BHANJI BHAGWANDAS Vs. COMMISSIONER OF INCOME TAX MADRAS

JUDGEMENT

(1.) This appeal is brought from the judgment of the Madras High Court dated January 2, 1964 in Tax Case No. 153 of 1962.

(2.) The assessment year involved in this appeal is 1948-49, the corresponding previous year being the financial year 1947-48. For the accounting period from November 13, 1947 to November 1, 1948 which was the corresponding previous year for the assessment year 1949-50 there was shown a credit of Rs. 25,000 in the capital account of the appellant On November 13, 1947, this amount was credited in the books of the appellant. On October 30, 1948 this amount was transferred to the account of one Amrithlal Ranchhoddas, the father-in-law of the appellant. The Income-tax Officer included the said amount as income of the appellant from undisclosed sources in the assessment for the assessment year 1949-50. On appeal to the Appellate Assistant Commissioner the appellant contended that the amount could not be included in the assessment year 1949-50 because the credit appeared prior to March 31, 1948. The Appellate Assistant Commissioner allowed the appeal holding that the credit came into the books of the appellant on November 13, 1947, i. e., in the financial year 1947-48 which is the previous year for the assessment year 1948-49. On this finding, the Appellate Assistant Commissioner deleted the addition of Rs. 25,000 from the assessment of the appellant for the year 1949-50. In doing so, the Appellate Assistant commissioner followed the decision in Commr. of Income Tax vs. P. Darolia and Sons, 1955-27 ITR 515. Consequently, on November 3, 1958 the Income-tax Officer issued a notice under Section 34 (1) (a) of the Income-tax Act, 1922 (hereinafter referred to as the Act,) to the appellant for the assessment year 1948-49. By his order dated April 20, 1959 he rejected the contention of the appellant that the assessment was barred by limitation and assessed the sum of Rs. 25,000 as income from other sources. The appellant took the matter in appeal to the Appellate Assistant Commissioner who, by his order dated February 23, 1960, allowed the appeal. He took the view that there was no finding in the order of the Appellate Assistant Commissioner that the credit represented the income of the appellant or that the same credit should be assessed in the assessment year 1948-49. He further held that the notice under Section 34 issued on November 3, 1958 was bad in law and was not saved by the second proviso to Section 34 (3) of the Act. The Commissioner of Income-tax preferred an appeal against the order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal which allowed the appeal, holding that "the order of the Appellate Assistant Commissioner in the appeal against the assessment for 1949-50 should be taken to contain a finding that the sum of Rs. 25,000 represented income of the assessee to be considered in the assessment year 1948-49". At the instance of the appellant the Appellate Tribunal referred the following questions of law for the opinion of the High Court under Section 66 (1) of the Act:

(3.) On behalf of the appellant Mr. Swaminathan put forward the argument that the decision of the High Court is contrary to the view taken by this Court in Income-tax Officer, A-Ward, Sitapur vs. Murlidhar Bhagwan Das, (1964) 52 ITR 335 in which it was held that the expressions "finding" and "direction", in the second proviso to Section 34 (3) , meant respectively, a finding necessary for giving relief in respect of the assessment for the year in question, and a direction which the late or revisional authority, as the case may be, was empowered to give under the Sections mentioned in that proviso. A "finding," therefore, could only be that which was necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner might hold, on the evidence, that the income shown by the assessee was not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context was that the income did not belong to the relevant year. He might incidentally find that the income belonged to another year, but that was not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. It was further held that the second proviso to Section 34 (3) did not save the time-limit prescribed under Section 34 (1) in respect of an escaped assessment of a year other than that which was the subject-matter of the appeal or revision, as the case may be, and accordingly the notice issued under Sec. 34 (1) (a) in that case was barred by limitation and was not saved by the second proviso to Section 34 (3) . In the course of its judgment this Court overruled the judgment of the Madras High Court in (1966) 47 ITR 16 (Mad) . It follows therefore that the view taken by the High Court in the present case is not correct in law and must be overruled.