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Issues:
1. Legality of issuing notice under Section 34 of the Income Tax Act. 2. Assessment of a sum of Rs. 15,000 as the assessee's income for a specific assessment year. Analysis: The case involved a Hindu undivided family engaged in the cloth business, facing assessment for the years 1939-40 and 1940-41. The issue revolved around a sum of Rs. 15,000 credited to one of the family members' accounts, which was later assessed as income for the year Samvat 1995-96. The Appellate Assistant Commissioner reversed the decision, stating it represented a balance from previous years. Subsequently, a notice under Section 34 was issued to assess the amount as escaped income for the year 1939-40. The Tribunal referred two questions to the High Court regarding the legality of the notice and the correctness of considering the sum as assessable income. Regarding the second issue, the High Court analyzed whether the sum of Rs. 15,000 was indeed the assessee's income for the relevant assessment year. The Tribunal did not establish this amount as income but assumed it to be so, focusing on the year of relevance. The High Court emphasized that for income tax assessment under Section 34, it must be conclusively proven that the amount in question constitutes income. As the Tribunal failed to establish this, the High Court concluded that the sum was not assessable income, rendering the question of its assessment year irrelevant. Consequently, due to the lack of evidence proving the sum as assessable income, the High Court did not delve into the legality of issuing the notice under Section 34. The High Court answered the reference on the second issue negatively, holding that the sum of Rs. 15,000 was not proven to be the assessee's income subject to taxation. The assessee was awarded costs amounting to Rs. 200, and the reference was resolved accordingly.
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