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Issues Involved:
1. Limitation period for issuing a notice under Section 34 of the Income-tax Act. 2. Validity of the finding by the Appellate Assistant Commissioner regarding the assessment year for the sum of Rs. 20,000. 3. Jurisdiction of the Income-tax Officer to act based on the finding of the Appellate Assistant Commissioner. Issue-wise Detailed Analysis: 1. Limitation Period for Issuing a Notice under Section 34 of the Income-tax Act: The petitioner argued that the proceedings initiated by the Additional Income-tax Officer were barred by limitation. The contention was that if the notice was issued under Section 34(1)(b) of the Act, it should have been issued within four years from the end of the assessment year, i.e., on or before March 31, 1950. The second proviso to sub-section (3) of Section 34, amended by Central Act XXV of 1953, came into force on April 1, 1952. Before this date, any action under Section 34(1)(b) was time-barred, as held in Prashar v. Vasantsen Dwarkadas [1956] 29 ITR 857. The petitioner further argued that if the notice was issued under Section 34(1)(a), it should have been issued within eight years from the end of the assessment year, i.e., before April 1, 1954, since the income that escaped assessment was less than one lakh of rupees. This was supported by the case Hiralal Amritlal Shah v. K.C. Thomas, Income-tax Officer [1958] 34 ITR 446, which held that no notice of re-assessment could be issued after eight years, even if there was a finding or direction by an Income-tax authority. The court explained that Section 34 deals with cases where income has escaped assessment, categorized into two types: - Section 34(1)(a) for cases where the escape is due to the assessee's failure to disclose material facts, with different limitation periods based on the amount of income. - Section 34(1)(b) for other cases, with a four-year limitation period. The second proviso to sub-section (3) of Section 34 abrogates the period of limitation for actions taken in consequence of a finding or direction by specified authorities. The court found that the Department was taking action under Section 34(1)(a) and hence, the plea of limitation was overruled. 2. Validity of the Finding by the Appellate Assistant Commissioner: The petitioner contended that there was no finding by the Appellate Assistant Commissioner that the amount of Rs. 20,000 should be assessed in the year 1945-46. The court referred to Indurkar v. Pravinchandra Hemchand [1958] 34 ITR 397, where a similar issue was discussed. However, in the present case, the Appellate Assistant Commissioner had clearly recorded a finding that the sum of Rs. 31,000 represented income from undisclosed sources and accepted the contention that Rs. 20,000 should be assessed in the assessment year 1945-46, following a judgment of the Patna High Court. This was considered a clear finding falling within the second proviso to Section 34(3). 3. Jurisdiction of the Income-tax Officer to Act Based on the Finding of the Appellate Assistant Commissioner: The petitioner argued that the finding by the Appellate Assistant Commissioner was not necessary and referred to Indira Balakrishna v. Commissioner of Income-tax [1956] 3 ITR 320. The court found that the findings were not gratuitous as the points were raised by the petitioner himself. The court also rejected the argument that the finding could only be used for the assessment year in which the decision was given, stating that such a construction would render the proviso otiose. The court concluded that the Income-tax Officer had jurisdiction to act on the finding of the Appellate Assistant Commissioner. The writ of prohibition sought by the petitioner could not be issued, and the petition was dismissed with costs. Conclusion: The court dismissed the petition, holding that the proceedings initiated by the Additional Income-tax Officer were not barred by limitation, the finding by the Appellate Assistant Commissioner was valid and applicable, and the Income-tax Officer had the jurisdiction to act on this finding.
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