BAIJNATH HARI SHANKER Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) TWO questions have been referred by the Income-tax Appellate Tribunal under Section 66(1) of the Indian Income-tax Act, 1922. They are:

(2.) THE reference relates to the assessment year 1954-55, the relevant previous year being the financial year ending March 31, 1954. THE assessee has been assessed in the status of an association of persons.

(3.) FOR the assessment year 1948-49, the Income-tax Officer taxed the surplus of Rs. 71,155 under the head " capital gains ". But, subsequently, proceedings were initiated under Section 34 of the Indian Income-tax Act for bringing to tax that surplus as business income. Proceedings were also initiated under Section 34(1)(a) for the assessment years 1949-50 to 1951-52. These assessment proceedings were challenged by two writ petitions in this court, in respect of the assessment year 1948-49, on the ground that the service of the notice under Section 34 was not valid and in respect of the remaining assessment years on the ground that the proceedings under Section 34(1)(a) were invalid. The pleas found favour with Manchanda J. who heard the writ petitions, and the proceedings were quashed and the Income-tax Officer was prohibited from continuing those proceedings. The Income-tax Officer, therefore, dropped the proceedings for the assessment years 1948-49 to 1951-52.