S. Kumaraswamy (Deceased) and Others vs Commissioner of Income Tax Madras, And Another

Veeraswami, J.—This reference raises a question of limitation under the Travancore Income Tax Act, 1121. We are concerned with the

assessment years 1122 to 1124, Malayalam Era, corresponding to 1948-49 to 1950-51, the accounting period in each of the years commencing

from August 17. Originally the assessments for these years were made on September 10, 1949, July 31, 1952 and November 29, 1952,

respectively. In purported exercise of the power u/s 47, the assessments were reopened and revised orders were made on July 12, 1955, in

respect of the first year and July 29, 1955, in respect of the other years. By section 13 of the Finance Act, 1950, the law relating to Income Tax in

operation in Part B States ceased to have effect except for purposes of levy, assessment and collection of Income Tax and super-tax in respect of

any period not included in the previous year for the purpose of assessment under the Indian Income Tax Act, 1922, for the year ending on the 31st

day of March, 1951, or for any subsequent year or as the case may be, the levy, assessment and collection of the tax on profits of business for any

chargeable accounting period ending on or before the 31st day of March, 1949. It appears that there was concealment of income was not in

dispute. The Tribunal was of the view that the effect of section 13 of the Finance Act, 1950, was not to repeal section 41(1) and that the extended

period of limitation, namely, eight years, was still available even after April 1, 1950. The revised orders were, therefore, held to be in time. The

question for our decision u/s 66(1) so :

Whether the assessments made for the years 1122 to 1124 (Malayalam) on July 12, 1955, and July 29, 1955, are within time ?

In our opinion, the view taken by the Tribunal is correct. Section 47(1) of the Travancore Act is worded more or less similar to section 34(1)

and says that where the Income Tax Officer has reason to believe that the assessee a has concealed the particulars of his income, he can serve on

the assessee a notice at any time within eight years and proceed to assess or reassess such income.

Sub-section (2) reads :

No order of assessment u/s 30 or of assessment or reassessment under sub-section (1) of this section shall be made after the expiry, in any case to

which clause (c) of sub-section (1) of section 41 applies, of eight years, and in any other case, of four years from the end of the year in which the

income, profits or gains were first assessable :

Provided that nothing contained in this sub-section shall apply to a reassessment made in pursuance of an order u/s 44, section 45 or section

113.

This sub-section virtually corresponds to section 34(3) of the Income Tax Act, 1922. Section 41(1) (c) is to the effect that, if the Income Tax

Officer is satisfied that any person has concealed the particulars of his income, he may direct the assessee to pay penalty assessed at a certain rate.

The Tribunal thought that what section 13of the Finance Act, 1950, saved in terms was confined to the provisions of the Travancore Act relating to

levy, assessment and collection of Income Tax and super-tax in respect of the years prior to 1950-51 and that meant the saving including sections

41 and 47. We think, as we said, that is the correct view to take.

In Commissioner of Income Tax v. Bhikaji Dadabhai and Co. the Supreme Court had to consider the effect of section 13(1)in relation to the

penalty provision in the Hyderabad Income Tax Act, 1357-F. Repelling an argument that this provision was not saved by section 13 of the Finance

Act, 1950, and that, therefore, the levy of penalty was barred, the Supreme Court held that the penalty proceedings which were initiated u/s 40 of

the Hyderabad Income Tax Act would be continued after the enactment of the Finance Act, 1950. On that basis the order of penalty was upheld.

This view was based on two grounds. One is that that the expression ""assessment"" as used in section 44 of the Indian Income Tax Act included the

procedure for imposition of penalty. That proposition was established by C. A. Abraham v. Income Tax Officer, Kottayam. The second ground is

that penalty is in the nature of an additional tax imposed upon a person in view of his dishonest or contumacious conduct. The effect of

Commissioner of Income Tax v. Bhikaji Dadabhai and Co. is that section 40 of the Hyderabad Act was one of the provisions saved by section 13

of the Finance Act. The reasoning of that decision will apply to the instant case as well. Section 47(2) itself makes a reference to section 41(1) (c)

in the Travancore Act. Section 47 clearly relates to assessment, and, if penalty also relates to that subject, we do not see how section 41(1) for the

purpose of section 47(2) is not attracted.

On that view we answer the reference against the assessee with costs. Counsels fee Rs. 250.