TaxTMI 
TaxTMI 
1961 (7) TMI 87
X X X X Extracts X X X X
X X X X Extracts X X X X
....sclosed sources. The amount was found to have been received by the appellants by encashing high denomination notes of the value of Rs. 85,000 on January 25, 1946. The appellants appealed against the order made by the Income-tax Officer to the Appellate Assistant Commissioner. In their appeal they raised three contentions. The first was that the fact of encashment of the high denomination notes was known to the Income-tax Officer at the time of the original assessment and that consequently he had no authority to proceed under section 34 of the Act.. The second contention was that the amount in question did not represent the income of the appellants, but formed part of the business cash balance and the sale proceeds of some lorries. The third....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt for 1946-47." According to this judgment, the sum of Rs. 85,000 should have been assessed in the year 1946-47 and not 1947-48. The Income-tax Officer subsequently issued a notice under section 34 of the Act calling upon the appellants to submit a return of their income for the year ending March 31, 1947, as he had reason to believe that the income assessable to income-tax for that year had escaped assessment or was under-assessed. The appellants then filed a petition in the High Court in which they challenged the validity of this notice and prayed for a writ or order restraining the Income-tax Officer from taking any further proceeding in pursuance of the said notice. The petition came up for hearing before Mr. Justice K.K. Desai. Onl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve been issued in respect of this income after 31st March, 1951, under sub-section (3), as it stood before its amendment in 1953. Under the second proviso to sub-section (3), as it stands at present, there is no time limit for issuing a notice under clause (b), if the reassessment is made in consequence of or to give effect to any finding or direction contained in the order under section 31. Mr. Rajagopal has urged that as the power to issue a notice under clause (b) in respect of the income realised in 1946-47 could not be used after 31st March, 1951, the remedy available to the income-tax department to assess the income, which had escaped assessment, had become time barred before the section was amended and that consequently, no action ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n or even at the time of its hearing, we have not permitted him to take up this point for the first time before us. It will be open to him to urge it before the Income-tax Officer. Under clause (b) in sub-section (1) of section 34, a notice under this clause can be issued within four years of the end of the year, the income arising in which has escaped assessment. Under the second proviso to sub-section (3) this time limit shall not apply in cases in which the reassessment is made in consequence of or to give effect to any finding or direction contained in an order made under section 31. The Income-tax Officer relies on this provision in support of his argument that the notice is in time. According to him the notice has been issued in or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at, as is pointed out in the judgment itself, the Appellate Assistant Commissioner had not recorded any finding that the income had arisen in 1944-45, for, as stated in the judgment, "if he had found to that effect, he would not have used the words 'if at all'". It is true that there is an observation in the judgment that the Appellate Assistant Commissioner could not have found whether the income related to 1944-45. This observation must, however, be read in the context and would not justify an inference that the appellate authority can in no case record a finding on such a question. The other case, on which Mr. Rajagopal has relied, is the decision of the Allahabad High Court in Pt. Hazari Lal v. Income-tax Officer [1960] 39 ITR 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e second proviso to section 34(3), that the finding was given after the point was raised on behalf of the assessee, that it could not be said to be gratuitous or uncalled for, and that consequently the notice could be said to have been issued in consequence of the finding given in the order under section 31 and was therefore valid. With respect, we are inclined to agree with the view taken by the Madras High Court. So far as the present case is concerned, the proceedings before the Appellate Assistant Commissioner, to which I have referred above, show that the assessing officer had included the amount of Rs. 85,000 in the income liable to assessment in 1947-48. The appellants contended that this amount should have been assessed in the as....