Law:

Section:

Section 253, read with section 147, of the Income-tax Act, 1961 [Corresponding to section 33, read with section 34, of the Indian Income-tax Act, 1922] - Appellate Tribunal - Appeals to - Assessment year 1947-48 - While passing order under section 34, ITO held certain sum to be assessee's income from undisclosed sources - Assessee, besides challenging said order on merits, contended that notice under section 34 was invalid as matter sought to be reopened under section 34 had already been considered by ITO at time of original assessment - AAC considered appeal only on merits and remanded matter to ITO for fresh assessment - On further appeal, Tribunal held that in view of appellate order passed by AAC, there was no subsisting demand against assessee and appeal, therefore, had become infructuous - Whether there is nothing in section 33 of 1922 Act to indicate that in case order passed under section 31 of 1922 Act by AAC was one which cancelled demand against assessee, no appeal to Tribunal was maintainable - Held, yes - Whether when assessee pressed before Tribunal legal contention in respect of validity of proceedings initiated under section 34 of 1922 Act, it was necessary for Tribunal to decide as to whether contention of assessee was or was not sound - Held, yes - Whether therefore, Tribunal was not justified in dismissing appeal as being infructuous - Held, yes FACTS Subsequent to the assessee-firm being assessed to tax for assessment year in question, the ITO issued a notice under section 34 calling upon the assessee to file a return of income. The assessee filed the return and in response to the notice issued under sections 23(2) and 22(4), offered an explanation in respect of the cash credits noted by the ITO. The assessee challenged the validity of the notice issued under section 34. The ITO overruled the legal objection and held that the said sum was the assessee's income from undisclosed sources and assessment was, therefore, made under section 34 read with section 23(3). On appeal, the assessee, besides challenging the correctness of the decision of the ITO on merits urged the legal contention that the notice under section 34 was invalid and that the…

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