Bishan Narain, J. - (1.) The Civil Writ No. 307-D of 1954 and Civil Writ No. 308-D of 1954 under Article 226 of the Constitution involve same facts and same points and it will be convenient to decide them by this one judgment. The petitioners in Civil Writ No. 307-D are the son and the widow of late Raghunandan Saran, and the other petition has been filed by Raghubir Saran. Raghunandan Saran and Raghubir Saran were real brothers and were carrying on the business of motor vehicles and spare parts and other allied businesses under the name of Pearey Lal & Sons, Ltd., and Saran Motors, Ltd., etc. The first two concerns are private limited companies and their share-holders before the death of Raghunandan Saran were the two brothers and their respective wives.
(2.) Taxation on Income (Investigation Commission) Act, 1947 (30 of 1947) received the assent of the Governor General in Council on 18-4-1947, and on 155- 1948, the Central Government referred to the Commission under Section 5 of the Act the cases of these two brothers and of their concerns for investigation and report. While the Commission was carrying on the Investigation and certain facts had been discovered, the brothers settled the matter with the Commission and on 2912- 1950, that settlement was accepted toy the Central Government under Section 8A of the Act. On 19-11-1952, the Income-Tax Officer issued la notice under Section 34, Income-Tax Act, to Raghunandan Saran that in the accounting year 1948-49 certain incomes had escaped taxation and the copy of the proposal was sent by the Income-Tax Officer to the Commissioner of Income-Tax and this proposal shows that the items involved in the notice are: (a) Rs. 1,49,906/4/- shown in the account books as loan from Begum Zafar All Khan of Rampur; and, (b) Rs. l,00,000/-/- shown in the account books as deposited in the name of Begum of Rampur. Civil Writ No. 307-D of 1954 is directed against this notice. Similarly, the Income- Tax Officer issued a notice under Section 34, Income-Tax Act, to Raghubir Saran on the same date to the effect that the income assessable to Income-tax for the year ending 31-3-1950, had escaped assessment and the proposal sent by the Income-Tax Officer to the Commissioner shows that the item involved in the notice is Rs. 49,968/12/- shown in the assessee's account books as a loan taken from Begum Zaidi of Rampur on 11-8-1948. The Writ Petition No. 308-D of 1954 is directed against this notice. Both these petitions were filed on 6-12-1954, i.e., after the lapse of more than two years.
(3.) The petitioners' prayer is that the Court should issue a writ in the nature of 'certiorari' quashing the abovementioned notices and issue a writ in the nature of prohibition and/or mandamus directing the Income-Tax Officer not to take any proceedings in pursuance of these notices and not to make any assessment on the basis of the above mentioned entries. The petitioners' case is that proceedings under Section 34, Income-Tax Act, cannot be taken because these items of income were covered by the settlement, and initiation of proceedings under this section was not expressly allowed under the settlement, and, therefore, Section 8A(4) of the Taxation on Income (Investigation Commission) Act is a bar to these proceedings. In the alternative the petitioners' case is that under the settlement the right to take proceedings was reserved only regarding those items which were discovered by the Income-Tax Officer and that inasmuch as these items had been disclosed to the Commission it cannot be said that these items had been discovered by him. In this connection the petitioners do not rely on the wording of Section 34 but their case is that Section 34 is, so far as the petitioners are concerned, modified under the settlement and no action under this section could be taken unless the items were subsequently discovered by the Income-tax Officer, and it was further urged that the knowledge of the Commission must be deemed to be the knowledge of the Income-Tax Officer as a copy of the report and that of the settlement had been sent to him when the amount of the tax fixed under the settlement was recovered through him under Section 8A(3) of the Taxation on Income (Investigation Commission) Act.;