1954 (4) TMI 55 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 34 of the Indian Income-tax Act, 1922, as amended by Act No. XLVIII of 1948.
2. Whether the decision of the Privy Council constitutes "definite information" under Section 34.
3. Legality of the assessment under Section 34 concerning the interest on arrears of rent.

Issue-wise Detailed Analysis:

1. Applicability of Section 34 of the Indian Income-tax Act, 1922, as amended by Act No. XLVIII of 1948
The Income-tax Officer initially assessed the Maharaja Bahadur Ramran Vijay Prasad Singh's income-tax excluding the interest on arrears of rent from agricultural land based on a Patna High Court decision. However, after the Judicial Committee reversed this decision in 1948, holding that such interest was taxable, the Income-tax Officer initiated proceedings under Section 34. The proceedings were started on 25th September 1948, and again on 18th March 1949, after an amendment to Section 34 with retrospective effect from 30th March 1948. The Appellate Tribunal held that even if the old Section 34 applied, the more stringent requirements of "definite information" and "discovery" were satisfied.

2. Whether the decision of the Privy Council constitutes "definite information" under Section 34
The Appellate Tribunal concluded that the decision of the Judicial Committee reversing the Patna High Court's view constituted "definite information" leading to the discovery that income had escaped assessment within the meaning of the old Section 34. This was a crucial point of contention, but the Tribunal found that the reversal of the Patna High Court's decision by the Judicial Committee met the criteria for "definite information."

3. Legality of the assessment under Section 34 concerning the interest on arrears of rent
When the case was brought before the High Court, the assessee's counsel conceded that the Judicial Committee's decision constituted "definite information." However, the counsel argued that the assessment made on 30th April 1949, was beyond the four-year limitation period prescribed under Section 34 (3) of the Act. This argument was not raised before the Appellate Tribunal or in the applications under Section 66(1) and 66(2). The High Court examined whether it could answer this new question of law, given that it was not raised earlier. The court held that under Section 66(1) and Section 66(2), the High Court's jurisdiction is limited to questions of law that were raised before the Tribunal and mentioned in the applications. Since the limitation issue was not raised earlier, the High Court declined to answer this question.

The High Court emphasized that its special advisory jurisdiction under Section 66(2) is conditional on the strict fulfillment of preliminary conditions, including that the question of law must have been raised before the Tribunal and mentioned in the applications. The court cited several precedents, including decisions from the Supreme Court and various High Courts, to support its interpretation that it could not entertain new issues not previously raised.

Conclusion:
The High Court declined to answer the question regarding the legality of the assessment under Section 34 in the form proposed by the assessee, as the issue of limitation was not raised before the Tribunal or in the applications under Section 66(1) and 66(2). The court upheld the Tribunal's decision that the Judicial Committee's reversal constituted "definite information" under Section 34, thereby justifying the reassessment.