In Re: Rajendra Narayan Bhanja Deo of Kanika

Dawson-Miller, C.J.—The only question in this case is whether the assessee can escape payment of Income Tax and super-tax assessed at Rs. 3,898 for the financial year 1922-23 on the ground that the demand notice issued to him claiming payment of the tax was not issued during the financial year for which the tax was payable. What happened was that for the previous year (1921-1922) he had been assessed for Income Tax and super-tax to a sum of over Rs. 18,000. That was under the Act of 1918. Under the provisions then in force the assessment was in all cases a provisional one based on the previous year''s income but liable to adjustment when the actual income for the year in question came to be known. It so happened that the income for the year 1921-1922 had bean provisionally assessed at a sum very much larger than the actual income turned out. In fact the actual income for 1921-1922 produced a tax and super-tax amounting together to only Rs. 3,898. There was therefore a balance due to the assessee on adjustment of over Rs. 14,000. That balance was ascertained after taking into consideration the return made by the assessee of his actual income for the year 1921-1922. The return was made for the purpose of ascertaining the income for the next succeeding year, that is to say, the year which began in April 1922. That year came under the new Act of 1922 by which the provisional adjustments were abandoned and a different method of adjustment was adopted, namely, the income for any financial year was based once and for all upon the actual income of the previous year. Accordingly on the 1st November, 1922, the assessee whose return was accepted was served with a notice intimating that in respect of the income of the previous year he was entitled to a refund of Rs. 14,277. That sum was the surplus which he had paid for the previous year over and above that which as it turned out, he was liable to pay upon the actual income earned. When that notice was issued it was perfectly clear from the form of it that the income for the year 1922-1923 which was based upon exactly the same assessment would also be taxed and super-taxed to the extent of Rs. 3,898, but for some reason or other no actual demand for payment of that sum for 1922-1923 was made at that time. This appears to have been discovered sometime before January, 1924, and on the 26th of that month the Income Tax Officer, finding that no Income Tax had bean paid by the assessee in respect of the year 1922-1923, treated the case as one u/s 34 of the Income Tax Act, 1922, which provides for cases where no assessment has been made or where certain items of income have not been taken into account in making the previous assessment. The section provides in effect that in such a case where income has escaped assessment or has been assessed at too low a rate for any year the Income Tax Officer may, at any time within one year of the end of that year, serve on the person liable to pay tax a notice containing the requirement which may be included in a notice under Sub-section (2) of Section 22 and may proceed to assess or re-assess such income. If that were the real state of affairs and no assessment had in fact been made for the year 1922-1923 then no doubt Section 34 would apply and the notice which was issued under that section, on the 26th January, 1924, would be a notice issued within the time prescribed for that purpose under that section. Here again it was obvious to the assessee that he had been assessed for a tax to the amount of Rs. 3,898 for the year in question, so that although no demand in the prescribed form for the Income Tax for that year was served, there was in fact an intimation to the assessee on two occasions, namely, on the 1st November, 1922 and the 26th January, 1924, of what the amount of the Income Tax payable by him was.

The Income Tax Commissioner before whom the case came eventually and who stated a case for the High Court, considered that this was not a case to which Section 34 applied, that is to say, be did not think it was a case where no assessment had been made for the year in question or where any part of the income, profits or gains had escaped assessment, for an assessment had actually been made. Therefore upon the case stated we must take it that the facts do not disclose a case coming within Section 34. Then on the 9th June, 1924, the assessee having taken exception to the demand u/s 34 a fresh notice was issued in the ordinary form prescribed under the Act demanding the Income Tax for the year 1922-1923. It will be seen that this notice was issued something more than a year after the expiration of the year of assessment and the assessee contends that that is too late to make any demand under the provisions of Section 29 of the Act, Section 29 of the Act provides that "When the Income Tax Officer has determined a sum to be payable by an assessee u/s 23, or when an order has been passed under Sub-section (2) of Section 25 or Section 28 for the payment of a penalty, the Income Tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum so payable." The first thing to be observed is that no period within which such a notice demanding Income Tax is to be issued is prescribed in the Act and therefore prima facie a notice issued about 14 months after the expiration of the year of assessment would not necessarily be too late. The assessee, however, relies upon the form under which the demand referred to u/s 29 is to be made. That form is headed "Notice of demand u/s 29 of the Income Tax Act, 1922." It begins thus:--" You have been assessed for the current year to Income Tax amounting to Rs. ..." and so on. The learned Counsel for the assessee contends that the form clearly indicates that the demand can only be made during the current year that is to say the year in respect of which the Income Tax is payable. No doubt in the ordinary course the form prescribed would be quite applicable because assessments are generally made as soon as possible after the commencement of the financial year and the demand notices are sent out in the ordinary course soon after the assessment is made. I cannot believe, however, that it was intended by prescribing a form of notice of this sort to create a limitation period within which such notice must be given. If it had been the intention of the legislature to prescribe a period of limitation for such notices I think that such an important provision would have found place in the body of the Act itself indicating that intention. In other sections of the Act we do find that where certain notices have to be given the period within which they have to be given is prescribed. But so far as Section 29 is concerned no period at all is prescribed in the Act. Again it is quite possible that in certain cases no demand could be made within the actual year for which the tax is payable. Provision is made for disputes which may arise as to the acceptance or rejection of the assessee''s return. If his return is not accepted then an enquiry takes place, evidence may be demanded of him and much time may be expended in carrying on the enquiry, and it is quite possible that such enquiry would not terminate until after the year of assessment and I do not think it can be suggested that because the ordinary form prescribed for such a demand contemplates that it will be issued during the current year of assessment, it is tantamount to an enactment that it cannot be issued afterwards. If any part of the form should not be applicable to the particular facts of the case then I presume it can be altered in the ordinary course before the form is sent out, but the mere fact that forms are prescribed under the Act does not seem to me to carry with it the result that unless everything is done exactly as provided by the form it is of no force and effect. Although no time is prescribed for issuing the notice in question I suppose it may be said that such a notice must be issued within a reasonable time. What would be a reasonable time might vary according to circumstances. In the present case it was, as I have already said, about 14 months after the expiry of the year of assessment but from November of the year of assessment the assessee had in fact had notice, although no formal demand was made upon him, of the amount for which he had been assessed to Income Tax for that year, and again he had notice in the following January showing that a demand was being made upon him for payment of the same sum on the ground that no previous assessment had been made. In these circumstances it seems to me that the notice was issued within a reasonable time. There is no period of limitation in the Act and I do not think in the circumstances the assessee should be allowed to escape payment of that which is justly due from him. I think that in this case the costs should be paid by the assessee who asked for a case to be stated. Having regard to the small amount in dispute we assess the hearing fee at Rs. 150.

Macpherson, J.

I agree.