Law: Income Tax Act, 1922

Section: 66(1)

JUDGMENT Kumarayya, J.-This is a reference under section 66(1) of the Indian Income-tax Act, 1922. The question for determination is: "Whether, on the facts and in the circumstances of the case, the assessment in pursuance of the notice issued under section 34 on February 12, 1958, is a valid assessment?" The facts of the case are few and may be briefly stated. The assessee is a Hindu undivided family consisting of K. Ankineedu and his two sons. For the assessment year 1949-50, for which the previous year is the financial year ending on March 31, 1949, he submitted his return in response to the notice sent to him. The Income-tax Officer computed his total income as only Rs. 2,429 which was far below the taxable limit and declared accordingly. Years later, he came to know that the assessee had failed to include in his return the profits of business earned by him in that year as procurement agent for the Government. Accordingly, he issued a notice under section 34 of the Act on March 22, 1957. The assessee in response thereto sent his return on April 30, 1957 showing as before his status as the Hindu undivided family. But the Income-tax Officer did not proceed with the assessment on the basis thereof. Instead, a few months later, on Febuary 12, 1958, he issued a fresh notice purporting to be under section 34. The assessee submitted a second return with enclosures to the same effect as before. Then the Income-tax Officer proceeded to assess and ultimately made his order of assessment on August 16, 1958. He included in the assessment a sum of Rs. 60,000 as the income escaping from the original assessment. The assessee went in appeal to the Appellate Assistant Commissioner disputing this addition of Rs. 60,000. He questioned the validity of the proceedings taken under section 34 of the Act. Such a plea was not taken before the Income-tax Officer nor was it included in the grounds of appeal. Yet, being a pure question of law, the Appellate Assistant Commissioner permitted it to be raised and eventually accepted it on the ground that no such notice could be issued after the expiry of eight years from the close of the "previous year" as distinct from the assessment…

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