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Issues:
1. Interpretation of Section 68 of the Income-tax Act, 1961 regarding assessment of cash credits as income from undisclosed sources. 2. Application of provisions under the 1922 Act and the 1961 Act in determining the assessment year for income from undisclosed sources. 3. Analysis of Section 297(2)(d)(ii) of the 1961 Act in relation to the application of substantive provisions like Section 68. Analysis: The case involved a question of law regarding the application of Section 68 of the Income-tax Act, 1961, in assessing cash credits as income from undisclosed sources for the assessment year 1960-61. The Income-tax Appellate Tribunal referred the matter to the High Court to determine whether the provisions of Section 68 applied in this scenario. The facts revealed that the cash credits were found in the assessee's books for the calendar year 1960, prompting the debate on the appropriate assessment year under the new Act. Under the 1922 Act, income from undisclosed sources was assessed based on the ordinary financial year. However, Section 68 of the 1961 Act introduced a different approach, allowing for assessment based on the previous year for which accounts were maintained. In this case, the cash credits were deemed income from undisclosed sources for the calendar year 1960, potentially affecting the assessment year. The application of Section 297(2)(d)(ii) of the 1961 Act was crucial in determining whether substantive provisions like Section 68 could be invoked post the repeal of the 1922 Act. The argument centered on whether all provisions of the new Act applied, including substantive laws like Section 68, or if it was limited to procedural aspects only. The High Court relied on a Supreme Court decision to conclude that substantive provisions could not be applied under Section 297(2)(d)(ii), maintaining the continuity of the previous substantive law for tax liability determination. The Court emphasized that the change in the previous year for assessment, as allowed by Section 68, constituted a substantive alteration, impacting the total income, tax rate, and obligations. This change was deemed beyond the scope of Section 297(2)(d)(ii), which was restricted to procedural aspects. Referring to a Calcutta High Court judgment, the Court affirmed that Section 68's role in fixing the previous year for income from undisclosed sources was substantive in nature. Ultimately, the Court ruled in favor of the department, holding that Section 68 could not alter the assessment year for the cash credits, maintaining the continuity of the substantive law under the 1922 Act. The decision highlighted the distinction between procedural and substantive provisions in the context of tax assessment, ensuring consistency in tax liability determination.
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