Pre-year income cannot be taxed in a later assessment year; unlawful inclusion rejected absent reassessment of escaped income.

Income earned before the relevant year of account could not be brought into assessment for that year, even if the firm was otherwise assessable under the governing provision. The amount had already been earned and reflected in earlier books and balances, so its inclusion in the taxable income for the assessment year was not permitted by law. The assessee's reliance on a different objection did not validate an assessment that the statute did not authorise, and no reassessment of escaped income had been initiated under the applicable provision. The inclusion was therefore held unlawful, and the issue was answered in favour of the assessee.

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Issues: Whether the Income-tax authorities were justified in including Rs. 26,699 in the taxable income for the assessment year 1938-39.

Analysis: The amount in question had been earned before the relevant year of account and appeared in the earlier books and balances. Even if the firm could be assessed under the relevant statutory provision, profits earned before the year of account could not be brought into the assessment for that year. The fact that the assessees rested their objection on a different ground did not permit inclusion of income which the law did not allow to be assessed. No action had been taken to reopen escaped income under the reassessment provision.

Conclusion: The inclusion of Rs. 26,699 was not in accordance with law and the answer was in the negative, in favour of the assessee.

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