COMMISSIONER OF INCOME TAX Vs. SOORAJMULL NAGARMALL

JUDGEMENT

(1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following questions have been referred to this court:

(2.) In order to appreciate the questions, we have to refer to certain facts. The above questions arose out of the assessment for the assessment year 1961-62. It is important to bear in mind a few dates before we go to the controversy. A notice under Section 22(2) of the Indian I.T. Act, 1922, was served on the assessee on the 10th June, 1961. On the 1st April, 1962, the I.T. Act, 1961, came into operation. It is the case of the ITO, in his assessment order, that pursuant to the notice under Section 22(2), the return was not furnished by the assessee. For filing the return, from time to time, reminders were given to the assessee but without any effect. A notice under Section 28(3) of the Indian I.T. Act, 1922, was also issued in November, 1961. But this was also not complied with. Ever since July, 1965, it was further stated by the ITO in his order, that efforts were made to find out whether the claim made on behalf of the firm that due to disputes among the partners it was not possible to file the return of income was correct or not. Ultimately after the examination of witnesses and examination of whatever papers and documents available, the ITO could gather otherwise, that the assessment was made under Section 23(4) of the Indian I.T. Act, 1922, on 9th March, 1960 (sic). After considering the various incomes in various sets of books, the ITO computed the total income at Rs. 52,98,996. He also initiated proceedings under Section 271(1)(a), (b) and (c) and also under Section 273(a) of the I.T. Act, 1961. Thereafter, the assessee filed a petition under Section 27 of the Indian I.T. Act, 1922, and considering the points urged, it was held by the ITO in its order, that no sufficient cause had been made out and as a result the application under Section 27 was rejected.

(3.) The matter was taken up in appeal by the assessee, both with regard to the order under Section 27 as well as the assessment made under Section 23(4) of the Indian I.T. Act, 1922, before the AAC. It was urged in the appeal against the order under Section 27 that the assessment was bad in law as it was completed under Section 23(4) at a time when the old Act stood repealed. It was urged, Section 297(2) of the I.T. Act, 1961, indicated an intention that Section 6(e) of the General Clauses Act would not be applicable. This argument was accepted by the AAC and he held that the ITO was not justified in making the assessment under Section 23(4) of the Indian I.T. Act, 1922. According to the Appellate Tribunal, the AAC had not specifically said whether the provisions of the new Act were applicable to the case and whether the ITO could make an assessment under the new Act. In any event, however, the AAC held that Section 6 of the General Clauses Act would not save the application of the old Act in the facts and circumstances of the instant case. The AAC, accordingly, cancelled the assessment under Section 23(4) of the 1922 Act and directed the ITO to make "fresh assessment according to law". This order, he passed in the appeal against the rejection order under Section 27 of the Indian I.T. Act, 1922. In the appeal against the order under Section 23(4), the AAC was of the view that the same had become infructuous and ordered the "filing of the proceedings". Consequently, he also cancelled the penalty order passed by the ITO under Section 271(1)(a) and Section 273 of the I.T. Act, 1961. He, however, had not gone specifically into the merits of these orders.