MAHAJAN, J. - (1.) THE Tribunal, Delhi Bench, has referred the following two questions of law for our opinion under s. 66 (1) of the IT Act, hereinafter referred to as the Act : "1. Whether, on the facts and in the circumstances of the case, the proceeding initiated under S. 34 on 11th Nov., 1954, were in order ? 2. In case the answer to the first question is in the negative, whether the assessment for the year 1948 -49, as made on 24th March, 1955, was in order regard being had to all the terms of sub -s. (3) of S. 34 ?" In order to arrive at a correct decision with regard to the question referred for our opinion, it will be proper to set out the facts with regard to the assessment in question which had led to the present reference.
(2.) THE assessee is a lady. She was a partner in a firm styled as National Stores, New Delhi, during the relevant year of account. She had a seven annas share in a rupee in this firm. The assessment year in question is 1948 -49, the previous year being the financial year 1947 -48. No notice under sub -s. (2) of S. 22 of the Act was issued to her to furnish a return of income during the previous year. However, on 3rd Sept., 1951, she voluntarily filed a return for that year. In the printed Form A prescribed for the filing of the return the first column at No. 4 is headed "business, profession or vocation" and part (b) of that head is as follows : "Share of profits in a registered firm", whereas part (c) of the same head is with regard to the share of profits in an unregistered firm or an association of persons. In column 2 of the aforesaid Form the amount of income, profit and gain is to be specified. The assessee in the return filed by her in column 2 of the Form merely indicated her share in the partnership, that is, seven annas in a rupee, but did not specify the amount of profits which accrued to her in lieu of that share. She did indicate that this seven annas share was in the National Stores, New Delhi. It may be mentioned that at the time when this return was filed, the assessment for the year in question had not been completed. A notice under S. 23 (2) of the Act was issued to her by the ITO on the basis of the return filed by her. It was served on her on 20th Dec., 1951. It appears from the record that this notice was complied with, because on 11th Jan., 1952, the following entry appears in the order -sheet in the file of the ITO : "A credit of Rs. 50,000 has appeared in the personal account of the lady for the first time in the books of the firm in which she is a partner. Notice under S. 34 to be issued for 1948 -49 estimating the income at Rs. 50,548." However, no compliance was made with this direction and no notice under S. 34 was issued. Nearly three years after the service of notice under S. 23 (2), the ITO issued a notice under section 34 (1) (a) with the prior approval of the CIT to the assessee. The assessee in response to this notice filed another return in which she declared a net loss of Rs. 952 for the year. In Part D of the return it was stated that the sum of Rs. 50,000 had been borrowed by her from one Manohar Singh of Jaipur for investment in the National Stores as her capital contribution, and that the said sum did not belong to her. She also pleaded that the notice issued and served on her by the ITO under s. 34 was not in accordance with law. The ITO found that the sum of Rs. 50,000 was not borrowed by her and that it was her income from undisclosed sources. He also held that the suo motu return filed by the assessee on 3rd Sept., 1951, was an invalid return and, therefore, a nullity and thus he could proceed under S. 34 (1) (a) of the Act. The assessee went up in appeal to the AAC, but without success. She came up in second appeal to the Tribunal. The Tribunal affirmed the decision of the AAC and rejected her appeal. She then moved the Tribunal under S. 66 (1) of the Act for referring the questions of law already stated above for the opinion of this Court. This application was allowed and that is how the matter has come up before us.
(3.) THE sole contention raised by the learned counsel for the assessee is that the decision of the Tribunal as well as that of the AAC and the ITO to the effect that the returns filed by her on 3rd Sept., 1951, was not a valid return is erroneous in law. It is conceded by the learned counsel for the Department that if we come to the conclusion that the return filed by the assessee on 3rd Sept., 1951, was not an invalid return, then in view of the Supreme Court decision in CIT vs. Ranchhoddas Karsondas (1959) 36 ITR 569, the first question must be answered in favour of the assessee. Therefore, all that we are required to examine is : Whether the return filed by the assessee on the 3rd Sept., 1951, was a valid return.;