A HASAN SASAMUSA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this case the assesses was the Managing Director of Sasamusa Sugar Works Limited for the assessment years 1944-45, 1945-46 and 1947-48. The relevant accounting years were the corresponding financial years, namely, 1943-44, 1944-45 and 1946-47. The assessee was paid in each accounting year a sum of Rs. 48,000/- as remuneration by the Company. But in the Company's assessment the Income-tax Authorities allowed only a deduction of Rs. 7,200/- instead of Rs. 48,000/- for each accounting year as remuneration of the Managing Director. The order of the Income-tax Officer on this point was confirmed by the Appellate Assistant Commissioner, and for each of the three years only a sum of Rs. 7,200/- was allowed as the Managing Director's remuneration and the balance of the amount, namely, Rs. 40,800/-, was disallowed as the proper deduction from the gross profits of the Company. The original assessment was made upon the assessee in the year 1947 by the Income-tax Officer for all the three assessment years. The assessee was taxed only on the amount of Rs. 7,200/-, though the entire amount of Rs. 48,000/- was taken into account for the purpose of determining the rate of tax. The Income-tax Officer followed this course in view of the Finance Department Notification No. 878-F, dated 21st March, 1922, as amended by Notification No. 8 of the Finance Department, dated 24th March, 1928. Later on, the Income-tax Officer issued a notice against the assessee under Section 34 on the basis of the contents of a circular issued by the Commissioner of Income-tax, United Province, stating that the notification of the Finance Department was not applicable to a case like that of the assessee. By this time Section 34 of the Income-tax Act had been amended by Central Act No. 48 of 1948. Under the provisions of the amended section the Income-tax Officer obtained the sanction of the Commissioner of Income-tax for reopening the assessment of the assessee for the three assessment years. After obtaining the sanction the Income-tax Officer drew up proceedings under Section 34. In due course the assessments were completed for all the three years and a sum of Rs. 40,800/- was assessed to tax. The assessee preferred an appeal to the Appellate Assistant Commissioner against all these assessments, but the appeals were dismissed. The assessee then took an appeal to the Tribunal against the order of the Appellate Assistant Commissioner. The Tribunal held that Section 34 as amended by Act 48 of 1948 was properly applied to the case of the assessee and further that the assessee was not entitled to the benefit of the Finance Department Notification No. 878-F, dated 21st March, 1922, as amended by another notification of the same department D/- 24-3-1928. It was held by the Appellate Tribunal that the conditions prescribed by the notification were not satisfied and, therefore, the assessee was not entitled to the benefit of the notification.

(2.) At the request of the assessee the Income-tax Appellate Tribunal submitted the following questions of law for the opinion of the High Court under Section 66 (1) of the Indian Income-tax Act :

(3.) With regard to the first question, Mr. S.N. Dutta on behalf of the assessee conceded that In view of the decision of this Court in Commr. of Income-tax, B. & O. v. Pratap Singh Bahadur, 1956-30 ITR 484: ,(AIR 1957 Pat 61) (A), it must be held that Section 34 of the Income-tax Act, as amended by Act 48 of 1948, was applicable to proceedings under Section 34 initiated against the assessee for the three assessment years in question. In view of this decision we consider that the first question of law referred to the High Court must be answered against the assessee and in favour of the Income-tax Department.