The amended Section 34 of the Income-tax Act applied to the case, and the Income-tax Officer's failure to comply with the mandatory requirements of the amended section rendered the entire proceeding invalid. The assessee's filing of a return in response to the notice under Section 34 did not constitute a waiver of the procedural benefits conferred by the amended section.

Ramaswami, J.

1. In this case the assessee, namely, Maharaja Pratap Singh Bahadur, had agricultural income from his zamindari for all the four assessment years 1944-45 to 1947-48. Assessment was made by the Income-tax authorities for all these assessment years but the income, of the assessee with regard to Interest on arrears of rent was not included In the computation of the assessable income. The Income-tax authorities followed this course in few of the decision of the Patna High Court in Lakshmi Daiji V/s. Commissioner of Income-tax B & O, 1944-12 ITR 309 : (AIR 1944 Pat 198) (SB) (A).

But the view of the law taken by the Patna High Court was reversed by the Judicial Committee in the Commissioner of Income-tax, B & O V/s. Kamakhaya Narayan Singh, 1948-16 ITR 325 : (AIR 1949 PC 1) (B). It was held by the Judicial Committee that the interest on arrears of agricultural rent was not agricultural income within the meaning of Sec.2 (1) of the Income-tax Act and was, therefore, not exempt from income-tax.

The decision of the Judicial Committee is dated the 6th of July, 1948. In accordance with this decision the Income-tax Officer issued notices under Sec.34 of the Income-tax Act against the assessee for all the four assessment years. These notices were issued on the 8th of August, 1948. The assessee filed returns of income in response to these notices and included in the returns the receipt of interest on arrears of rent. The Income-tax Officer completed all the assessments on the 26th of August. 1948.

The Income-tax Officer followed the procedure laid down by Sec.34 as it stood before it was amended by Act XLVII of 1948. The amendment received the assent of the Governor General on the 8th of September, 1948. The assessee took appeals to the Appellate Assistant Commissioner against the order of the Income-tax Officer, but the appeals were dismissed. The assessee took the matter in appeal again to the Appellate Tribunal.

The appeals were heard before the Patna bench constituted of Mr. Sastri, the Judicial Member, and Mr. Narayana Row, the Accountant Member. There was difference of opinion between these two members as to how the appeals were to be decided. Mr. Sastri, the Judicial Member held that the procedure prescribed under the old Sec.34 applied to the case and there was "definite information" obtained by the Taxing authorities within the meaning of the old Sec.34.

The Judicial Member also held that the as-sessee was estopped from contesting the validity of Sec.34 because he had responded to the notice and included the receipt of interest from the rent in his income. The Accountant Member, Mr. Narayan Row, expressed a different view on both these points. He held, firstly, that there was no waiver on the part of the assessee merely because he filed the return of income in response to the notice under Sec.34.

In the second place, the Accountant Member took the view that the amended Sec.34 applied to the case and since the peremptory requirements of the amended section were not complied with the proceedings under Sec.34 taken by the Income-tax authorities were legally invalid and the assessments made under Sec.34 are also invalid and should be cancelled.

The appeals were then placed before the President of the Appellate Tribunal, who held, in the first place, that there was no waiver on the .part of the assessee and, secondly that the assessments under Sec.34 were legally invalid because the requirements imposed by the amended Sec.34 had not been complied with.

2. Under Section 06(1) of the Income-tax Act the Appellate Tribunal has submitted for the opinion of the High Court the following questions of law :

(1) "Whether in the circumstances of the case, assessment proceedings were validly initiated under Sec.34 of the Indian Income-tax Act?

(2) If so. whether in the circumstances of the case, the amount received from interest on arrears of agricultural rent was rightly included in the income of the assessee?"

On behalf of