G.C. Mathur, J. - (1.) THIS is a special appeal against the judgment of Manchanda J. dismissing the writ petition filed by the appellant, challenging a notice dated September 14, 1961, issued under Section 34(1)(a) of the Indian Income-tax Act, 1922.
(2.) THE accounting year of the appellant for his business income was the calendar year. During the course of the examination of the appellant's account books in connection with the assessment for the assessment year 1947-48 (corresponding to the accounting year 1946), the Income-tax Officer noticed that 20 high denomination notes of Rs. 1,000 each were encashed by the appellant on January 19, 1946. THE Income-tax Officer called upon the assessee by a notice under Section 23(3) to explain the nature arid source of the income of Rs. 20,000. THE explanation of the assessee was that the notes were out of the closing balance of Rs. 23,916 on the evening of January 11, 1946. This explanation was not accepted by the Income-tax Officer who held that the amount represented the secreted profit of the assessee and was liable to income-tax. THE amount was added to the income for that year as undisclosed income. Corresponding assessment was made for purposes of excess profits tax also. The two assessments made by the Income-tax Officer were, on appeals by the assessee, confirmed by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the instance of the assessee, certain questions of law were referred by the Appellate Tribunal to this court (Income-tax Reference No. 33 of 1957). In this reference, it was held by a Division Bench on December 14, 1960 : (i) That the income of Rs. 20,000 was not from business but from an undisclosed source and, therefore, it could not be subjected to excess profits tax; and (ii) that the income would fall to be assessed in the assessment year 1946-47 and not in 1947-48. The Bench made it clear that it was not expressing any opinion whether this amount constituted assessable income for the assessment year 1946-47 or not. Thereafter, on September 14, 1961, the impugned notice under Section 34(1)(a) was issued and it was served on the appellant on September 16, 1961. On November 20, 1961, the assessee filed an objection, challenging the notice on two grounds, namely: " (i) that it was issued after eight years as provided by Section 34(1)(a) and that the provisions of Section 34 do not apply to this case; and (ii) that there was no material on the record on which the Income-tax Officer could say that he had reason to believe that the income, profits or gains chargeable to income-tax for the year 1946-47 had escaped assessment."
(3.) BY order dated November 24, 1961, the Income-tax Officer rejected the objection. On March 17, 1962, the assessee moved an application before the Central Board of Revenue, asserting that the notice issued under Section 34(1)(a) was time-barred and praying that the Income-tax Officer be directed to close the proceedings. BY a letter dated May 10, 1962, the assessee was informed that the Central Board of Revenue did not consider it necessary to interfere in the matter. After this, the writ petition was filed on August 1, 1962, praying for a writ of prohibition restraining the Income-tax Officer from taking any further proceedings on the basis of the impugned notice. In reply to the writ petition, the Income-tax Officer has filed a written statement by way of an annexure to a short affidavit opposing the stay application filed by the assessee. The writ petition came up for final hearing before Manchanda J. Before him, the following three points were canvassed : (i) Whether the writ petition deserved to be dismissed on account of laches of the appellant; (ii) Whether the bar of limitation in giving notice was saved by subsection (4) of Section 34; and (iii) Whether the conditions precedent for the issue of the notice under Section 34(1)(a) were satisfied in this case. ;