1969 (8) TMI 20 - HC - Income Tax

Notice under section 148 - reason to believe that all material facts had not been fully and truly disclosed by the assessee - held that notice under section 148 of the Act is not without jurisdiction

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer in issuing notice under section 148 of the Indian Income-tax Act, 1961.
2. Whether the petitioner disclosed all material facts fully and truly during the original assessment for the year 1952-53.
3. Validity of reopening the assessment based on the alleged non-disclosure.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Income-tax Officer in Issuing Notice under Section 148:
The petitioner challenged the jurisdiction of the Income-tax Officer in issuing the notice under section 148 of the Act. The notice stated that the officer had reason to believe that the income chargeable to tax for the assessment year 1952-53 had escaped assessment. The petitioner argued that the conditions precedent for assuming jurisdiction under section 147 were not met. The court examined whether the Income-tax Officer had reason to believe that the income had been under-assessed due to the petitioner's failure to disclose all material facts fully and truly.

2. Whether the Petitioner Disclosed All Material Facts Fully and Truly During the Original Assessment:
The petitioner contended that all primary facts necessary for the assessment were disclosed during the original assessment for the year 1952-53. The court noted that mere production of account books and balance-sheets was not sufficient; the petitioner had a duty to specifically bring to the notice of the Income-tax Officer all primary facts related to the impugned item. The court found no intrinsic evidence to show that the impugned primary fact was brought to the notice of the then Income-tax Officer, Sri A. K. Jana. The court emphasized that if the attention of the Income-tax Officer had been invited to this transaction, it would have been reflected in the original assessment order.

3. Validity of Reopening the Assessment Based on the Alleged Non-Disclosure:
The court analyzed the law under section 147 of the Act, which allows reopening of assessments if the Income-tax Officer has reason to believe that income has escaped assessment due to the assessee's failure to disclose all material facts. The court cited several Supreme Court judgments establishing that the belief must be held in good faith and have a rational nexus to the formation of the belief. The court found that the Income-tax Officer had reason to believe that the under-assessment occurred due to the petitioner's failure to disclose fully and truly all material facts necessary for the assessment year 1952-53. The court noted discrepancies in the accounts that were not apparent until the examination of accounts for the assessment year 1963-64, which justified the reopening of the assessment.

Conclusion:
The court concluded that the conditions precedent for issuing notice under section 148 were fulfilled. The Income-tax Officer had reason to believe that the income chargeable to tax had been under-assessed due to the petitioner's failure to disclose all material facts fully and truly. Therefore, the notice was not without jurisdiction. The writ application was dismissed with costs, and the reopening of the assessment was deemed valid.

Writ application dismissed.