Judgment :- RAJAGOPALAN, J. The assessee took a toddy lease operative for what was known as the abkari (toddy) year October 1, 1943, to September 30, 1944. His own claim all along was that he sustained a loss over that contract as a whole. Whether that claim is well founded or not, it may not be necessary to decide at this stage. In response to a notice issued under section 34 of the Act for the assessment year 1944-45, the assessee filed a return on March 29, 1946. In that return, he showed the whole period October 1, 1943, to September 30, 1944, as the " previous year ", that is, in relation to the assessment year 1944-45, and in that return he claimed he had sustained a loss. On the same date, March 29, 1946, the assessee also filed a return for 1945-46 in which he treated the period October 1, 1944 to September 30, 1945, as the previous year in relation to the assessment year 1945-46. For that period, October 1, 1944, to September 30, 1945, the assessee showed no income. It should be remembered that the toddy lease expired on September 30, 1944. Subsequently, the assessee filed an affidavit when he appeared before the Income-tax Officer on July 19, 1948. That affidavit has been referred to as Annexure A-1. In that affidavit, the assessee explained that he had incurred a loss of Rs. 1241-12-0 over the contract as a whole. Then there was this passage in that affidavit " From the abovesaid particulars it will be seen that I have incurred a loss of Rs. 620-14-0 for the assessment year 1944-45 and the balance of loss not less than Rs. 620-14-0 for the assessment year 1945-46." * Again, whether that contention was correct or not does not arise for consideration at this stage On the basis of the returns and this affidavit, what the Income-tax Officer did on February 5, 1949 was evidenced by a note made in the proceedings of 1944-45" In this case, assessment will be made for 1945-46. The assessee will be declared not assessable for 1944-45." The Income-tax Officer however took no further action on the return for the assessment year 1945-46 filed on March 29, 1946, as further explained by the affidavit, annexure A-1 On February 27, 1950, the Income-tax Officer issued a notice under section 34 in relation to the assessment year 1945-46. Despite the objection taken by the assessee, assessment proceedings for 1945-46 were completed, and that assessment was ultimately upheld by the Tribunal It is against this background we have to answer the two questions referred to this court under section 66(2) of the Income-tax Act " 1. Whether on the facts and in the circumstances of the case the assessment made on the assessee is valid in law 2. Whether on the facts and in the circumstances of the case the Income-tax Officer was correct in adopting the period 1st October, 1943, to 30th September, 1944, as the previous year for the assessment year 1945-46 in view of the provisions of section 2(xi)(a) of the Act." * The second question can arise for consideration only if the first question is answered against the assessee and in favour of the Department, that is, only if it is held that the initiation of proceeding for the assessment year 1945-46 with notice under section 34 of the Act was valid Factually the position was that in relation to 1945-46, the assessee submitted a return on March 29, 1946. Particulars furnished in that return may or may not be correct ; none the less, it was a return. The claim made by the assessee, that he had no income at all assessable for the year might have been incorrect. Equally the claim made that for purposes of assessment year 1945-46, the relevant previous year was from October 1, 1944, to September 30, 1945, may be incorrect. As we said, the correctness or incorrectness of the statements made in the return filed on March 29, 1946, for the assessment year 1945-46 still left the assessee in the position that he had filed a return for 1945-46. It should be remembered that with reference to the return for this assessment year 1944-45, also filed on March 29, 1946, what the Income tax Officer did was that to reserve consideration of the assessment for 1945-46. It should be remembered that with reference to the return for this assessment year 1944-45, also filed on March 29, 1946, what the Income tax Officer did was that to reserve consideration of the assessment for 1945-46. That assessment was not undertaken, and was certainly not completed on the face of the return for 1945-46 filed by the assessee on March 29, 1946. What, however, the Income-tax Officer did was to retain the return for 1945-46 filed on March 29, 1946, remain undisposed off ; but he initiated proceedings under section 34 of the Act with a notice issued in 1950The contention of the learned counsel for the assessee, that, under these circumstances, the Income-tax Officer was not entitled to initiate proceedings under section 34 of the Act is well founded, and is supported by authority : Commissioner of Income-tax v. Ranchhoddas Karsondas, the relevant passage is at pages 575 and 576. Since the first question has to be answered against the Department and in favour of the assessee, that the initiation of proceedings under section 34 of the Act was not valid, the assessment itself, which was based on that invalid notice under section 34 of the Act, has to be set aside. We answer the first question in the negative and in favour of the assessee. As we have pointed out earlier, in view of the answer to the first question, on the basis of which the entire assessment goes, there is no need to answer the second question. As the assessee has succeeded in the reference, he will be entitled to the costs. Counsel's fee Rs. 250 Reference answered accordingly.