1968 (9) TMI 51 - HC - Income Tax

Petitions have been filed to quash the several notices issued by respondent under section 34(1)(a) of the Act for reopening assessments

Issues Involved:
1. Jurisdiction and validity of notices issued under Section 34(1)(a) of the Indian Income-tax Act, 1922.
2. Whether the notices under Section 34(1)(a) were issued and served within the prescribed time.
3. Impact of previous agreements or settlements on the issuance of notices under Section 34.
4. Allegations of non-disclosure of material facts by the assessee.
5. Allegations of mala fide actions by the Income-tax authorities.
6. Applicability of Section 34(1)(a) versus Section 34(1)(b).
7. Constitutionality of Section 297(2)(d)(i) and (ii) of the Income-tax Act, 1961.
8. Preliminary objections regarding delay in filing writ petitions and availability of alternative remedies.

Detailed Analysis:

1. Jurisdiction and Validity of Notices Issued Under Section 34(1)(a):
The primary contention was whether the Income-tax Officer had the jurisdiction to issue notices under Section 34(1)(a) of the Indian Income-tax Act, 1922. The court observed that for invoking Section 34(1)(a), it is necessary that the Income-tax Officer should have reason to believe that the assessee failed to disclose fully and truly all material facts necessary for assessment, resulting in income escaping assessment. The court noted that all material facts, including the credits in the names of the Ranas and conversion charges, were disclosed during the original assessment proceedings. The court held that the belief of the Income-tax Officer was based on inferences drawn from subsequent facts, which were not material facts existing at the time of the original assessments. Therefore, the notices were deemed without jurisdiction.

2. Timeliness of Issuance and Service of Notices:
The petitioners argued that the notices under Section 34 must be issued and served on the assessee before 31st March, 1962. The court noted that the notices sent by registered acknowledgment due post were received by the petitioners on 11th April, 1962, and the petitioners denied the service by affixation as alleged by the respondents. The court did not delve deeply into this issue as it was not the primary contention addressed.

3. Impact of Previous Agreements or Settlements:
The petitioners contended that a notice under Section 34 cannot be issued where there is an agreed assessment, and the only remedy for the revenue is by way of a suit to set aside the agreement. The court referred to the agreement or settlement dated 18th October, 1954, relating to assessment years 1943-44 to 1949-50, and noted that the income-tax authorities had already examined the validity of the claims regarding deposits, interest on deposits, and conversion charges. The court did not provide a detailed ruling on this contention as it was not the primary issue addressed.

4. Allegations of Non-Disclosure of Material Facts:
The respondents argued that the petitioners did not disclose fully and truly all material facts necessary for assessment, specifically regarding the deposits in the names of the Ranas and the conversion charges. The court held that all material facts were disclosed during the original assessment proceedings, and the subsequent sale deed executed in 1955 and the inquiries conducted in 1961 were not material facts existing at the time of the original assessments. Therefore, there was no non-disclosure of material facts by the petitioners.

5. Allegations of Mala Fide Actions by Income-tax Authorities:
The petitioners contended that the satisfaction of the Central Board of Revenue or the Commissioner of Income-tax was obtained mala fide and without disclosing all relevant facts. The court did not address this contention in detail as it focused primarily on the jurisdiction and validity of the notices issued under Section 34(1)(a).

6. Applicability of Section 34(1)(a) Versus Section 34(1)(b):
The petitioners argued that the facts of the case fell within the purview of Section 34(1)(b) of the 1922 Act, and the notices were therefore barred by time. The court noted that Section 34(1)(a) contemplates deliberate omission or failure to disclose material facts, while Section 34(1)(b) covers cases of errors or omissions resulting in escapement of income. The court held that the facts relied upon by the respondents were subsequent facts and not material facts existing at the time of the original assessments, thereby not justifying action under Section 34(1)(a).

7. Constitutionality of Section 297(2)(d)(i) and (ii) of the Income-tax Act, 1961:
The petitioners contended that Section 297(2)(d)(i) and (ii) of the 1961 Act were ultra vires and violated Article 14 of the Constitution. The court did not address this contention in detail as it focused primarily on the jurisdiction and validity of the notices issued under Section 34(1)(a).

8. Preliminary Objections:
The respondents raised preliminary objections regarding the delay in filing the writ petitions and the availability of alternative remedies. The court did not address these objections in detail as it focused on the primary contention regarding the jurisdiction and validity of the notices issued under Section 34(1)(a).

Conclusion:
The court allowed the writ petitions, quashing the impugned notices dated 23rd March, 1962, issued under Section 34(1)(a) for reassessment proceedings relating to assessment years 1942-43 to 1953-54. The respondents were restrained by a writ of mandamus from taking any further proceedings in pursuance thereof. The petitioners were awarded costs of Rs. 250 for all the petitions.

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