BRIJLAL GUPTA J. - This is a reference under section 66(1) of the Income-tax Act.
The question which has been referred to the court for opinion is :
'Whether, on the facts and in the circumstances of the case, the assessment made under section 34(1)(a) was legal and valid ?'
The assessee is a Hindu undivided family. In its assessment for the assessment year 1947-48, certain items of cash credits amounting to Rs. 15,000 were included in its total income. The assessee went up in appeal to the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner took the view that the nature and source of these items of cash credits remained unexplained and as such the previous year for the amount of Rs. 15,000 was the financial year corresponding to the assessment year 1946-47. In this view he allowed the appeal. Thereafter, the Income-tax Officer issued a notice under section 34 and subjected the amount of Rs. 15,000 to tax under section 34(1)(a) along with the amount of Rs. 7,370 as originally taxed for the assessment for that year and also by his assessment order dated March 15, 1954, took action under section 28(1)(c).
The assessee went up in appeal against this order and the Appellate Assistant Commissioner allowed the appeal on the ground that the provisions of section 34(1)(a) were not applicable to the case. He was of the view that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Against this order of the Appellate Assistant Commissioner the Income-tax Officer was directed to go up in appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal reversed the order of the Appellate Assistant Commissioner and held that the assessee had not disclosed fully and truly all material facts necessary for the assessment for the year 1946-47. It also held that the mere fact that certain entries regarding cash credits might be found in the books did not amount to disclosure of the information contained in those entries to the Income-tax Officer. As such it held that the provisions of section 34(1)(a) were clearly attracted to the case. On the question of limitation the Tribunal held that the case was covered by the second proviso to sub-section (3) of section 34. Thereafter, the assessee asked for a reference to this court and the case has been stated on the question of law mentioned at the beginning of this judgment.
It appears to me that on the finding of fact recorded by the Tribunal the question referred must be answered in the affirmative. The Tribunal has pointed out that the mere fact that entries regarding cash credits might be contained in the account books of the assessee did not amount to disclosure of the information contained in the entries. As such it must be held that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It is well settled that the mere fact that account books may have been produced before the Income-tax Officer does not amount to communication of information contained in particular entries in those account books to the Income-tax Officer unless his attention is specifically drawn to those entries. It is also clear that there was a failure on the part of the assessee to disclose fully and truly the material facts necessary for the assessment. The assessee should have disclosed to the Income-tax Officer the nature and amount of the entries relating to cash credits and then should have left it to the Income-tax Officer to assess or not to assess the amounts depending upon the fact whether the amounts of cash credits could or could not in the circumstances be held to be taxable income. It follows that the proceedings under section 34(1)(a) were legally justified. The only other question which remains is whether the assessment under section 34(1)(a) was completed within the period of limitation prescribed for such an assessment. The limitation for an assessment under section 34(1)(a) was a period of eight years under the unamended section as it stood during the assessment year in question. The impugned assessment was completed on March 15, 1954, which was within the period of eight years from the end of the assessment year. As such the assessment was completed within time.
There is another way of looking at the matter. This is a case to which the provisions of section 28(1)(c) were held to be attracted. Under section 34(2) as it stood at the time, it was provided that in a case to which the provisions of section 28(1)(c) were attracted assessment could be completed within eight years. Thus even without reference to section 34(1)(a) reassessment can be justified as an assessment under section 23.
The answer to the reference must, therefore, be in the affirmative which should be returned to the Income-tax Appellate Tribunal, Allahabad, under the seal of the court and the signature of the Registrar. The department should be entitled to its usual costs of Rs. 200.
Reference answered in the affirmative.