1974 (2) TMI 18 - HC - Income Tax

Court rules Commissioner erred in taxing amounts, orders fresh decision post-April 1, 1962.

Sterling Construction And Trading Company Versus Income-Tax Officer And Another

The court held that the Commissioner erred in treating the amounts as taxable in the assessment year 1962-63. It emphasized that post-April 1, 1962, ... Previous Year Issues: Assessment of income from undisclosed sources for the assessment year 1962-63, applicability of Income-tax Act provisions, interpretation of section 297(2)(b) of the Income-tax Act, 1961.Analysis:The petitioner, engaged in the extraction and sale of manganese and iron ores, challenged the Commissioner of Income-tax's order under section 264 of the Income-tax Act, 1961, regarding discrepancies in stock and borrowings. The Income-tax Officer added Rs. 3,40,970 as income from undisclosed sources to the petitioner's declared income, which was upheld on appeal. The Commissioner modified the assessment but upheld certain items as income from undisclosed sources, leading to the writ petition.The key contention was whether amounts related to undisclosed sources from before March 31, 1961, should be assessed in the financial year 1960-61 or 1961-62. Citing a Supreme Court decision, the petitioner argued for assessment in 1961-62. The revenue relied on section 297(2)(b) of the Income-tax Act, 1961, stating that assessments post-April 1, 1962, fall under the new Act's procedural provisions, not the liability aspects.The court held that the Commissioner erred in treating the amounts as taxable in the assessment year 1962-63. It emphasized that post-April 1, 1962, assessments follow the new Act's procedural rules, not liability provisions. The order was set aside, and the matter was remitted to the Commissioner for a fresh decision. The authorities were permitted to take lawful steps regarding the sums in question. The writ petition was allowed, with costs awarded.