PRIYANAND PRASAD SINGH Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The following questions of law have been referred for the opinion of this Court: 1. Whether in the circumstances of the case the proceedings started for the assessment year 1945-46 under Section 34 of the Income-tax Act were valid in law?

(2.) Whether In the circumstances of the case, the price of timber trees received by the assessees was exempt from the income-tax either as, (a) agricultural income under Section 4(3)(viii), I. T. Act, or as, (b) casual income under Section 4(3) (vii), Income-tax Act. 2. This reference relates to assessment years 1945-46 and. 1946-47. The assessee was assessed for the year 1945-46 on 28th of November 1945 on a total income of Rs. 12,055/- on the basis of the return filed by him. The assessee owned certain blocks of forest in the district of Gorakhpur situate in villages Anantpur alias Bhadauna and Dumri which according to the assesses were follow land but had been converted into forest by planting trees on them. The trees on these lands were sold under an agreement to Tribeni Nath and Ramanand for a sum of Rs. 2,15,000/-and to Mohan Singh Autar Singh for a sum of Rs. 1,95,000/-. Under this agreement certain sums were realised by the assessee for the sale of the trees during the two previous years corresponding to the two assessment years in question viz., 1945-46 and 1946-47. After the assessment for the year 1945-46 had been completed on 28th November, 1945 by the Income Tax Officer of Banaras, a letter dated 8th January 1946 was received by him from the Income Tax Officer, Gorakhpur informing him that the assessee had sold standing timber in the Zamindari at Gorakhpur to Tribeni Nath and Ramanand for Rs. 2,15,000/- and to Mohan Singh Ram Autar for Rs. 1,95,000/-. The Income Tax Officer, Banaras, thereupon, addressed a letter making inquiries from the assessee about the details of the transactions. The information was supplied by the assesses and, thereafter on 23rd February 1946, the Income Tax Officer, issued a notice under Section 34 of the Income Tax Act in respect of the assessment for, the year 1945-46 calling upon the assessee to show cause why his income from the sale of these trees, which had escaped assessment, should not toe brought into assessment. In the proceedings for the original assessment of 1946-47, a sum for the sale of trees by the assesses had been shown in his return and hence the assessee challenged the validity of the notice under Section 34. In addition, the assessee challenged the liability to tax of the income derived by him from the sale of forest trees and timber on the ground that it was agricultural income and in the alternative that it was casual income. The Income Tax Officer rejected these contentions and the appeal of the assessee to the Appellate Assistant Commissioner as well as to the Tribunal failed. Consequently, at the request of the assessee the questions mentioned above have been referred to this Court.

(3.) So far as the first question referred to us is concerned, the contention on behalf of the assessee was that, at the time when the notice under Section 34 of the Income Tax Act was issued to the assessee for the assessment year 1945-46, the Income Tax Officer had not received any definite Information in consequence of which he discovered that a part of the income had escaped assessment. The main contention was that the information, which was received by the income Tax Officer Banaras on 8th of January 1946, had already been present before him at the time of the original assessment which was made on the 28th of November 1945, and the income from the sale of the forest trees had not been assessed by the Income Tax Officer on the view that it was not liable to be charged with income-tax. This contention in effect was that the material, which came before the Income Tax Officer in January 1946, was not fresh material at all and, the issue of the notice was a mere change of opinion. Dealing with this contention, the Tribunal mentioned in its judgment that it had been pointed out by the Income Tax Officer who dealt with the proceedings under Section 34 that no books of account containing the items in question (i.e. entries relating to income from sales of trees) were produced before him in the revised assessment proceedings containing any signature of his predecessor-in-office in token of their examination by him. It would appear from, this that the Income- Tax Officer; who had made the original assessment on the 28th November, 1945, was not the same individual who received the letter dated 8th January 1946 from the Income Tax Officer, Gorakhpur and who issued the notice under Section 34 of the Income Tax Act. The officer being different pointed out in his order that the books of account which were produced before him in proceedings under Section 34 did not contain any signature of his predecessor in token of the fact that these account books had been examined by the latter. The Tribunal also added that the Appellate Assistant Commissioner had pointed out that the assessee did not produce the Siahas and Jamabandis before him but only the books relating to Banaras in which the sale of timber was noted in Gorakhpur Khata, that the assessee had been taxed for Rs. 35,000/- as his receipts during the previous year, while the Gorakhpur Khata had a total of Rs. 1,58,625/- and that no details of the various items were given in the accounts except under the general head "Amdani Ilaqua". After mentioning these facts which were pointed out by the Income Tax Officer and the Appellate Assistant Commissioner in their orders, the Tribunal did not proceed to record their concurrence with the views of the officers on these points. What the Tribunal stated was merely that they agreed with the Appellate Assistant Commissioner's view that, "when the items in question were mixed up with such a mass of agricultural income as is admitted by the assesses's own Munim Ramji, no conscious knowledge of the existence and the character of such income could be attributed to the Income Tax Officer seized, of the original assessment. Neither the order sheet of the original assessment for the notes about the examination of accounts that were produced, nor even the rough notes on the miscellaneous file contain any iota of proof to show that the items in question were ever the subject of any consideration by the Income Tax Officer."