1988 (6) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Validity of reopening income-tax assessments for the years 1968-69 and 1969-70.
2. Bar of limitation under section 147 of the Income-tax Act.
3. Jurisdiction of the Income-tax Officer in reopening assessments.
4. Duty of the assessee to disclose material facts.

Issue-wise Detailed Analysis:

1. Validity of Reopening Income-tax Assessments for 1968-69 and 1969-70:
The primary issue in the writ petitions is the validity of the reopening of income-tax assessments for the years 1968-69 and 1969-70. The firm filed returns for these years, and the assessments were finalized on September 27, 1971. However, the Income-tax Officer issued notices to reopen these assessments based on information from the Sales Tax Department, which revealed that the firm's turnover had been significantly understated. The court held that the reopening was justified under section 147(a) of the Income-tax Act because the assessee had not disclosed "fully and truly all material facts necessary for assessment." The court emphasized that the Income-tax Officer could reopen an assessment if it was found that true facts were not disclosed, as was the case here with the additional account books seized by the Sales Tax Department.

2. Bar of Limitation under Section 147 of the Income-tax Act:
The assessee argued that the notice for the assessment year 1968-69 was time-barred as it was served after four years, invoking clause (b) of section 147. The court clarified that the impugned notices were issued under clause (a) of section 147, which does not have the same time limitation as clause (b). Thus, the court held that no question of the bar of limitation arises in either of the cases.

3. Jurisdiction of the Income-tax Officer in Reopening Assessments:
The court examined the jurisdiction of the Income-tax Officer to reopen assessments. It referenced several Supreme Court decisions to explain that the jurisdiction arises when there is reason to believe that the assessee failed to disclose fully and truly all material facts necessary for assessment. The court reiterated that the powers of the Income-tax Officer are not plenary and must be based on "reason to believe" rather than "reason to suspect." The court found that the Income-tax Officer had valid reasons to believe that income had escaped assessment based on the additional account books seized, justifying the reopening of the assessments.

4. Duty of the Assessee to Disclose Material Facts:
The court discussed the extent of the duty of the assessee to disclose material facts. Citing Supreme Court cases, it was emphasized that the assessee is required to disclose fully and truly all material facts necessary for assessment. The court noted that the assessee had not placed the additional account books before the Income-tax Officer, which were later seized by the Sales Tax Department. This failure to disclose true material facts justified the reopening of the assessments. The court underscored that once the assessee has disclosed all material facts, it is up to the Income-tax Officer to draw inferences and make the assessment. However, if the assessee fails in this duty, the assessment can be reopened.

Conclusion:
The court concluded that the impugned notices for reopening the assessments did not suffer from any legal infirmity. The assessee's failure to disclose all material facts justified the reopening under section 147(a) of the Income-tax Act. The court dismissed the writ petitions with costs, affirming the validity of the reopening of the assessments.