1. The assessee was a partner in a registered firm known as C. M. Jaffar Khan & Co., Bangalore. The firm in question filed a return in respect of its income for the period ending June 30, 1949, under the Mysore Income-tax Act, 1923. For that year, the said firm was taxed in a sum of Rs. 3,376-7-0. The said assessment was duly paid. On March 15, 1950, the assessee filed his return for his individual income including his share of the firm income for the accounting year ending June 30, 1949. That return was also made under the Mysore Act. The Income-tax Officer did not make any specific order of assessment on that return. But, there is no doubt, he accepted the return in question as correct. That is clear from the fact that he refunded a sum of Rs. 641-3-0 to the assessee, that sum having been arrived at on the basis of the difference in the rate of tax applicable to the assessee and the maximum rate. As a result of the investigation carried on in respect of the assessment for the years 1951-52 and 1952-53, the Income-tax Officer was of the opinion that the assessee's income had escaped assessment in the accounting year ending June 30, 1949. He, therefore, issued notice under section 34 of the Indian Income-tax Act, 1922. The assessee objected to the same on the ground that he had already been assessed under the Mysore Act. Overruling the objection of the assessee, the Income-tax Officer reassessed the income of the assessee for the year in question. But his order was reversed in appeal by the Income-tax Appellate Assistant Commissioner. The Appellate Assistant Commissioner came to the conclusion that in view of clause 5 in part B States (Taxation Concessions) Order, 1950, to be hereinafter referred to as the 'Order', the assessee could not be reassessed under section 34 of the Indian Income-tax Act. Aggrieved by the order of the Appellate Assistant Commissioner, the department went up in appeal to the Income-tax Appellate Tribunal, Madras Bench. That Tribunal reversed the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. The Tribunal came to two starting conclusions, namely, (1) that the assessee had not been assessed at all for the accounting year ending June 30, 1949; and (2) on a proper construction of clause 5 of the Order, only such income of the assessee as had been assessed under the Mysore Act was taken out of the purview of the Indian Income-tax Act, 1922. We have now to see whether these two conclusions are sustainable.
2. From the admitted facts, it is clear that the Income-tax Officer had accepted the return of the assessee for the year in question. Otherwise, he could not have ordered a refund of Rs. 641-3-0 to the assessee. The fact that there was no assessment order as such is wholly immaterial. Our conclusion in this regard is supported by the decision of the Supreme Court in Esthuri Aswathiah v. Income-tax Officer, Mysore. In that case, the Income-tax Officer had ordered 'no proceedings' in the return submitted by the assessee. The Supreme Court interpreted that order as meaning that the Income-tax Officer had accepted the return submitted by the assessee. The same reasoning applies to the facts of the present case. Therefore, we come to the conclusion that the assessee had been assessed for the accounting year ending June 30, 1949.
3. This takes us to the true scope of clause 5(1) of the Order. That clause reads :
'The income, profits and gains of any previous year ending after the 31st day of March, 1949, which is a previous year for the State assessment year 1949-50, shall be assessed under the Act for the year ending on the 31st day of March, 1951, if and only if, such income, profits and gains have not, before the appointed day, been assessed under the State law.'
4. In view of the provisions of the Finance Act, 1950, the assessee's income for the year in question would have been assessable under the Indian Income-tax Act, 1922. But to avoid double taxation in respect of certain periods, an exception is provided under clause 5 of the Order. This position is made clear by the decision of the Supreme Court in Esthuri Aswathiah's case referred to earlier.
5. Therefore, if a case falls under clause 5 of the Order, that Order should be applied. Hence what we have to see in this case is whether the present case falls under clause 5 of the Order.
6. This takes us to the question as to what is the meaning to be attached to the words 'such income' found in clause 5 of the Order. The Appellate Assistant Commissioner held that the word 'such' in the Order refers to the income, profits and gains relatable to a particular previous year and it cannot be extended to mean that it pertains to a particular source as there is no reference to the escarpment of income under different sources. The Income-tax Appellate Tribunal differed from him on this point and found that the words in question referred to identity of income or sources; that it is only in cases where an income had been assessed under the Mysore Act, that the Income-tax Officer is prohibited from taking further action thereon. On this point, we are unable to agree with the conclusion of the Appellate Tribunal. On the other hand, we are of the opinion that the view taken by the Appellate Assistant Commissioner is the correct view. Otherwise, what would happen is that there would be two assessments in respect of the income of an assessee during one assessment year. The learned counsel for the revenue concedes that so far as the income of the assessee obtained by him as a share in the firm's income is concerned, the same has already been assessed to tax. That income cannot be again assessed. If the view of the Appellate Tribunal is correct, then, that portion of the income of the assessee relating to the assessment year in question, which had already not been brought to tax under the Mysore Act, can alone be taxed by having recourse to section 34 of the Indian Income-tax Act, 1922. The resulting position is there would be one assessment under the Mysore Act and that relating the assessee's income obtained as his share from the firm's income and another assessment in respect of his other income. Such a procedure is wholly repugnant to the provisions of the Income-tax Act and, if we accept it as correct, it would lead to anomalous result. If the income of one assessee in respect of one assessment year is spilt under several heads and taxed separately, then in many cases, the incidence of taxation is likely to be affected. The total tax payable by that assessee is likely to be lesser than that prescribed by law. There is no authority for such a procedure either under the Indian Income-tax Act or under the Mysore Income-tax Act.
7. The words 'such income' in clause 5 of the Order, in our judgment, means the entire income of the assessee relating to the assessment year already brought to tax under the Mysore Act.
8. For the reasons mentioned above, our answers to the questions referred are : (1) on the facts and in the circumstances of the case, the refund granted by the Income-tax Officer under section 48 of the Mysore Income-tax Act amounted to an assessment; and (2) the interpretation placed by the Appellate Tribunal on the words 'such income, profits and gains' in clause 5 (1) of the Order is not correct.
9. The department to pay the costs of the assessee. Advocate's fee Rs. 250.