1969 (8) TMI 19 - HC - Income Tax

Whether a notice issued under s. 34 based on a certain item of income that had escaped assessment, can be used to include other items which had escaped assessment - Held, yes

Summary

Issues Involved:
1. Validity of proceedings under section 34(1)(a) of the Income-tax Act.
2. Assessability of Rs. 3,06,000 for the assessment year 1945-46 or 1947-48.
3. Assessability of Rs. 25,000 for the assessment year 1946-47 or 1947-48.
4. Permissibility of including other items in reassessment under section 34.

Issue-wise Detailed Analysis:

1. Validity of Proceedings under Section 34(1)(a):
The crux of the case revolved around whether the proceedings initiated under section 34(1)(a) were valid. The Tribunal held that the notice issued under section 34(1)(a) was bad in law, emphasizing that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal concluded that the reopening of the assessment was due to a mere change of opinion by the successor Income-tax Officer, rather than any omission or failure by the assessee. The court underscored that for the Income-tax Officer to assume jurisdiction under section 34(1)(a), there must be reasonable grounds to believe that income had escaped assessment due to the assessee's failure to disclose material facts, which was not the case here.

2. Assessability of Rs. 3,06,000:
Given the answer to the first question, this issue became moot. However, the Tribunal had noted that the sum of Rs. 3,06,000 received by the assessee on April 8, 1946, had its origin in a sum of Rs. 3,00,000 deposited in a bank in Jaipur in December 1944. The Tribunal held that this amount could only be included for the 1945-46 assessment, not for 1947-48, as it existed as early as December 1944.

3. Assessability of Rs. 25,000:
Similarly, this issue was rendered academic due to the answer to the first question. The Tribunal found that the sum of Rs. 25,000, credited in the assessee's books on December 31, 1945, was liable to be included only for the 1946-47 assessment, not for 1947-48.

4. Permissibility of Including Other Items in Reassessment:
The court clarified that once an assessment is validly reopened under section 34, the Income-tax Officer can include other items that had escaped assessment. However, since the proceedings under section 34(1)(a) were held to be invalid, this question was deemed academic. The court cited precedent to affirm that a valid reopening under section 34(1)(a) allows a de novo assessment, encompassing all escaped incomes.

Conclusion:
The High Court upheld the Tribunal's decision, affirming that the proceedings under section 34(1)(a) were invalid as there was no failure on the part of the assessee to disclose material facts. Consequently, questions regarding the specific years for assessing Rs. 3,06,000 and Rs. 25,000 were not addressed. The court also reiterated that a valid reopening under section 34 permits the inclusion of all escaped incomes in the reassessment. The assessee was awarded costs from the revenue.