JUDGMENT

Gulati, J. - This is a reference u/s 66(1) of the Indian income tax Act, 1922.

2. The assessee is a private limited company. In the previous year relevant to the assessment year 1960-61, the assessee had earned a sum of rupees one lakh which in its opinion was exempt from Income Tax. Thus, in the return filed for the assessment year 1960-61, the assessee did not include in its taxable income the sum of rupees one lakh and appended the following note in Part D of the return which is meant for showing items of income and gain in respect of which the assessee claims exemption.

"Addition to capital reserve......Rs. 1,00,000.

(i) It is a receipt of casual nature not arising from any business, profession, vocation or occupation ; and

(ii) It is also not taxable as capital gain on account of aggregate capital loss of Rs. 21,09,001 brought forward u/s 24(2B) from 1954-55 and 1956-57."

3. The Income Tax Officer passed an assessment order on March 7, 1964, but did not deal with the claim of the assessee contained in Part D of the return. Later on he issued a notice u/s 148 of the Income Tax Act, 1961, as in his opinion the sum of Rs. 1,00,000 mentioned by the assessee in Part D had escape