1966 Supreme(Cal) 80

HIGH COURT OF CALCUTTA
K. C. Sen, A. C. Sen
DAULATRAM RAWATMULL - Appellant
Versus
COMMISSIONER OF INCOME-TAX, CENTRAL - Respondent
Income-Tax Ref.  88  Of  1960
Decided On : APRIL 1, 1966

The authority of the Income-tax Officer to take action under Clause (a) of Sub-section (1) of Section 34 came to an end with the introduction of Subsection (1a) of Section 34 because the assessee belongs to a class whose escaped income can be assessed or reassessed only under Sub-section (1a) of Section 34.

Headnote:

Whether on the facts and in the circumstances of the case, the Income-tax Officer was justified in proceeding to reopen the assessment under Section 34 (1) (a) after Section 34 (1a) had been introduced in the Indian Income-tax Act, 1922. Whether on the facts and in the circumstances of the case, the cash credits and fixed deposits in question were assessable for the assessment year 1946-1947.

Fact of the Case:

The assessee at all material times was a firm of six partners whose names and shares are indicated below: (1) Nandlal Bhowalka 3 (2) Giridharilal Bhowalka 3 (3) Shyamlal Bhowalka 2 (4) Bajranglal Bhowalka 2 (5) Rautmal Nowpani 3 (6) Rameswarlal Nowpani 3 These fixed deposits were made in November, 1944. The Income-tax Officer held that the amounts of the fixed deposits credited in the Jamnagar Branch of the Central Bank of India Ltd in the names of the two sons of the partners of the firm were secret profits that belonged to the assessee firm itself and he added the sum of Rs. 10,00,000 to the total income of the assessee. He also added another sum of Rs. 5,00,000 held as fixed deposit in the Jamnagar Branch of the Central Bank of India Ltd standing in the name of S. P. Agarwala, son of Rameshwar Agarwala.

Finding of the Court:

We, therefore, hold that the Income-tax Officer was justified in the instant case in proceeding to reopen the assessment under Section 34 (1) (a) after Section 34 (1a) had been inserted in the Indian Income-tax Act. The question No. 1 is, accordingly, answered in the affirmative. WE now propose to consider the fourth question in so far as it relates to fixed deposits, The question to be decided is whether the fixed deposits in question were assessable for the assessment year, 1946-47. It is contended by the learned Counsel for the assesses that the fixed deposits were not assessable for the assessment year, 1946-47. The fixed deposits were made in the financial year, 1944-45. The argument on behalf of the assessee is that if the fixed deposits are treated as the assessee's income from some undisclosed source, the corresponding assessment year would be 1945-46. In that event, it is urged, the fixed deposits were not assessable for the assessment year, 1946-47. WE, therefore, hold that the fixed deposits represented income from business and that they were assessable in the assessment year, 1946-47. The assessability of the cash credits is not disputed The fourth question, accordingly, is answered in the affirmative. Question Nos. 2 and 3 were not pressed at the hearing; we, therefore, refrain from answering them.

Issues: Whether on the facts and in the circumstances of the case, the Income-tax Officer was justified in proceeding to reopen the assessment under Section 34 (1) (a) after Section 34 (1a) had been introduced in the Indian Income-tax Act, 1922. Whether on the facts and in the circumstances of the case, the cash credits and fixed deposits in question were assessable for the assessment year 1946-1947.

Ratio Decidendi: The assessee in the instant case undoubtedly belongs to this class and the proceeding for reassessment could have been initiated under Sub-section (1a) of Section 34. But the escaped income of the assessee has in fact been reassessed under Clause (a) of Sub-section (1) of Section 34. Can it be said that reassessment is void? Prior to the introduction of Sub-section (1a) under Section 34 the Income-tax Officer was competent to initiate proceeding against the assessee in respect of his income that has escaped assessment during war period under Clause (a) of Sub-section (1) of Section 34. The contention of the assessee is that the authority of the Income-tax Officer to take action under Clause (a) of Sub-section (1) of Section 34 came to an end with the introduction of Subsection (1a) of Section 34 because the assessee belongs to a class whose escaped income can be assessed or reassessed only under Sub-section (1a) of Section 34. THERE was nothing in the language of Clause (a) of Sub-section (1) of Section 34 before amendment in 1956 from which it could be said that the assessees mentioned in Sub-section (1a) of Section 34 could not be assessed under that clause, namely, Clause (a) of Sub-section (1) of Section 34 within the period of the limitation mentioned in the said clause.

Final Decision: The two questions pressed at the hearing having been answered in favour of the Revenue, the assessee must pay costs of this Reference to the Commissioner of Income-tax.