GANGADHAR BAIJNATH Vs. COMMISSIONER OF INCOME TAX U P

JUDGEMENT

(1.) THE assessee, a partnership firm, advanced two loans, one of Rs. 97,00,000 on May 1, 1946, and the other of Rs. 5,10,000 on May 10, 1946, to M/s. Bagla Jaipuria and Company. On October 17, 1946, Messrs. Bagla Jaipuria and Company paid a sum of Rs. 1,77,232 to the assessee on account of interest on the two loans. The Income-tax Officer, proceeding on the consideration that the assessee followed the mercantile system of accounting, assessed Rs. 1,60,000 of the total amount of interest as income for the assessment year 1947-48 and the balance, Rs. 17,232, as income for the assessment year 1948-49. Upon appeal by the assessee against the assessment for the assessment year 1947-48, the Appellate Assistant Commissioner held that the sum of Rs. 1,60,000 was not taxable as income for that assessment year as it could not be said to have accrued during the previous year ending October 17, 1946. He excluded that sum from the assessment. On June 12, 1963, the Income-tax Officer issued a notice under section 34 of the Indian Income-tax Act, 1922, in respect of the assessment year 1948-49 for the purpose of bringing the sum of Rs. 1,60,000 to tax. He overruled the objection of the assessee that the proceedings were without jurisdiction and made an assessment order including the sum in the assessee's total income. The Appellate Assistant Commissioner dismissed the appeal filed by the assessee. He held that the case fell under section 34(1)(a) and not under section 34(1)(b). The assessee proceeded in second appeal to the Income-tax Appellate Tribunal. The two members of the Tribunal hearing the appeal agreed that the case was not governed by section 34(1)(a) but fell to be decided by reference to section 34(1)(b). They differed on the question whether the bar of limitation of making the assessment was raised by the second proviso to section 34(3). The Accountant Member was of the view that it was, while the Judicial Member held that it was not. Upon reference made to him, the President of the Tribunal agreed with the view expressed by the Accountant Member. Upon the view taken by the majority of the members of the Tribunal that the assessment proceedings were not bared by limitation the assessee's appeal was dismissed. At the instance of the assessee, the Tribunal has referred the following question of law for the opinion of this court:

(2.) THE second proviso to section 34(3) reads:

(3.) WE hold that the assessment proceedings taken by the Income-tax Officer, which according to the Tribunal fell under section 34(1)(b), are barred by limitation. The question referred to this court must be answered in the negative.