The assessee is a Hindu undivided family carrying on money lending and Sarafa business. It also derives income from property and dividends. On October 30, 1952, it was assessed on its total income for the assessment year 1949-50, the relevant previous year being the year ended March 31, 1949. During the assessment proceedings for the assessment year 1950-51, the Income-tax Officer noticed two cash credit entire in the account books relating to the money lending business, one of Rs. 6,000 made on March 6, 1949 and the other of Rs. 19,000 made on March 11, 1949. The assessee explained that the sums credited represented moneys withdrawn previously in 1930 and 1937 but the Income-tax Officer did not accept the explanation. He added the amount of Rs. 25,000 as income from undisclosed sources in the assessment for the assessment year 1950-51. Against the addition the assessee appealed unsuccessfully to the Appellate Assistant Commissioner. In second appeal before the Income-tax Appellate Tribunal, there was a difference of opinion between the Accountant Member and the Judicial Member, who while agreeing that the amount represented income taxable in the hands of the assessee, could not agree as to the assessment year respecting which it was liable to be taxed. The President of the Tribunal, upon reference, made to him, held that the amount of Rs. 25,000, could not be assessed in the assessment year 1950-51. In the result on December 16, 1954 the Tribunal made an order excluding the amount of Rs. 25,000 from the assessment for the assessment year 1950-51. The orders of the Accountant Member the Judicial Member and the President of the case. The Income-tax Officer now obtained the sanction of the commissioner of Income-tax and took assessment proceedings under section 34 in respect of the assessment year 1949-50. He rejected the explanation of the assessee in respect of the amount of Rs. 25,000, which was to the same effect as the earlier explanation and added that amount in the total income of the assessee for the assessment year 1949-50 as income from 'other sources'. The Appellate Assistant Commissioner dismissed the appeal of At the instance of the assessee, the Tribunal has referred three questions to this court for its opinion;
'1. Whether on the facts and in the circumstances of the case, the income of Rs. 25,000 had escaped assessment for the assessment year 1949-50 within the meaning of section 347 ?
2. If the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, and having regard to annexure A, any provision of limitation applies to the reassessment made on February 6, 1959 ?
3. If the answer to the above is in the affirmative, whether the said reassessment is within time ?'
Mr. P. N. Pachauri learned counsel for the assessee, has not made any submission in respect of the first question, and we shall assume for the purposes of this case that the amount of Rs. 25,000 represents income which has escaped assessment for the assessment year 1949-50 within the meaning of section 34. Mr. Pachauri however contends that the second and this questions should be answered in favour of the assessee. In order to appreciate the rival contentions of the parties, it is desirable to set out the findings of the Tribunal contained in its appellate order.
In disposing of the contentions raised before it the Tribunal found that the proceedings under section 34 for the assessment year 1949-50 were taken by the Income-tax Officer because of the decision of the Tribunal in the appeal relating to the assessment year 1950-51 that the amount of Rs. 25,000 did not fall for consideration for that assessment year. It held that that decision constituted 'information' within the meaning of section 34(1) (b) on the basis of which the Income-tax Officer had reason to believe that income had escaped assessment for the assessment year 1949-50. It expressed the view that section 34(1) (b) was attracted and not section 34(1) (a). The notice under section 34 was admittedly served on the assessee on March 18, 1956, after the expiry of four years of the end of the assessment year 1949-50. Upon the basis of a decision rendered by a Full Bench of the Tribunal of which unfortunately we have no copy before us the Tribunal held that the bar of limitation was raised by reason of the second proviso to section 34(3) having regard to the finding contained in the appellate order of the Tribunal relating to the assessment year 1950-51.
We may now consider the second and third questions framed by the Tribunal. In the appeal relating to the assessment year 1950-51 the Tribunal found that the amount of Rs. 25,000, was not income which could be considered for the assessment year 1950-51, and no finding or direction rendered therein could be considered as a finding or direction in consequence of which or to give effect to which, a reassessment for the assessment year 1949-50 could be made. The provisions of the second proviso to section 34(3) are not attracted, and, in our opinion, the Tribunal plainly erred in holding by reference to that proviso that the bar of limitation could not be invoked by the assessee against the reassessment under section 34. That a finding or direction rendered by the Tribunal in a proceeding for one assessment year cannot be employed by reference to that proviso for ignoring the bar of limitation in respect of assessment proceedings concerning another assessment year has now been clearly laid down by the Supreme Court in Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das. In our opinion, it is not correct that no provision of limitation applies to the reassessment made on February 6, 1959. That provision is contained in section 34(3) which provides a period of four years from the end of the assessment year for an order of reassessment under section 34(1) (b) with an additional one year from the date of service of the notice where the notice has been issued within four years of the assessment year. The second question is answered accordingly.
Inasmuch as the period of limitation for making the reassessment under section 34(1) (b) for the assessment year 1949-50 expired on March 31, 1954, the reassessment proceedings initiated by the notice dated March 18, 1956, are barred by time and therefore, the reassessment is beyond limitation. The third question must be answered in the negative.
There has been no resistance by Mr. Gopal Behari, who appears for the Commissioner of Income-tax to the contention that the law laid down by the Supreme Court in Murlidhar Bhagwan Das applies to the facts of the instant case. But Mr. Gopal Behari contends that it is open to him to establish that the case is one falling under section 34(1) (a) and if regard be had to the provisions of section 34(1) (a) as amended by the Indian Income-tax (Amendment) Act, No. 1 of 1959, it should be held that there is no period of limitation for making the reassessment. Mr. Gopal Behari points out that the language of the second question is sufficiently wide to include within its scope the point raised by him. We find considerable difficulty in accepting the submission. The terms in which the second question has been couched clearly confines it to the facts and circumstances of the case and the three orders of the Tribunal on the appeal for the assessment year 1950-51. The three orders relate to the question whether the amount of Rs. 25,000 was not liable to tax for the assessment year 1950-51. That was the only question upon which the Accountant member and the Judicial Member of the Tribunal found themselves in disagreement and which was decided, upon reference, by the President of the Tribunal. In the appeal for the assessment year 1949-50 the Tribunal expressly referred to the view taken in the appeal for the assessment year 1950-51 and considered it as information in the possession of the Income-tax Officer within the meaning of section 34(1) (b) justifying a reassessment under that provision for the assessment year 1949-50. Then it referred to the provisions of the second proviso to section 34(3), and held that there was no bar of limitation against the reassessment for the assessment year 1949-50. When the Tribunal framed the second question on the point whether any provision of limitation applied to the reassessment, it clearly had in mind the second proviso to section 34(3). We are unable to hold that the question whether there was any period of limitation for the assessment in view of the Indian Income-tax (Amendment) Act, No. 1 of 1959 arises in this case. When the Tribunal held that the reassessment fell for consideration under section 34(1) (b) and not under section 34(1) (a), there could be no occasion for considering the application of the Indian Income-tax (Amendment) Act, No. 1 of 1959. We find no reference to that question in the Tribunals appellate order, and there is nothing to suggest that it was ever raised during the hearing of the appeal before the Tribunal. Mr. Gopal Behari submits that the reassessment was, in fact, made under section 34(1) (a) and the Tribunal was incompetent to consider it as one made under section 34(1) (b), but that again is not a question framed by the Tribunal and we must, therefore, decline to enter into it. Upon all these considerations, we are unable to accept the submissions of Mr. Gopal Behari.
The assessee is entitled to his costs which we assess at Rs. 200. Counsels fee is also assessed at Rs. 200.