1961 (1) TMI 79 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the notices issued under Section 34 of the Indian Income-tax Act.
2. Jurisdiction of the Income-tax Officer to issue the notices.
3. Delay in filing the writ petitions.
4. Sufficiency of the material for the Income-tax Officer's belief of income escaping assessment.
5. Adequacy of the notices issued under Section 34.

Detailed Analysis:

1. Legality of the Notices Issued under Section 34:
The petitioner company challenged the legality of the three notices dated March 20, 1959, issued by the Income-tax Officer under Section 34 of the Indian Income-tax Act for the assessment years 1950-51, 1951-52, and 1952-53. The contention was that the conditions precedent to the exercise of jurisdiction under Section 34 did not exist, and thus the Income-tax Officer lacked jurisdiction to issue the notices. Specifically, the petitioner argued that there was no material upon which the Income-tax Officer could have entertained a reasonable belief that income had escaped assessment due to the petitioner's failure to disclose fully and truly all material facts necessary for the assessment.

2. Jurisdiction of the Income-tax Officer to Issue the Notices:
The court examined whether the Income-tax Officer had the requisite jurisdiction to issue the notices under Section 34. It was found that the Income-tax Officer had conducted a meticulous scrutiny of the petitioner's accounts for the year 1954-55, which revealed discrepancies and inaccuracies. This led the Officer to believe that similar discrepancies existed for the years 1950-51, 1951-52, and 1952-53, warranting the reopening of assessments. The Income-tax Officer had indeed called for the cash books of the relevant years and found that the accounts had been manipulated. The court held that the Income-tax Officer had relevant material to entertain a reasonable belief that income had escaped assessment due to the petitioner's nondisclosure of material facts.

3. Delay in Filing the Writ Petitions:
The court noted that the writ petitions were filed one year and five months after the impugned notices were issued and more than one year after the petitioner had filed fresh returns. The petitioner had also induced the Income-tax Officer to grant multiple extensions for filing returns and adjournments. The court held that the inordinate delay in filing the writ petitions, coupled with the petitioner's conduct, disentitled it from invoking the extraordinary jurisdiction of the court under Article 226 of the Constitution. On this ground alone, the writ petitions deserved to be dismissed.

4. Sufficiency of the Material for the Income-tax Officer's Belief:
The petitioner argued that the Income-tax Officer had not issued any summons for the production of the account books for the relevant years, nor had the books been scrutinized. However, the court found that the Income-tax Officer had indeed called for the account books and had reasonable grounds for believing that there had been nondisclosure of material facts. The reasons recorded by the Income-tax Officer in his report to the Commissioner on February 5, 1959, were found to be sufficient to form a reasonable belief. The court emphasized that the sufficiency of the material was not within its purview to investigate, as long as there were some reasonable grounds for the belief.

5. Adequacy of the Notices Issued under Section 34:
The petitioner contended that the notices were "blank notices" and did not indicate the action proposed by the Income-tax Officer. The court held that the notices, although in printed form, mentioned that they were issued under Section 34 of the Act. The section does not prescribe a standard form of notice, and the notices contained all the contingencies contemplated by Section 34(1). The court found that the petitioner was fully aware of the import of the notices and had filed the returns as required. Therefore, the petitioner's complaint about the form of the notices was deemed idle.

Conclusion:
The court dismissed all three writ petitions. W.P. No. 574/60 was dismissed with costs, awarding an advocate's fee of Rs. 250, while W.Ps. Nos. 575 and 576 were dismissed without costs. The court concluded that the Income-tax Officer acted within his jurisdiction in issuing the impugned notices and that the petitioner failed to establish that there was no material for the Officer's belief of nondisclosure of material facts.