A S KHADER ISMAIL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THESE petitions are filed for the issue of writs of prohibition restraining the Income-tax Officer, Salem, from continuing the proceedings initiated under section 34 of the Income Tax Act, 1922. In W.P. No. 225 of 1958 the petitioner, Khader Ismail, was assessed to income-tax for the year 1945-46 (the relevant year of account being April 1, 1944, to March 31, 1945), under section 23 of the Indian Income-tax Act on January 31, 1946, by the Income-tax Officer, Salem. That assessment was re-opened by the Income-tax Officer under section 34 of the Act on the ground that certain cash credits amounting to Rs. 56, 234 in the assessee's books were not genuine ones but on the contrary represented income from undisclosed sources. The assessment that followed was the subject-matter of an appeal to the Appellate Assistant Commissioner. That authority, while sustaining the view of the Income-tax Officer that the alleged borrowings represented by the cash credits were income from undisclosed sources, held that such income must have been received during the year previous to the year of account. The Appellate Assistant Commissioner stated

(2.) THEREUPON, the Income-tax Officer, Salem, initiated proceedings against the petitioner under section 34(1)(a) of the Act in respect of the assessment for the year 1944-45 and issued a notice on January 28, 1958, calling upon the petitioner to submit a return of income for the year ending March 31, 1944The facts in W. P. No. 1007 of 1958 are almost similar. The assessment of the petitioner's father, Parisa Mudaliar, for the year 1946-47 was revised on the ground that a sum of Rs. 33, 250 which was income from undisclosed sources was concealed from the Income-tax Officer. The consequent order of revised assessment was the subject-matter of an appeal to the Appellate Assistant Commissioner who set aside the same on the ground that the impugned credits must have represented income received prior to the year of account. The appellate authority stated

(3.) THE validity of the initiation of proceedings under section 34 in both the cases has been challenged on behalf of the respective assessees on several grounds. Mr. Sharfuddin, appearing, for the assessees, first contended that the cases would be governed by the provisions of section 34 (1)(b) of the Indian Income-tax Act and not by section 34(1)(a) and that as the initiation of proceedings under section 34 was made more than four years after the respective years of assessment, it would be barred by limitation. Section 34(1)(b) relates to a case where there has been no omission or failure on the part of the assessee to disclose fully and truly all material facts, but yet the income has escaped assessment. Under the Act, as it stood at the time when the assessment was made, the proceedings could be initiated only within a period of four years of the end of the relative assessment year. THE second proviso to section 34(3) as it stood before its amendment by Act 25 of 1953, which came into effect on April 1, 1952, was as follows