The amendment made by Section 2 of the Income-tax (Amendment) Act, 1959 (Act 1 of 1959) to Section 34 of the Income-tax Act, 1922 removed the time limit of eight years for issuing a notice under Section 34(1)(a) of the Act.

Judgement

RAMASWAMI, J.:- This appeal is brought from the judgment of the Madras High Court dated January 2, 1964 in Tax Case No. 153 of 1962.

2. The assessment year involved in this appeal is 1948-49, the corresponding previous year being the financial year 1947-48. For the accounting period from November 13, 1947 to November 1, 1948 which was the corresponding previous year for the assessment year 1949-50 there was shown a credit of Rs. 25,000 in the capital account of the appellant On November 13, 1947, this amount was credited in the books of the appellant. On October 30, 1948 this amount was transferred to the account of one Amrithlal Ranchhoddas, the father-in-law of the appellant. The Income-tax Officer included the said amount as income of the appellant from undisclosed sources in the assessment for the assessment year 1949-50. On appeal to the Appellate Assistant Commissioner the appellant contended that the amount could not be included in the assessment year 1949-50 because the credit appeared prior to March 31, 1948. The Appellate Assistant Commissioner allowed the appeal holding that the credit came into the books of the appellant on November 13, 1947, i. e., in the financial year 1947-48 which is the previous year for the assessment year 1948-49. On this finding, the Appellate Assistant Commissioner deleted the addition of Rs. 25,000 from the assessment of the appellant for the year 1949-50. In doing so, the Appellate Assistant commissioner followed the decision in Commr. of Income Tax v. P. Darolia & Sons, 1955-27 ITR 515 Consequently, on November 3, 1958 the Income-tax Officer issued a notice under Section 34 (1) (a) of the Income-tax Act, 1922 (hereinafter referred to as the Act,) to the appellant for the assessment year 1948-49. By his order dated April 20, 1959 he rejected the contention of the appellant that the assessment was barred by limitation and assessed the sum of Rs. 25,000 as income from other sources. The appellant took the matter in appeal to the Appellate Assistant Commissioner who, by his order dated February 23, 1960, allowed the appeal. He took the view that there was no finding in the order of the Appellate Assistant Commissioner that the credit represented the income of the appellant or that the same credit should be assessed in the assessment year 1948-49. He further held that the notice under Section 34 issued on November 3, 1958 was bad in law and was not saved by the second proviso to Section 34 (3) of the Act. The Commissioner of Income-tax preferred an appeal against the order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal which allowed the appeal, holding that "the order of the Appellate Assistant Commissioner in the appeal against the assessment for 1949-50 should be taken to contain a finding that the sum of Rs. 25,000 represented income of the assessee to be considered in the assessment year 1948-49". At the instance of the appellant the Appellate Tribunal referred the following questions of law for the opinion of the High Court under Section 66 (1) of the Act :

"(1) Whether on the facts and in the circumstances of the case, the proceedings initiated against the assessee for the assessment year 1948-49 under Section 34 and the assessment for the said year are barred by limitation and hence not lawful?

(2) Whether the proceedings initiated against the assessee for the assessment year 1948-49 under Section 34 and the assessment made under Section 34 for the assessment year 1948-49 could be justified in law as for the purpose of giving effect to a finding or directions in the order of the Appellate Assistant Commissioner in I. T. A. No. 134 of 1958-59?

(3) Whether on the facts and in the circumstances of the case, the assessment made is saved from the bar of limitation under the second proviso to Section 34 (3)?"

By its judgment dated January 2, 1964, the High Court answered the questions in favour of the respondent and against the appellant. The High Court fol