INCOME TAX OFFICER BANGALORE Vs. K N GURUSWAMY

JUDGEMENT

(1.) These four appeals brought by the Income-tax Officer, Special Circle, Bangalore, on a certificate granted by the High Court of Mysore, are from the judgment and order of the said High Court dated March 22, 1955, by which it quashed certain proceedings initiated, and orders of assessment made, against the respondent assessee in the matter of reassessment of income-tax for the years 1945 46, 1946-47, 1947-48 and 1948-49.

(2.) The relevant facts are these. The respondent K. N. Guruswamy was carrying on business as an Excise Contractor in the Civil and Military Station of Bangalore, hereinafter called the retroceded area, in Mysore. He was assessed to income-tax for each of the four years mentioned above under the law then in force in the retroceded area by the Income-tax Officer having jurisdiction therein. For 1945-46 the original assessment was made on February 12, 1946, for 1946-47 on January 21, 1949, for 1947-48 on January 22, 1949, and for 1948-49 also sometime in the year 1949. The tax so assessed was duly paid by the assessee. On January 5, 1954 more than four years after , the Income-tax Officer, Special Circle, Bangalore, served a notice on the assessee under S. 34 of the Indian Income-Tax Act, 1922, for the purpose of assessing what was described as 'escaped' of 'under-assessed' income chargeable to income-tax for the said years. The assessee appeared through his auditors and contested the jurisdiction of the Income-tax Officer to issue the notice or make a re-assessment under S. 34 of the India Income-tax Act, 1922. On February 19, 1954, the Income-tax Officer overruled the assessee's objection, and made a re-assessment order for the year 1945-46.

(3.) For a clear understanding and appreciation of the issues involved in these appeals, it is necessary to set out, in brief outline, the political and constitutional changes which the retroceded area has from time to time undergone; because those changes had important legal consequences. Under the Instrument of Transfer executed sometime in 1881, when there was installation of the Maharaja of Mysore by what has been called "the rendition of the State of Mysore", the Maharaja agreed to grant to the Governor-General in Council such land as might be required for the establishment and maintenance of a British cantonment and to renounce all jurisdiction therein. Pursuant to that agreement, the retroceded area was granted to the Governor-General in Council, and jurisdiction therein was exercised by virtue of powers given by the Indian (Foreign Jurisdiction) Order in Council, 1902, made under the Foreign Jurisdiction Act, 1890. The law administered in the area included various enactments made applicable thereto from time to time by the promulgation of notifications made under the aforesaid Order in Council and one of such enactments was the Indian Income-tax Act, 1922.