K. C. THOMAS, FIRST INCOME-TAX OFFICER, BOMBAY vs VASANT HIRALAL SHAH & ORS.

The Supreme Court ruled that under Section 34(1) of the Indian Income-tax Act, 1922, the requirement for obtaining sanction from the Central Board of Revenue applies only when a notice is issued under clause (ii) of the proviso, which pertains to escaped income exceeding one lakh rupees. In this case, since the escaped income was below one lakh and more than eight years had elapsed since the assessment year, the notice was valid as it was issued under a different provision with the necessary sanction from the Commissioner. The Court held that the High Court erred in its interpretation of the applicability of the second proviso to Section 34(3).