Pathak, J. - (1.) THE petitioner is a partnership firm consisting of four partners. It carries on business in gold and silver ornaments.
(2.) FOR the assessment year 1953-54, the Income-tax. Officer assessed the petitioner on an income of Rs. 10,303 by an assessment order dated July 29, 1953. It is alleged that the petitioner-firm was dissolved in 1959. Subsequently, a notice dated June 26, 1965, under Section 148 of the Income-tax Act, 1961, was served on Murari Lal, a former partner of the firm. The Income-tax Officer made an assessment order dated March 10, 1969, under Section 147 of the Act of 1961, computing the total income at Rs. 71,072. Aggrieved by the assessment order the petitioner has filed this petition under Article 226 of the Constitution. Sri S. B. L. Srivastava, learned counsel for the petitioner, contends that the assessment proceeding lay under the Indian Income-tax Act, 1922, and not under the provisions of the Income-tax Act, 1961. He urges that inasmuch as the income said to have been concealed by the petitioner was less than Rs. 1,00,000, the period of limitation governing the issue of a notice under Section 34(1) for taking reassessment proceedings was eight years from the end of the assessment year. That period expired, it is pointed out, on March 31, 1962, and, thereafter, recourse could not be had to the provisions of the Act of 1961 for taking reassessment proceedings. Learned counsel for the respondents contends that according to the reasons recorded by the Income-tax Officer the concealed income exceeded Rs. 1,00,000, and there was no period of limitation under the Act of 1922 for taking reassessment proceedings in respect of such income. Consequently, it is said, reassessment proceedings could be taken, when the Act of 1961 was brought into force on April 1, 1962, under sections 147 and 148 of that Act by virtue of Section 297(2)(a)(ii) of the said Act.
(3.) IT is now settled law that Section 297(2)(a)(ii) of the Income-tax Act, 1961, enables the application of that Act to those cases only where the period of limitation for taking proceedings under Section 34 of the Income-tax Act, 1922, has not expired : see J.P. Jani, Income-tax, Officer, Ahmedabad v. Induprasad Devskankar Bhatt, [1969] 72 I.T.R. 595 (S.C.) and Sardar Inder Singh v. Income-tax Officer, C. Ward, Varanasi, 1969 72 ITR 349 All.. The question then is whether the period of limitation for taking reassessment proceedings had already expired before the Act of 1961 came into force. That will depend on whether the amount of concealed income, according to the reasons recorded by the Income-tax Officer, exceeded Rs. 1,00,000. We considered it necessary to send for the original record of the income-tax assessment proceeding before us. From the report of the Income-tax Officer recording the reasons, on the basis of which he obtained the sanction of the Central Board of Direct Taxes, it seems to us impossible to hold that he considered that the concealed income exceeded Rs. 1,00,000. The reasons recorded are : "Assessment for 1953-54 was completed on an income of Rs. 10,303. The account books for this period were seized by the sales tax department. These books reveal a profit of Rs. 39,242. There thus is a concealment of about Rs. 29,000 as per books. In addition to this the accounts of the partners on the opening day show credit balance of Rs. 1,91,933 in seized books as against Rs. 75,179 shown in the books produced at the time of assessment. There also exists an anamat account in the seized books. Scrutiny of this account reveals that there are cash credits amounting to Rs. 30,000 which are not covered by the previous withdrawals. These cash credits represent assessee's income from undisclosed sources. The income concealed thus works out to Rs. 59,000 which has escaped assessment and it is sought to assess this escaped income." ;