Tayabali Mohammadali vs Commissioner of Income Tax, Madras

Veeraswami, J.

(1) The inclusion of a sum of Rs. 10,000 in the assessment was the subject-matter of a reference to this Court which was answered in favour of the

assessee. Which disposing of that matter, this Court observed:

..... even though the Tribunal was entitled to hold that Rs. 10,000 constituted the income of the assessee, it was not income that could be assessed

in the assessment year 1950-51"".

This sum related to a credit entry for Rs. 10,000 dated 20-12-1948 in favour of the assessee''s wife in his account books. The revenue proceeded

on the basis that this credit was not proved to belong to the assessee''s wife, treated is as income from the undisclosed source and assessed it. The

decision of this Court in the earlier reference is to be found in Taibally Md. Ali Bahadur Bros., Madras v. Commissioner of Income Tax, (1961)

74 MLW 634, and the question referred was whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in

treating the sum of Rs. 16,000 and a further sum of Rs. 10,000 as income from undisclosed sources during the account year in question. Although

the question was framed in that form and was confined to the assessment of the sum of Rs. 10,000 as income from undisclosed sources during the

accounting year, namely, the year ended 31-3-1948, still this Court, while disposing of the reference, happened to observe that it was not income

that could be assessed in the assessment year 1950-51. In view of this observation, the revenue acted under S. 34(1)(a) and second proviso to

sub-section (3) of S. 34 of the Income Tax Act and by a notice called upon the assessee to show why the assessment order for the assessment

year 1949-50 should not be reopened and the sum of Rs. 10,000 included for charge to Income Tax. The assessee''s objections were overruled

and the revenue included this sum. The assessee has filed throughout.

(2) So far as S. 34(1)(a) is concerned, clearly the notice would be out of time for it was issued beyond the period of limitation prescribed by Cl.

(2) of the first proviso to sub-section (1) of S. 34.

(3) As a finding within the meaning of second proviso to sub-section (3) of S. 34 also, the revenue is in no better position. A finding for purposes

of that proviso should be one which is rendered on and is necessary for the disposal of an issue in the sense of the Civil Procedure Code. That was

the view taken by the Supreme Court in Income Tax Officer, A-Ward, Sitapur Vs. Murlidhar Bhagwandas, Lakhimpur Kheri, . This view this

Court applied in T. C. No. 155 of 1962 and T. C. No. 175 of 1962 (Mad). The only difference in this case is that the observation was made by

this Court in the course of disposal of a reference. That would hardly make any difference. In one sense the jurisdiction of this Court on a reference

is even narrower that that of the Appellate Assistant Commissioner or the Tribunal on appeals. As we have observed, the only question that was

referred to this Court earlier was whether the sum Rs. 10,000 could be included as income from undisclosed sources during the accounting year in

question there. That being the case, the observation relied on by the Revenue for purposes of applying the second proviso to S. 34(3) cannot be

regarded as a finding within the meaning of that proviso.

(4) The result is, the question is answered in favour of the assessee with costs; counsel''s fee Rs. 250.