The ITO's power to reassess income under s. 34 of the IT Act is not limited to the income specified in the notice issued under s. 34.

G.K. MITTER, J.

1. THE question referred to this Court under s. 66(1) of the Indian IT Act is :

"Whether on the facts and in the circumstances of the case, the ITO was justified in including the income from undisclosed sources in the reassessment for the year 1946-47 ?"

The facts are as follows :

2. THE assessee was a member of an HUF until October, 1944. By a deed of partition the assessee separated from his brothers and this deed which purported to give the entire family holding was accepted by the Revenue authorities. After the partition the first assessment year of the assessee was the year 1946-47. He did not produce any account books nor did he specify any mode of accounting but claimed to go by the Dewali year. The Dewali year 2002 ended some time in November, 1945. The assessee was assessed to an income of Rs. 2,800 in his business of broking and another sum of Rs, 2,000 from "other sources" because of the fact that he had encashed two one thousand rupee notes for the possession of which he failed to give any satisfactory explanation. This assessment was made on 22nd March, 1949. Thereafter the ITO came to know that the assessee held a money- lender's licence and had a money-lending business which he had failed to disclose. On 6th July, 1954, a notice under s. 34 of the IT Act was issued on the assessee by the ITO stating that he had reason to believe that the assessee's income assessable to income- tax for the asst. yr. 1946-47 had escaped assessment and it was, therefore, proposed to reassess the said income escaping assessment." On 10th Sept., 1954, the ITO issued a notice under s. 22 (4) for the asst. yr. 1946-47 (2002 Dewali) pursuant to notice under s. 34 calling upon the assessee to produce his books of account along with the books for the year 2002 Dewali and bank pass books. On 27th June, 1955, the assessee filed a duly verified list of debtors against some of whom he had filed suits while other had filed insolvency petitions. He did not however, disclose three specific debts the particulars whereof are as follows : Being asked to explain the source of these investments the assessee stated that they had come out of his ancestral funds. This was rejected by the ITO who estimated that the assessee had invested Rs. 1,50,000 in his said business and that income therefrom was Rs. 18,000. In appeal the AAC confirmed the said estimated with regard to money-lending business but reduced the income from undisclosed sources. The ITO treated the financial year 1945-46 as the previous year for this assessment.

The point now taken is that inasmuch as the Revenue authorities had stated in the notice under s. 34 that income for the Dewali year 2002 had escaped assessment it was not open to them to

Sl. No. Name of the debtor Date of advance Amount 1. K. G. Marston 24-12-1945 500 2. M. A. Rashid 1-01-1946 10,000 3. D. Rajagopal Pillai 20-03-1946 900

take into account any investment which fell beyond that period. It will be noticed that the three specific debts which the assessee failed to disclose dt. from December 1945, onwards and they are not within the Dewali year 2002. The question which arises is whether on the basis of the notice which had stated that income for the Dewali year had escaped assessment it was open to the Revenue authorities to assess income which fell outside that year but during the financial year 1945-46.

3. UNDER s. 34(1) of the Act as it stood at the relevant time "if in consequence of definite information which has come into his possession the ITO discovers that income, profits or gains chargeable to income-tax have escaped assessment in any year. . . the ITO may in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars thereof at any time within eight years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income, profits or