Case: Bhanji Bagawandas Vs. Commissioner Of Income-Tax, Madras

2. The assessment year involved in this appeal is 1948-49, the corresponding previous year being the financial year 1947-48. For the accounting period from November 13, 1947 to November 1, 1948 which was the corresponding previous year for the assessment year 1949-50 there was shown a credit of Rs. 25,000 in the capital account of the appellant On November 13, 1947, this amount was credited in the books of the appellant. On October 30, 1948 this amount was transferred to the account of one Amrithlal Ranchhoddas, the father-in-law of the appellant. The Income-tax Officer included the said amount as income of the appellant from undisclosed sources in the assessment for the assessment year 1949-50. On appeal to the Appellate Assistant Commissioner the appellant contended that the amount could not be included in the assessment year 1949-50 because the credit appeared prior to March 31, 1948. The Appellate Assistant Commissioner allowed the appeal holding that the credit came into the books of the appellant on November 13, 1947, i. e., in the financial year 1947-48 which is the previous year for the assessment year 1948-49. On this finding, the Appellate Assistant Commissioner deleted the addition of Rs. 25,000 from the assessment of the appellant for the year 1949-50. In doing so, the Appellate Assistant commissioner followed the decision in Commr. of Income Tax v. P. Darolia and Sons, 1955-27 ITR 515   = (AIR 1955 Pat 478  ). Consequently, on November 3, 1958 the Income-tax Officer issued a notice under Section 34 (1) (a) of the Income-tax Act, 1922 (hereinafter referred to as the Act,) to the appellant for the assessment year 1948-49. By his order dated April 20, 1959 he rejected the contention of the appellant that the assessment was barred by limitation and assessed the sum of Rs. 25,000 as income from other sources. The appellant took the matter in appeal to the Appellate Assistant Commissioner who, by his order dated February 23, 1960, allowed the appeal. He took the view that there was no finding in the order of the Appellate Assistant Commissioner that the credit represented the income of the appellant or that the same credit should be assessed in the assessment year 1948-49. He further held that the notice under Section 34 issued on November 3, 1958 was bad in law and was not saved by the second proviso to Section 34 (3) of the Act. The Commissioner of Income-tax preferred an appeal against the order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal which allowed the appeal, holding that "the order of the Appellate Assistant Commissioner in the appeal against the assessment for 1949-50 should be taken to contain a finding that the sum of Rs. 25,000 represented income of the assessee to be considered in the assessment year 1948-49". At the instance of the appellant the Appellate Tribunal referred the following questions of law for the opinion of the High Court under Section 66 (1) of the Act :"(1) Whether on the facts and in the circumstances of the case, the proceedings initiated against the assessee for the assessment year 1948-49 under Section 34 and the assessment for the said year are barred by limitation and hence not lawful?(2) Whether the proceedings initiated against the assessee for the assessment year 1948-49 under Section 34 and the assessment made under Section 34 for the assessment year 1948-49 could be justified in law as for the purpose of giving effect to a finding or directions in the order of the Appellate Assistant Commissioner in I. T. A. No. 134 of 1958-59?(3) Whether on the facts and in the circumstances of the case, the assessment made is saved from the bar of limitation under the second proviso to Section 34 (3)?"By its judgment dated January 2, 1964, the High Court answered the questions in favour of the respondent and against the appellant. The High Court followed an earlier decision in A. S. Khader Ismail v. Income-tax Officer (1963) 47 ITR 16 (Mad)   in which it had held that the word "finding" in the proviso to Section 34 (3) of the Act must he given a wide significance so as to include not only findings necessary for the disposal of the appeal but it would apply to cases where it is held that the income in question was in respect of an earlier year which was not the subject-matter of the appeal before the appellate authority.

Reasoning:
It follows therefore that the view taken by the High Court in the present case is not correct in law and must be overruledWe do not think there is any substance in the objection raised on behalf of the appellantIt is true that the impact of the Amending Act, l959 (Act 1 of 1959) was not raised before the Appellate Tribunal or before the High Court, but it is not a separate question by itself and is only an aspect of the question of limitation which has already been referred by the Appellate Tribunal to the High CourtWhere the question itself was under issue, there is no further limitation imposed by the Section that the reference should be limited to those aspects of the question which had been argued before the Tribunal, and it will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question far the purpose of S. 66 (1) of the Act.In our opinion, the argument of the respondent with regard to the legal effect of the Amending Act of 1959 (Act 1 of 1959) is within the frame-work of the question already referred to the High Court and it is therefore competent to this Court, in a case of this description, to allow a new contention to be advanced5. It is, however, necessary that the case should be remanded to the High Court for examining the question of law referred to it after considering the impact of the Amending Act of 1959 (Act 1 of l959).