1965 (10) TMI 14 - SC - Income Tax

Whether on a true construction of the Raigarh Darbar Notification No. 89/44/D/Raigarh dated July 31, 1944, section 34 of the Indian Income-tax Act, 1922, as amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948, was applicable to the proceedings taken in the present case ? Held that - . The question of construction now raised would not arise on the basis the judgment was given by the Tribunal. Furthermore, the Tribunal definitely refused to frame the question on the basis of merger of the State in India on January 1, 1948, and that order has become final as its correctness was not challenged by the revenue authorities in further proceedings. The question now raised by the learned Additional Solicitor-General is not a question that is involved in the question framed. It really turns on a question of fact as to which, of course, no reference could be made by the Tribunal to the High Court. It is not contended that if the date of merger was January 1, 1948, the question framed can be answered to the advantage of the revenue authorities. In fact we were not asked to answer that question on the basis that the merger took place on January 1, 1948. The question must, therefore, be answered in the affirmative. Appeal dismissed.

Summary

Issues:
1. Interpretation of a notification regarding the application of the Indian Income-tax Act, 1922 to a former ruling State.
2. Validity of reopening earlier income tax assessments under section 34 of the Indian Income-tax Act.
3. Applicability of the amendment made to section 34 by the Income-tax and Business Profits Tax (Amendment) Act, 1948 to the former State.
4. Determination of the date of merger of the former State into India and its impact on the tax assessments.

Analysis:
1. The case involved the interpretation of a notification issued by the Ruler of a former State, stating that the Indian Income-tax Act, 1922 was applicable with its amendments. The respondent-assessee was assessed under this Act for the years 1945 and 1946. The State later merged into India, leading to a dispute regarding the interpretation of this notification.

2. The Income-tax Officer reopened the assessments under section 34 of the Act without the required sanction of the Commissioner of Income-tax. The Appellate Tribunal upheld that the amendment to section 34 by the Amending Act of 1948 applied to the former State, which had merged into India. The question of irregularity in the proceedings under section 34 was raised by the respondent but was rejected initially.

3. The Tribunal referred a question to the High Court regarding the applicability of the amendment to section 34 in the present case. The revenue authorities attempted to argue that the amendment was not applicable due to the merger date of the State into India. However, the High Court did not allow this argument as it was considered a question of fact, and the Tribunal's decision was based on the assumption of the merger date being January 1, 1948.

4. In the Supreme Court, the revenue authorities continued to argue that the amendment did not apply due to the merger date being January 1, 1948. The Court agreed with the High Court's view, emphasizing that the question referred was based on the assumption of the merger date being April 1, 1949. As the revenue authorities did not challenge the Tribunal's decision on the merger date, the Court held that the question raised by the revenue authorities was not relevant to the case.

In conclusion, the Supreme Court dismissed the appeal, affirming the decision that the amendment to section 34 of the Indian Income-tax Act, 1922 was applicable to the former State, and the appeal failed on this basis.