapshi v. Commissioner of Income-tax, [1967] 65 I.T.R. 261 there was an appeal before the Appellate Assistant Commissioner. The assessee and the department arrived at a settlement before the Appellate Assistant Commissioner. It was agreed before him that a certain addition should be deleted from the assessment. It was held by the Bombay High Court that that question could not be reopened before the Appellate Tribunal.
18. In Abdul Rahiman Sait v. Income-tax Officer, Alleppey, [1958] 33 I.T.R. 106 the assessee in his appeal before the Tribunal questioned the jurisdiction of the Income-tax Officer in enhancing the assessment after remand from the Commissioner. Subsequently, the asseessee withdrew that contention, and agreed to the return of the total income computed at the suggestion of the Tribunal on the basis of income levels in comparable cases. The Tribunal passed its order accordingly. It was held by the Kerala High Court that that point could not be reopened at a subsequent stage.
19. In C. Beepathuma v. Kadambolithaya, A.I.R. 1965 S.C. 241 the Supreme Court explained the do'ctrine of election on page 246. He, who accepts a benefit under a deed or will or other instrument, must adopt the whole contents of that instrument, must conform to all its provisions and renounce all rights that are inconsistent with it. A person cannot approbate and reprobate the same transaction.
20. In Seth Gopal Das Mohta v. Union of India, [1954] 26 I.T.R. 722 (S.C.), there were proceedings against the assessee under Section 5 of the Taxation on Income (Investigation Commission) Act, 1947. During the pendency of the investigation the petitioner applied for settlement under the provisions of section 8a of that act. In the settlement application the applicant proposed that he was prepared to pay the sum of Rs. 18,00,000 and odd. He was assessed accordingly. Subsequently, the assessment was challenged by the assessee by filing a petition before the Supreme Court under Article 32 of the Constitution. The petition was dismissed by the Supreme Court. It was held that, since the petitioner entered into a voluntary settlement with the Central Government, he could not question the settlement by preferring a petition under Article 32 of the Constitution.
21. In that case the assessee challenged the assessment order by moving the petition under Article 32 of the Constitution. Under Article 32 of the Constitution a petitioner has to estabilsh infringement of a fundamental right. The Supreme Court pointed out that, in view of the settlement application by the assessee himself, he could not raise any point about infringement of a fundamental right. In the present case we are dealing with a petition under Article 226 of the Constitution. The scope of a petition under Article 226 is wider than the scope of a petition under Article 32 of the Constitution. The petition is not limited to the question of fundamental rights. Further, we note that in that case the petitioner himself came forward agreeing to pay a sum of Rs. 18,00,000 and odd as tax. In the present case it is true that the assessee filed a voluntary return. But there is no clear indication that she was agreeable to assessment of income-tax for the assessment year 1953-54. Thus, the facts of the present case are different from those in Seth Gopal Das Mohta v. Union of India.
22. We have examined the terms of the compromise as indicated in Sri Shri Ram's counter-affidavit. The compromise was to the effect that the petitioner would file a voluntary return ; and the department would drop the proceeding against the firm under Section 34 of the 1922 Act. It is true that the petitioner agreed to file a voluntary return. But, there is no indication in annexure "A" to the counter-affidavit that there was any concession that the return that was being filed would be a valid return under Section 139 of the Act. So, in spite of the compromise, it is open to the assessee to take up the position that the return filed by her in 1966 was barred by time. It is equally open to her to urge before this court that the assessment order dated April 1, 1966, was also barred by time. We note that there is no indication in the counter-affidavit that the petitioner was agreeable to any assessment for the assessment year 1953-54. So, in spite of the fact that she filed a voluntary return, it is open to her to satisfy this court that the assessment for 1953-54 was barred by time.
23. The learned Advocate-General raised two preliminary objections. The first objection is that the petitions were filed late. It was pointed out that, although the assessment order is dated April 1, 1965, the writ petition was not tiled till September 18, 1968, more than two years after the passing of the assessment order. The petitioner has explained that she was in the meanwhile busy prosecuting her revision before the Commissioner of Income-tax. It appears from the counter-affidavits that the revision was dismissed by the Commissioner on account of the petitioner's failu're to pay the prescribed court-fee. The Commissioner dismissed the revision on May 21, 1968. A copy of that order was served upon the petitioner on June 1, 1968, A copy of the writ petition was served upon the standing counsel for the department on September 2, 1968. The writ petition was filed on September 18, 1968. There was not much dealy in filing the writ petition after the order of the Commissioner rejecting the revision was communicated to the petitioner.
24. It has also been urged for the opposite parties that the petitioner had an alternative remedy. There is some force in this contention. It was open to the petitioner to file an appeal to the Appellate Assistant Commissioner against the assessment order dated April 1, 1966. It seems that the petitioner did not take the trouble to file any such appeal. She had already taken the trouble of filing a revision against the assessment order before the Commissioner of Income-tax. The petitioner has made out her point that the Income-tax Officer had no jurisdiction to pass an assessment order in the year 1966 for the assessment year 1953-54. In view of these circumstances, we need not throw out these writ petitions on the short ground that the petitioner had an alternative remedy.
25. As discussed above, the assessment orders dated April 1, 1966, were barred by limitation and are, therefore, invalid. It follows that the notices demanding various sums from the four petitioners on the strength of these assessment orders are also invalid. These orders may be quashed.
26. The four connected writ petitions are allowed. We quash the four assessment orders dated April 1, 1966. The opposite parties are directed not to make any demand against the four petitioners on the basis of the four assessment orders dated April 1, 1966. In each case the petitioner shall receive a sum of Rs. 100 (Rupees one hundred only) as costs from respondent No. 1.
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