JAGDISH SAHAI J. - (1.) IN compliance with the direction of this court made under section 66(2) of the INdian INcome-tax Act of 1922 (hereinafter referred to as the Act), a statement of the case and the following question of law has been referred to this court by the INcome-tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter referred to as the Tribunal) : Whether, in the circumstances of the case, the INcome-tax Officer had information in his possession in consequence of which he could have reason to believe that income, profits or gains in the sum of Rs. 20,762 has escaped assessment ?
(2.) THE instant reference has been made at the instance of the department. THE assessee is a limited liability company styled as M/s. India Reconstruction Corporation Ltd., Kanpur (hereinafter referred to as the assessee). The assessee filed its return for the assessment year 1948-49, declaring a total income of Rs. 48,487. In Part VII of the return, the assessee had disclosed that it had made a profit of 20,762 as capital gains on the sales of certain securities. The income-tax Officer did not accept the case of the assessee that the sum of Rs. 20,762 was capital gains but held that it was income received from business and liable to be taxed under section 10 of the Act. The Income-tax Officer, therefore, included this sum in the assessment of the assessee.
(3.) THE assessee filed an appeal before the Appellate Assistant Commissioner on the ground that the sum of Rs. 20,762 should not have been and could not be assessed as income from business. THE Appellate Assistant Commissioner dismissed the appeal and confirmed the order of the Income-tax Officer. The assessee then filed a second appeal before the Tribunal which by means of its order dated April 29, 1952, as modified subsequently, under section 35 of the Act on April 16, 1956, held that the sum mentioned above could not be included in the business income of the assessee for purposes of taxation under section 10 of the Act and, while allowing the appeal, directed the Income-tax Officer to exclude that amount from the assessable business income of the assessee.;