JAGDISH PRASAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN compliance with an order of this court under Section 66(2) of the Indian Income -tax Act, 1922 (hereinafter referred to as to as 'the Act'), the Income -tax Appellate Tribunal, Delhi Bench 'A', has submitted this statement of the case and has referred the following two questions for our opinion : '1. Whether, on the facts and circumstances of the case, the income of Rs. 70,000 can be said to have escaped assessment because of the failure or omission on the part of the assessee so as to attract the provisions of Section 34(1)(a) of the Act ?

(2.) IF the answer to the above question be in the negative, whether the Tribunal was right in affirming the assessment for the year 1943 -44 made by the Income -tax Officer on February 22, 1952 ?' 2. The assessee is a Hindu undivided family consisting of Sahu jagdish Prasad and his sons. The family carried on a business in respect of which it adopted Dashra year as the accounting year. In the books relating to the previous year relevant to the assessment year 1944 -45, the Income -tax Officer noticed two cash credits of Rs. 20,000 and Rs. 50,000 entered on October 28, 1942, and November 16, 1942, respectively. The assessee was asked to explain the source and nature of these credits. Sahu Jagdish Prasad, karta of the assessee family, appeared before the Income -tax Officer on February 22, 1947, and made a statement that the cash deposits had come out of the family's secret reserve fund. This explanation was not accepted and the Income -tax Officer treated the two cash credits as the assessee's income from undisclosed sources and brought them to tax in the assessment year 1944 -45. The assessee's appeal to the Appellate Assistant Commissioner of Income -tax failed. On a second appeal the Income -tax Appellate Tribunal held that as the assessee did not maintain accounts in respect of any source other than the business carried on by it, the previous year in respect of the income from undisclosed source could only be the financial year in which they were credited as provided under Section 2(11) of the Act The cash credits were entered in the financial year 1942 -43 and, as such, they could be assessed in the assessment year 1943 -44 only. On this ground the Income -tax Appellate Tribunal by its order dated May 28, 1951, deleted the two cash credits from the assessment for the year 1944 -45. Thereupon, the Income -tax Officer reopened the assessment for the year 1943 -44 by issuing a notice under Section 34 of the Act on 18th September, 1951. In response to the said notice the assessee filed a return on November 8, 1951, and did not include in the total income shown in the return the two cash credits. When called upon to explain the source and nature of the cash credits, the assessee reiterated the explanation which it had given earlier during the course of proceedings for the year 1944 -45. The explanation was not accepted and the two amounts were assessed in the year 1943 -44, representing the assessee's income from undisclosed source. The assessee's appeal to the Appellate Assistant Commissioner of Income -tax failed. It then went in second appeal before the Income -tax Appellate Tribunal. Two legal contentions were raised before the Tribunal: (1) that Section 34(1)(a) was not applicable to the facts of the case and, as such, the assessment was barred by time; and (2) that the assessment having been made on the Hindu undivided family after its dissolution was bad in law. The Tribunal rejected both the contentions. Hence, this reference.

(3.) TAKING up the question No. 1, it is not disputed that if Clause (a) of Sub -section (1) of Section 34 is not applicable, then the impugned assessment will be out of time. Section 34(1)(a) reads : '34. (1) If. - (a) the Income -tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his income under Section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income -tax have escaped assessment for that year ...... he may in cases falling under Clause (a) ...... serve on theassessee...... a notice ...... '