9911796707
TMI Blog1979 (11) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... from undisclosed sources, for the assessment year 1960-61 ? The facts stated are as follows. The assessment year involved is 1960-61 for which the assessee's accounting year was the calendar year ending 31st December, 1959. The assessee had not filed any voluntary return of the income under s. 22(1) of the Indian I.T. Act, 1922. The ITO had also not issued notice to the assessee under s. 22(2) of that Act. After the commencement of the I.T. Act, 1961, while perusing the accounts of the assessee for the calendar year 1960, the ITO came across the following cash credits in the capital account of the assessee : Rs. 1-1-1960 10,000 30-3-1960 5,000 The ITO disbelieved the explanation offered by the assessee in respect of these entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the question which we have set out above. The settled law under the 1922 Act was that the only possible way in which income from an undisclosed source could be assessed or reassessed was to make the assessment on the basis that the previous year for such income was the ordinary financial year [Baladin Ram v. CIT (1969] 71 ITR 427 (SC)]. Section 68 of the 1961 Act makes a departure on this point in respect of amounts found credited in the books of the assessee.. The section provides thus : " Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation, offered by him is not, in the opinion of the Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the previous year for which the accounts were maintained, i.e., the calendar year 1960, and they could be assessed only as income for the assessment year 1961-62. If s. 68 was inapplicable and if the law to be applied was that which prevailed prior to the commencement of the 1961 Act, the cash credits would be taken as the income of the financial year 1959-60, assessable as income for the assessment year 1960-61. The 1961 Act came into-force on 1st April, 1962. By s. 297(1) of that Act, the 1922 Act was repealed. The repeal was subject to the provisions contained in sub-s. (2) of s. 297. We are here concerned with cl. (d) of sub-s. (2), which reads as follows: " (d) Where in respect of any assessment year after the year ending on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was considered by the Supreme Court in Govinddas v. ITO [1976] 103 ITR 123. The Supreme Court held that the words " all the provisions of this Act shall apply accordingly " merely refer to the machinery provided in the new Act for the assessment of escaped income and they do not import any substantive provisions of the new Act which create rights or liabilities. It was further observed that the word " accordingly " in the context meant nothing more than for the purpose of assessment " and it clearly suggested that the provisions of the new Act which were made applicable were those relating to the machinery of assessment. In view of the decision in Govinddas's case [1976] 103 ITR 123 (SC) the substantive provisions of the 1961 Act cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1960-61. This liability cannot be affected by recourse to s. 68 by treating the cash credits as the income of the calendar year 1960, assessable for the assessment year 1961-62. Such a change affects substantive rights and obligations leading to change in total income, rate and quantum of tax. Such a change, in our opinion, cannot be allowed by recourse to sub-s. (2)(d) of s. 297 which is restricted to the application of the machinery provisions of the new Act. The Calcutta High Court in Damodar Hansraj v. CIT[1979] 118 ITR 999 did not think it necessary to decide the point but it appears to be of the opinion that s. 68 in so far as it relates to the fixing of the previous year for income from undisclosed sources is a substantive provision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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