- (1.) In proceedings for assessment of income-tax for the years 1947-48 and 1948-49, the Income-tax Officer, Ranchi held that Banwari Lal agarwal-hereinafter called 'the assessee' had invested Rs. 17,425. 00 in the year of account relating to the assessment year 1947-48, and Rs. 35,500. 00 in the year of account relevant to the assessment year 1948-49, in Indian Woollen and Silk Stores, Ranchi of which the assessee was a partner. The Income-tax Officer included those sums as the income from undisclosed sources in the assessment of the Hindu Undivided Family styled M/s. Narmal Rarnkumar of which the assessee was a member in the two respective assessment years. The Hindu Undivided Family appealed against that order. The Appellate tribunal held in respect of the appeal for the assessment year 1947-48, that the sum of Rs. 17,425. 00 represented the income from undisclosed sources, but it could not be assessed in the hands of the Hindu Undivided Family. But in respect of i he appeal for the year 1948-49, following the decision of the tribunal in the appeal relating to the assessment year 1947-48, the Appellate assistant Commissioner directed that the sum of Rs. 35,500. 00 be removed from the assessment of the Hindu Undivided Family and that it be assessed in the hands of the assessee.
(2.) The Income-tax Officer then commenced a proceeding for assessmentof the income of the assessee for the year 1948-49, under S. 34 (1) (a) , after obtaining the sanction of the Commissioner of Income-tax. The Commissioner's sanction was specifically given on the direction given by the appellate Assistant Commissioner. In proceeding for assessment before the income-tax Officer it was contended by the assessee that the proceeding under section 34 (1) (a) was barred by limitation, as it was initiated more than eight years after the expiry of the assessment year. The Income-tax Officer rejected the contention and assessed the sum of Rs. 35,500. 00 as the income of the assessee from undisclosed sources. The appeal filed by the assessee to the appellate Assistant Commissioner did not succeed. The Appellate tribunal following the judgment of the Bombay High court in Hiralal Amritlal Shah v. K. C. Thomas, I Income Tax Officer, M. Ward. Bombay held that the proceeding under S. 34 (l) (a) had become barred and was therefore invalid. At the instance of the Commissioner of Income-tax, the tribunal referred the following question to the High court of Patna : "Whether on the (facts and circumstances of the case, the Appellate tribunal was right in holding that proceedings under S. 34 (1) (a) of the Income Tax Act for the assessment year 1948-49, in the case of the assessee was invalid -the High court answered the question in the affirmative. Against that order the Commissioner of Income Tax has appealed to this court.
(3.) The principal argument advanced in the appeal is that the judgment of the Bombay High court in Hiralal Amritlal Shah's case (supra) , on which (1) reliance was placed by the tribunal was overruled by this court in K. C. Thomas, 1st Income Tax Officer, Market Ward, Bombay v. Vasant Hiralal Shah and others* and on that account the answer to the question referred be recorded in the negative. This court held in K. C. Thomas's case (supra) that the second proviso to S. 34 (3) in the form in which it stood on the date of the issue of the notice of assessment would govern the whole of S. 34 (1) and would, consequently, apply even to an assessment of escaped income with respect to which limitation is provided in clause (ii) of the first proviso to section 34 (1). In that case, bar of limitation was held not to apply when an order to reassess the income of the appellant was made.;