1967 (7) TMI 56 - HC - Income Tax

Summary

Issues:
1. Whether the income of Rs. 25,000 had escaped assessment for the assessment year 1949-50 within the meaning of section 34?
2. If the income had escaped assessment, whether any provision of limitation applies to the reassessment made?
3. Whether the reassessment made under section 34(1)(b) for the assessment year 1949-50 is within the time limit?

Analysis:

Issue 1:
The case involved an assessee, a Hindu undivided family, engaged in money-lending and Sarafa business. The Income-tax Officer added Rs. 25,000 as income from undisclosed sources in the assessment for the year 1950-51. The Tribunal later excluded this amount from the assessment for 1950-51. Subsequently, the Income-tax Officer initiated assessment proceedings under section 34 for the year 1949-50, adding the same amount to the total income of the assessee. The Tribunal found that the decision regarding the exclusion of Rs. 25,000 from the assessment for 1950-51 constituted "information" for the year 1949-50, justifying the reassessment. It was held that the income had indeed escaped assessment for the year 1949-50.

Issue 2:
Regarding the provision of limitation for the reassessment, the Tribunal held that the reassessment under section 34(1)(b) for the year 1949-50 was beyond the time limit as the period had expired on March 31, 1954. The notice for reassessment was served on March 18, 1956, after the limitation period, rendering the reassessment barred by time. The Tribunal correctly applied the provisions of section 34(3) in determining the applicability of the limitation period.

Issue 3:
The Tribunal's decision was based on the fact that the reassessment for the year 1949-50 was initiated under section 34(1)(b) and not under section 34(1)(a). The Tribunal found that the bar of limitation applied to the reassessment, as per the second proviso to section 34(3). The Tribunal's decision was in line with the legal provisions and the Supreme Court's ruling in a similar case. The argument raised by the Commissioner of Income-tax regarding the application of the Indian Income-tax (Amendment) Act, No. 1 of 1959, was not considered relevant to the case as the reassessment was made under section 34(1)(b) and not under section 34(1)(a).

In conclusion, the reassessment for the assessment year 1949-50 was found to be beyond the time limit and, therefore, not valid. The Tribunal's decision on the issues raised was upheld, and the assessee was awarded costs and counsel's fee.