Judgement

P. B. GAJENDRAGADKAR, J. : This is an appeal with the certificate issued by the High Court of Judicature at Patna under S. 66A (2), Income-tax Act (hereinafter called the Act) and it raises a short question of the construction of S. 34 (1) (b) of the Act. This question arises in this way. Proceedings were taken by the Income-tax Officer, Special Circle, Patna, against Maharaja Bahadur Rama Rao Vijaya Prasad Singh, the father of the appellant, to levy income-tax for the year 1945-46. The total income assessed to income-tax by the said order was Rs.1,60,602. This amount included the sum of Rs. 93,604 received by the assessee on account of interest on arrears of rent due to him after deduction of collection charges. It was urged before the Income-tax Officer by the assessee that this amount was not liable to be taxed in view of the decision of the Patna High Court in Kamakshya Narain Singh v. Commissioner of Income-tax, (1946) 14 I T R 673 : The Income-tax Officer, however, held that, since the department had obtained leave to appeal to the Privy Council against the said decision, the matter was sub judice and so he would not be justified in accepting the assessee s contention. In the result, he included the said amount in the total income for the purposes of assessment, but ordered that the realisation of the tax on the said amount should be stayed till the decision of the Privy- Council or 31st March1947, whichever was earlier. This order was passed under S. 25 (3) of the Act on 31st December 1945.

2. Against this order the assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax, Patna. On 8th May1946, the appellate authority held that the Income-tax Officer was bound to follow the decision in the case of Kamakshya Narain Singh, (1946) 14 IT R 673 : and so, he set aside the order under appeal in regard to the amount of Rs. 93,604 and directed the Income-tax Officer to make fresh assessment. He also observed that it was not clear as to what portion of the said amount was interest on arrears of agricultural rents and what portion related to interest on arrears of nonagricultural rents. The Income-tax Officer was accordingly directed to determine the latter amount and to levy tax on it.

3. Pursuant to this appellate order the Income-tax Officer made a fresh assessment under Ss. 28 (3) and 31 of the Act on 20th August 1946. By this order the total amount of income liable to tax was determined after deducting the whole of the amount of Rs. 93,604 from it. Some other minor reductions were also allowed in compliance with the appellate order. The department did not challenge either the appellate order or the subsequent order passed by the Income-tax Officer in pursuance of the said appellate order. ,

4. Subsequently, on 6th July 1948, the appeal preferred by the department to the Privy Council against the decision of the Patna High Court in Commissioner of Income-tax, B. & O. v. Kamakshya Narain Singh, 1948-16 I T R 325 : was allowed and it was held that interest on arrears of rent payable in respect of agricultural land is not agricultural income for it is neither rent nor revenue derived from land.

5. As a result of this decision, the Income-tax Officer issued a notice to the assessee under S. 34 of the Act on 25th September 1948. This notice called upon the assessee to file a fresh return as the Income-tax Officer had reason to believe that a part of the assessee s income assessable to income-tax for the year ending 31st March 1946, had escaped assessment. It appears that this notice was found to be defective, and so under the provisions of S. 34 as amended, a fresh notice was issued by the officer to the assessee on 18th March 1949. The proceedings thus taken by the officer under S.34 ultimately led to a revised assessment order passed under S. 23 (3) and S. 34 of the Act and the amount of Rs. 93,604 was added to the assessment amount as interest on arrears of rent. This revised assessment order