1964 (9) TMI 1 - HC - Income Tax

Notices under sections 147(1) and 142 - limitation - attempt to issue a notice under section 147(1) of the Act of 1961 after the lapse of four years cannot succeed as the notices issued are clearly without jurisdiction inasmuch as the condition precedent for the issue of such a notice is not satisfied

Summary

Issues:
1. Validity of notices under sections 147(1) and 142 of the Income-tax Act, 1961 for the assessment year 1958-59.
2. Disclosure of material facts necessary for assessment.
3. Application of the Supreme Court decision in Calcutta Discount Co. Ltd. v. Income-tax Officer.
4. Assessment of income from an undisclosed source based on financial year.
5. Jurisdiction of the Income-tax Officer to issue notice under section 147(1) after the lapse of four years.

Detailed Analysis:
1. The judgment concerns the validity of notices under sections 147(1) and 142 of the Income-tax Act, 1961 for the assessment year 1958-59. The petitioner challenged the orders under sections 147(1) and 142 seeking to quash them.
2. The petitioner, a partner in a firm, disclosed amounts credited in the firm's books as income from the sale of ornaments. The Income-tax Officer disbelieved the explanation and assessed the amounts as income from an undisclosed source. The petitioner contended that he had disclosed all material facts necessary for assessment, as required by law.
3. The judgment refers to the Supreme Court decision in Calcutta Discount Co. Ltd. v. Income-tax Officer, emphasizing the duty of the assessee to disclose primary facts, with legal inferences left to the Income-tax Officer. The petitioner's disclosure of the credits and receipts was deemed sufficient, and the legal inference regarding the nature of income was to be drawn by the Income-tax Officer.
4. The Income-tax Officer erred in assessing the income from an undisclosed source based on the petitioner's previous year instead of the financial year. The income found credited in the books on November 1, 1957, was to be assessed for the assessment year 1958-59, as per the law at that time.
5. The Income-tax Officer attempted to issue a notice under section 147(1) after the lapse of four years, which was beyond the statutory period. The court held that the notices were without jurisdiction as the condition precedent for issuing such notices was not satisfied, leading to the quashing of the notices.

In conclusion, the court allowed the petition, quashed the notices under sections 147(1) and 142, and directed the issuance of a writ of certiorari. The judgment highlighted the importance of disclosing primary facts for assessment and clarified the application of legal principles regarding assessing income from undisclosed sources based on the financial year.