R.L.GULATI, J. - (1.) THIS is a reference under S. 66(1) of the Indian IT Act, 1922.
(2.) THE assessee is a private limited company. In the previous year relevant to the asst. year 1960 - 61, the assessee had earned a sum of rupees one lakh which in its opinion was exempt from income -tax. Thus, in the return filed for the asst. year 1960 -61, the assessee did not include in its taxable income the sum of rupees one lakh and appended the following note in Part D of the return which is meant for showing items of income and gain in respect of which the assessee claims exemption. "Addition to capital reserve....... Rs. 1,00,000. (i) It is a receipt of casual nature not arising from any business, profession, vocation or occupation; and (ii) It is also not taxable as capital gain on account of aggregate capital loss of Rs. 21,09,001 brought forward under S. 24(2B) from 1954 -55 and 1956 -57." The ITO passed an assessment order on 7th March, 1964, but did not deal with the claim of the assessee contained in Part D of the return. Later on he issued a notice under S. 148 of the IT Act, 1961, as in his opinion the sum of Rs. 1,00,000 mentioned by the assessee in Part D had escaped assessment. However the ITO did not pass any assessment order within one year of the service of the notice under S. 148, with the result the proceedings under S. 148 lapsed. Thereafter, the CIT issued a notice under S. 33B of the Indian IT Act, 1922. The assessee objected to the notice on the ground that as the proceedings under S. 148 were still pending, the CIT was not competent to take any action under S. 33B. This objection of the assessee was overruled by the CIT saying that proceedings under S. 148 had become time -barred and could not be said to be pending. The CIT accordingly cancelled the assessment order to enable the ITO to pass a fresh assessment after taking into consideration the claim of the assessee contained in Part D of the return. The assessee then appealed to the Tribunal, but did not succeed. However, at the instance of the assessee, the Tribunal has referred the following question of law for our opinion : "Whether, on the facts and in the circumstances of the case, action under S. 33B of the Indian IT Act, 1922, against the assessee was maintainable ?"
(3.) SRI K. L. Misra, learned counsel for the assessee, has argued only one point. He says that in order that the CIT should have exercised his jurisdiction under S. 33B, it was necessary for him to be satisfied that the assessment order passed by the ITO was prejudicial to the interests of the Revenue, and on the material on the record the assessment order could not be said to the prejudicial to the interest of the Revenue.;