MANEKLAL CHUNILAL AND SONS LTD Vs. COMMISSIONER OF INCOME TAX CENTRAL BOMBAY

JUDGEMENT

(1.) THE assessee is a private limited company and has succeeded to the business of one Maneklal Chunilal. The assessment on the income of Maneklal Chunilal was made on the 14th of June, 1937, and the assessment was for the accounting Samvat Year 1992. That accounting year closed on the 14th of November, 1936. On the 14th of March, 1939, the Income-tax Officer served a notice under Section 34 upon the assessee company and a further notice was served under Section 22 (4) to produce certain books of account. The assessee company failed to produce the accounts and thereupon the Income-tax Officer made a best judgment assessment under Section 23 (4 ). An appeal was preferred to the Appellate Assistant Commissioner and finally to the Tribunal, who confirmed the assessment, and the question that arises before us is whether the assessee company was liable to be assessed in respect of the income of Maneklal Chunilal which escaped assessment.

(2.) THE point which has been urged before us by Mr. Palkhiwala is that the assessee company succeeded to Maneklal Chunilal on the 16th of September, 1937, and proceedings under Section 34 have been taken in respect of the assessment for the Samvat Year 1992 and inasmuch as the assessee company had not succeeded to Maneklal Chunilal in the Samvat Year 1992 but succeeded to him subsequently, the Income-tax authorities are not entitled to proceed against the successor in respect of the income of Maneklal Chunilal which escaped assessment.

(3.) THE answer to this question depends upon first whether Section 26 (2) before it was amended applies or the amended section applies. Section 26 (2) was amended on the 31st of March, 1939, and it is common ground that if the amended section applies then the assessee company's contention must be upheld and the company is not liable to pay assessment. If, on the other hand, the old section applies, then we have to consider whether on a true construction of that section the assessee company is liable.