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Agarwal Brothers Vs. Income-tax Officer, F-ward - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ No. 2206 of 1969
Judge
Reported in[1971]79ITR101(All)
ActsIncome Tax Act, 1961 - Sections 148 and 297(2); Income Tax Act, 1922 - Sections 34
AppellantAgarwal Brothers
Respondentincome-tax Officer, F-ward
Appellant AdvocateS.B.L. Srivastava, Adv.
Respondent AdvocateB.L. Gupta and ;R.R. Misra, Advs.
Excerpt:
- - the conclusion of the income-tax officer is clearly expressed in the last sentence that 'the income concealed thus works out at rs......previous withdrawals. these cash credits represent assessee's income from undisclosed sources. the income concealed thus works out to rs. 59,000 which has escaped assessment and it is sought to assess this escaped income.'7. plainly, the income-tax officer took into consideration two items of concealed income. the first related to the concealment of about rs. 29,000 according to the figures disclosed in the account books of the petitioner. the second concerned cash credits amounting to rs. 30,000 which were not covered by previous withdrawals. the conclusion of the income-tax officer is clearly expressed in the last sentence that 'the income concealed thus works out at rs. 59,000 which has escaped assessment and it is sought to assess this escaped income'. this is a case, where, on the.....
Judgment:

Pathak, J.

1. The petitioner is a partnership firm consisting of four partners. It carries on business in gold and silver ornaments.

2. For the assessment year 1953-54, the Income-tax. Officer assessed the petitioner on an income of Rs. 10,303 by an assessment order dated July 29, 1953. It is alleged that the petitioner-firm was dissolved in 1959. Subsequently, a notice dated June 26, 1965, under Section 148 of the Income-tax Act, 1961, was served on Murari Lal, a former partner of the firm. The Income-tax Officer made an assessment order dated March 10, 1969, under Section 147 of the Act of 1961, computing the total income at Rs. 71,072. Aggrieved by the assessment order the petitioner has filed this petition under Article 226 of the Constitution.

3. Sri S. B. L. Srivastava, learned counsel for the petitioner, contends that the assessment proceeding lay under the Indian Income-tax Act, 1922, and not under the provisions of the Income-tax Act, 1961. He urges that inasmuch as the income said to have been concealed by the petitioner was less than Rs. 1,00,000, the period of limitation governing the issue of a notice under Section 34(1) for taking reassessment proceedings was eight years from the end of the assessment year. That period expired, it is pointed out, on March 31, 1962, and, thereafter, recourse could not be had to the provisions of the Act of 1961 for taking reassessment proceedings.

4. Learned counsel for the respondents contends that according to the reasons recorded by the Income-tax Officer the concealed income exceeded Rs. 1,00,000, and there was no period of limitation under the Act of 1922 for taking reassessment proceedings in respect of such income. Consequently, it is said, reassessment proceedings could be taken, when the Act of 1961 was brought into force on April 1, 1962, under sections 147 and 148 of that Act by virtue of Section 297(2)(a)(ii) of the said Act.

5. It is now settled law that Section 297(2)(a)(ii) of the Income-tax Act, 1961, enables the application of that Act to those cases only where the period of limitation for taking proceedings under Section 34 of the Income-tax Act, 1922, has not expired : see J.P. Jani, Income-tax, Officer, Ahmedabad v. Induprasad Devskankar Bhatt, [1969] 72 I.T.R. 595 (S.C.) and Sardar Inder Singh v. Income-tax Officer, C. Ward, Varanasi, [1969] 72 I.T.R. 349 (All.). The question then is whether the period of limitation for taking reassessment proceedings had already expired before the Act of 1961 came into force. That will depend on whether the amount of concealed income, according to the reasons recorded by the Income-tax Officer, exceeded Rs. 1,00,000.

6. We considered it necessary to send for the original record of theincome-tax assessment proceeding before us. From the report of theIncome-tax Officer recording the reasons, on the basis of which he obtainedthe sanction of the Central Board of Direct Taxes, it seems to us impossibleto hold that he considered that the concealed income exceeded Rs. 1,00,000.The reasons recorded are :

'Assessment for 1953-54 was completed on an income of Rs. 10,303.The account books for this period were seized by the sales tax department.These books reveal a profit of Rs. 39,242. There thus is a concealment of about Rs. 29,000 as per books. In addition to this the accounts of the partners on the opening day show credit balance of Rs. 1,91,933 in seized books as against Rs. 75,179 shown in the books produced at the time of assessment. There also exists an anamat account in the seized books. Scrutiny of this account reveals that there are cash credits amounting to Rs. 30,000 which are not covered by the previous withdrawals. These cash credits represent assessee's income from undisclosed sources. The income concealed thus works out to Rs. 59,000 which has escaped assessment and it is sought to assess this escaped income.'

7. Plainly, the Income-tax Officer took into consideration two items of concealed income. The first related to the concealment of about Rs. 29,000 according to the figures disclosed in the account books of the petitioner. The second concerned cash credits amounting to Rs. 30,000 which were not covered by previous withdrawals. The conclusion of the Income-tax Officer is clearly expressed in the last sentence that 'the income concealed thus works out at Rs. 59,000 which has escaped assessment and it is sought to assess this escaped income'. This is a case, where, on the face of it, the Income-tax Officer had no jurisdiction to reassess the petitioner's income by recourse to the provisions of the Act of 1961. It was a case governed by the provisions of the Act of 1922 and plainly, upon the law laid down by the Supreme Court and this court in the decisions set out above, the Income-tax Officer was not competent to take the proceedings at all, inasmuch as the period of limitation for doing so had expired.

8. An objection has been taken on behalf of the respondents that an alternative remedy was available to the petitioner by way of appeal under the statute and that the petitioner should be compelled to have recourse to that remedy. Indeed, it is pointed out, the petitioner has actually preferred an appeal against the assessment order and that the appeal is pending. It seems to us that when on the plain facts of the case it appears ex facie that the Income-tax Officer had no jurisdiction, it is not necessary that the petitioner should be compelled to take recourse to an alternative remedy. We are of opinion that, having regard to the particular facts of this case, the existence of a remedy by way of appeal, even though resort has been had to it, should not preclude the grant of relief upon this petition. The objection of the respondents is overruled.

9. The petition is allowed. The assessment order dated March 10, 1969, made by the Income-tax Officer in respect of the petitioner and the consequent notice of demand are quashed. The petitioner is entitled to its costs.

Petition allowed.


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