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Issues Involved:
1. Validity of initiation of action under section 34(1) for reassessment for the assessment year 1954-55. 2. Chargeability of interest on Mysore Durbar Securities to super-tax under the Indian Income-tax Act for the assessment years 1954-55 and 1956-57. Issue-Wise Detailed Analysis: 1. Validity of Initiation of Action under Section 34(1) for Reassessment for the Assessment Year 1954-55: The primary question was whether the initiation of reassessment proceedings under section 34(1) for the assessment year 1954-55 was valid. The facts revealed that the original assessment for the year 1954-55 was completed on July 31, 1954, without considering the interest on Mysore Durbar Securities due to either the unawareness or ignorance of Notification No. 39(I.T.) dated July 5, 1954. The Tribunal opined that the Income-tax Officer was likely unaware of the notification at the time of the original assessment. The reassessment was initiated after the Income-tax Officer became aware of this notification, which modified the exemption status of the interest income from Mysore Durbar Securities. The assessee contended that the Income-tax Officer had the notification before him during the original assessment and thus, action under section 34 was not justifiable. However, there was no material evidence to support this claim. The Tribunal's conclusion that the Income-tax Officer was unaware of the notification was deemed reasonable. The Supreme Court's decision in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 supported the view that subsequent awareness of a notification constitutes "information" under section 34(1)(b), allowing reassessment. The High Court held that the failure to understand the true implication of the notification at one stage and a correct understanding at a later stage does constitute "information" under section 34(1)(b). Thus, the initiation of action under section 34(1) for reassessment for the assessment year 1954-55 was validly made. 2. Chargeability of Interest on Mysore Durbar Securities to Super-tax under the Indian Income-tax Act for the Assessment Years 1954-55 and 1956-57: The second issue was whether the interest on Mysore Durbar Securities was rightly chargeable to super-tax for the assessment years 1954-55 and 1956-57. The relevant notification, No. 39(I.T.) dated July 5, 1954, modified the earlier exemption and provided that interest on Mysore Durbar Securities would be included in the total income and exempt from income-tax but not from super-tax. The assessee argued that the notification could not deprive the right to exemption retrospectively and that the Central Government should have asked the Mysore State Government to pay the tax on the interest income instead of withdrawing the exemption. The Tribunal rejected these contentions, stating that the notification was valid and that the exemption given was only in respect of income-tax and not super-tax. The High Court noted that the notification clearly indicated that the interest income derived from the Durbar Securities must be included in the computation of the total income of the assessee. The Madras High Court's decision in Nachiappa Chettiar v. Commissioner of Income-tax [1933] 1 ITR 241 supported the view that the Government of India could deal with income-tax or super-tax or both through notifications under section 60 of the Income-tax Act. Thus, the High Court concluded that the interest on Mysore Durbar Securities was rightly held to be chargeable to super-tax under the Indian Income-tax Act for the assessment years 1954-55 and 1956-57. Conclusion: The High Court answered both questions against the assessee and in favor of the department. The initiation of action under section 34(1) for reassessment for the assessment year 1954-55 was validly made, and the interest on Mysore Durbar Securities was rightly held to be chargeable to super-tax under the Indian Income-tax Act for the assessment years 1954-55 and 1956-57. Advocate's fee was set at Rs. 250.
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