Sarkar, J. - (1.) The respondent-assessee was resident and ordinarily resident in the former ruling State of Raigarh. On July 31, 1944, the Ruler of Raigarh issued a notification in the following terms :"It is notified for the general information of the assessees of the Raigarh State that the Income Tax Act (XI of 1922) of British India (mutatis mutandis) is in full force in this State with its up- to-date amendments. All future amendments will be applicable automatically in Raigarh State."
(2.) The respondent-assessee was to income-tax for the accounting years 1945 and 1946, under the Income Tax Act, 1922, applied to the State by virtue of this notification. The State later merged in India.
(3.) On March 15, 1952, and March 26, 1954, the Income-tax Officer, Nagpur, took action under section 34 of the Income Tax Act as applied to the State by virtue of the aforesaid notification to reopen the earlier assessments. It was contended on behalf of the respondent that the proceedings under section 34 were irregular as the sanction of the Commissioner of Income-tax had not been taken without which the proceedings could not be taken in view of the amendment of that section by the Income-tax and Business Profits Tax (Amendment) Act, 1948, which applied to the area of the former Raigarh State by virtue of the notification of July 31, 1944. It was not in dispute that the sanction had not been taken. This contention was rejected by the Income-tax Officer and his decision was upheld on appeal by the Appellate Assistant Commissioner. On further appeal to the Income-tax Appellate Tribunal, the Tribunal upheld that contention and allowed the appeal. The Tribunal held that the amendment made in section 34 by the Amending Act of 1948 applied to the area covered by the Raigarh State which, as the parties agreed before it, merged in India prior thereto.;