The High Court's jurisdiction under Section 66(2) of the Income Tax Act, 1922, to answer questions of law arising out of an order of the Appellate Tribunal is conditional on the assessee having made an application under Section 66(1) requiring the Appellate Tribunal to refer the question of law and having included the question in the application made to the High Court under Section 66(2).

1. In this case Maharaja Bahadur Ramran Vijay Prasad Singh was assessed to income-tax in the first instance by an order of the Income-tax Officer dated 12-12-1944. The assessee had shown in his return a gross figure of Rs. 87,910 as interest on arrears of rent from the agricultural land. But the Income-tax Officer excluded this amount from the total assessable income on the basis of a Full Bench decision of the Patna High Court holding that the interest on the agricultural income was not liable to be taxed under the Indian Income-tax Act.

The decision of the Patna High Court was reversed by the Judicial Committee some time in the year 1948. The Judicial Committee took the view that interest on arrears of rent was not agricultural income and was liable to be taxed under the provisions of the Indian Income-tax Act.

After the decision of the Judicial Committee was pronounced the Income-tax Officer started a proceeding against the Maharaja under Sec.34. The proceeding was started on 25-9-1948. The provisions of Sec.34 were later amended and though the actual date of the amendment was 8-9-1948 the amendment was made with retrospective effect from 30-3-1948. In view of the amendment of Sec.34 the Income-tax Officer started a fresh proceeding on 18-3-1949. On 30-9-1949 the Income-tax Officer granted certain deductions and held that the amount of Rs. 76,921 should be added to the assessable income of the Maharaja of Dum-raon. The Maharaja died on 13-11-1949 and his son Maharaj Kumar Kamal Singh has been substituted in his place in the proceedings of the Income-tax authorities. An appeal was taken against the order of the Income-tax Officer to the Appellate Assistant Commissioner. The contention of the assessee was that the decision of the Judicial Committee was not tantamount to definite information or discovery within the meaning of Sec.34 and the Income-tax Officer had no jurisdiction to start a proceeding. The argument was rejected by the Appellate Assistant Commissioner and the appeal was dismissed.

The Assessee thereupon preferred an appeal to the Income-tax Appellate Tribunal. Two arguments were addressed on his behalf. In the first place, it was argued that the old Sec.34 and not the amended section was applicable to the case and notices should have been issued under the provision of the old section. In the second place, it was argued that the decision of the Judicial Committee was not definite information which led to any discovery that the income had escaped assessment within the meaning of Sec.34.

On the first point the Appellate Tribunal held that it was not necessary to consider whether the old or the amended section applied for assuming in favour of the assessee that the old Sec.34 applied the Appellate Tribunal took the view that the more stringent requirements of the old Sec.34 with respect to definite information and discovery have been satisfied. On the second point the Appellate Tribunal held that the argument put forward on behalf of the assessee was not valid and the reversal of the Patna view by the Judicial Committee was tantamount to definite information which led to discovery that the income had escaped assessment within the meaning of the old Sec.34. The appeal of the assessee was therefore dismissed by the Income-tax Appellate Tribunal.

2. The assessee made an application to the Tribunal under Sec. 66(1), Income-tax Act, requiring the Appellate Tribunal to state a case to the High Court on certain questions of law. In this application the assessee referred only to two questions of law which they had argued before the Tribunal and prayed that these questions should be referred to the High Court under Section 66 (1). The application was rejected by the Appellate Tribunal on the ground that the questions raised were not questions of law and that there was no case made out for reference to the High Court. The assessee thereupon filed an application to the High Court under Sec. 66 (2), Income-tax Act. Para