1969 (2) TMI 29 - HC - Income Tax

Notice u/s 148 of IT Act, 1961 for reopening of assessment - list of the Directorate of Inspection was not irrelevant for the purpose of formation of the belief by the ITO u/s 147 - ITO had himself formed the opinion that the petitioner s income had prima facie escaped assessment, and had not abdicated his jurisdiction to the Directorate of Inspection

Issues Involved:
1. Jurisdiction of the Income-tax Officer to issue notice under Section 148 of the Income-tax Act, 1961.
2. Whether the Income-tax Officer abdicated his jurisdiction to the Directorate of Inspection.
3. Relevance and sufficiency of material for the belief of income escaping assessment under Section 147 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Income-tax Officer to issue notice under Section 148 of the Income-tax Act, 1961:

The petitioner, a registered firm engaged in the exhibition of films, challenged the notice issued under Section 148 of the Income-tax Act, 1961, by the Income-tax Officer, Ward "A", Special Circle, Patna. The notice was issued on the basis that the petitioner's income chargeable to tax for the assessment year 1961-62 had escaped assessment within the meaning of Section 147 of the Act. The petitioner contended that the Income-tax Officer did not have any material before him to believe that there had been any material non-disclosure leading to under-assessment for the assessment year 1960-61. The court examined the relevant provisions of the Act, including Sections 147, 148, and 149, and concluded that the existence of material for the belief of the Income-tax Officer is justiciable, but its sufficiency or adequacy is not. The court held that the list of bogus hundi brokers and bankers provided by the Directorate of Inspection was relevant material for the Income-tax Officer to form his belief.

2. Whether the Income-tax Officer abdicated his jurisdiction to the Directorate of Inspection:

The petitioner argued that the notice was issued based on the belief of the Directorate of Inspection, Central Board of Revenue, New Delhi, and not on the belief of the Income-tax Officer, thereby abdicating his jurisdiction. The court referred to the decision in Commissioner of Police v. Gordhandas Bhanji, which established that an authority must exercise its power independently and not act on the dictates of another authority. However, the court found that the list from the Directorate of Inspection merely provided information that the petitioner's creditors were bogus hundi brokers and bankers. The Income-tax Officer formed his belief based on this information, and there was no indication that the notice was issued based on someone else's belief. Therefore, the court rejected the contention that the Income-tax Officer had abdicated his jurisdiction.

3. Relevance and sufficiency of material for the belief of income escaping assessment under Section 147 of the Income-tax Act, 1961:

The court analyzed whether the list of bogus hundi brokers and bankers could be considered relevant material for the Income-tax Officer's belief that the petitioner's income had escaped assessment. The court referred to several decisions, including Calcutta Discount Co. Ltd. v. Income-tax Officer, Commissioner of Income-tax v. A. Raman and Co., and Ramniwas Kanailal v. S. P. Shende, Income-tax Officer, D-1 Ward, Bombay. The court noted that the relevancy or irrelevancy of material must be decided based on the facts and circumstances of each case. The court found that if the loans mentioned in the petitioner's return were bogus, it indicated a failure to disclose material facts. The court held that the list from the Directorate of Inspection was relevant material for forming the belief under Section 147 of the Act. The sufficiency or adequacy of the material was not justiciable.

Conclusion:

The court dismissed the petition, holding that the Income-tax Officer had jurisdiction to issue the notice under Section 148, did not abdicate his jurisdiction to the Directorate of Inspection, and had relevant material for forming the belief that the petitioner's income had escaped assessment. The application was dismissed with costs, and the hearing fee was assessed at Rs. 250.

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