M/S. GAJANAND PHOOL CHAND Vs. INCOME

JUDGEMENT

(1.) The petitioner claims to be a Hindu Undivided family represented by Gajanand Pasari as its 'Karta'. It is being assessed to income-tax in Rajasthan ever-since its introduction, from the assessment year 1950-51, as the In come-tax Act was made applicable to the State with effect from April 1, 1950. The validity of the retrospective levy was successfully challenged by a writ petition in this Court. The Court's judgment is dated Jan. 16, 1951 and is reported in Madan gopal Kabra Vs. Union of India (1951 20ITR 214) . It was however set aside on Dec. 16, 1953 by a judgment of their Lordships of the Supreme Court reported in Union of India Vs. Madan Gopal Kabra (1954 25 ITR 58) .

(2.) The petitioner has stated that as there was "no income-tax or any other law in the State of Rajasthan upto 31-3.50" requiring it to "maintain books of accounts" it "did not maintain any books of account upto 31.3-50". It has been stated that the petitioner prepared an inventory of its assets and liabilities on April 1, 1950 and started maintaining "proper and regular books of account and documents" with effect from April, 1950. It claims that it closed its first accounting year on March 31, 1951 and found a net profit of Rs. 39, 328,10. It therefore voluntarily filed its return of income-tax, alongwith the profit and loss account and the balance sheet which are on record as Annexure A. The assessment was completed by order Annexure B dated April 25, 1952. The petitioner filed the subsequent returns also, so that its in come upto the assessment year 1965-67 had been assessed to income-tax, and the return for the year 1966-67 was pending consideration on the date of the petition. The same was the position regarding the wealth tax, and the petitioner has stated that nothing was outstanding against it.

(3.) As the petitioner did not file a return for assessment year 1950-51, Income tax Officer, B-Ward, Jaipur, respondent No. 1, initiated action under section 34 (1)(a) of the Income-tax Act of 1922, by notice Annexure E dated March 17, 1959, requiring the petitioner to file a return of its income for the period April 1, 1949 to March 31, 1950 within 35 days, on the ground that he had reason to believe that the income had escaped assessment by reason of the omission or failure to make the return. The petitioner claims that as it had not maintained books of account for that year, he filed his return on Nov. 23, 1959 declaring an income of Rs. 10,000.00 "on estimate" disclosing "all primary and relevant facts necessary" for the assessment. The Income-tax Officer estimated the petitioner's income at Rs. 50,000.00 to his best judgment, and completed the assessment by order Annexure G dated Nov. 26, 1959, creating a demand for Rs. 4,729,31, which was paid by the petitioner. The income was, however, reduced on second appeal to Rs. 25,000.00 and the excess tax was refunded in 1962.