COMMISSIONER OF INCOME TAX Vs. PALURAM DHANANIA

JUDGEMENT

(1.) THE assessee was a resident of the former State of Raigarh in the province of Madhya Pradesh. By a notification, dt. 31st July, 1944, issued by the Ruler of the Raigarh State, the Indian IT Act, 1922, with all the amendments made till that date, as in operation in British India, was made applicable to the territory of the Raigarh State. It was also provided by the notification that all future amendments made in the Indian INCOME TAX ACT, 1922, will be applicable "automatically" to the Raigarh State. The assessee was assessed to income -tax for the asst. yrs. 1946 -47 and 1947 - 48. As accepted on a concession made by the Department by the Tribunal, the Raigarh State merged with the Central Provinces and Berar on 1st April, 1949. In March, 1954, the ITO, Special Circle 1, Nagpur, initiated proceedings under S. 34 of the Indian IT Act for reassessment of the assessee's income on the view that certain income of the assessee for the relevant assessment years had escaped assessment. Before the ITO it was counted by the assessee that as required S. 34(1) of the Indian INCOME TAX ACT, 1922, as amended by the Income -tax and Business Profits Tax (Amendment) Act, 1948, the sanction of the CIT should in the first instance be obtained before commencing action under S. 34 and no such sanction having been obtained, the proceedings were without jurisdiction. The ITO negatived that contention and reassessed the income of the assessee. That order was upheld by the AAC. The Tribunal, however, accepted the plea of the assessee that sanction, as required, of the CIT was not obtained before the commencement of proceedings and, therefore, the proceedings under S. 34 were without jurisdiction. At the instance of the CIT, the following question has now been referred :

(2.) ON the question as framed, there can be little doubt that S. 34 of the Indian INCOME TAX ACT, 1922, as amended by the Inocme -tax and Business Profits Tax (Amendment) Act, 1948, was applicable to the Raigarh State by virtue of the notification dt. 31st July, 1944. It is expressly enacted by the notification that all future amendments in the Indian IT Act will be applicable automatically to the Raigarh State. By the Income -tax and Business Profits Tax (Amendment) Act, 1948, S. 34 of the IT Act was amended and the CIT's sanction before proceedings were commenced under that section was required and that provision must be deemed to have been made applicable to the Raigarh State as from the date on which it was applied in the Dominion of India.

(3.) ON that view of the case, the answer to the question must be in the affirmative. The CIT to pay the costs of the assessee.