1971 (4) TMI 34 - HC - Income Tax

By this application under article 226 of the Constitution the petitioner, Nand Kishore Jhajharia, challenges the validity of certain reassessment proceedings - if the department wants to assess any of the amounts in any other year, then it is for the department to establish that such amounts constitute the income of that particular year - therefore, at this stage it could not be said that the Income-tax Officer was not justified in issuing the reassessment notices

Issues Involved:
1. Validity of reassessment proceedings initiated under section 148 of the Income-tax Act, 1961, for the assessment years 1946-47 to 1950-51.
2. Whether the reassessment notices were justified based on the belief that the petitioner's income had escaped assessment.
3. Whether multiple years' assessments could be reopened under section 147(a) based on suspected accumulated profits.

Detailed Analysis:

1. Validity of Reassessment Proceedings Initiated Under Section 148:
The petitioner challenged the validity of reassessment proceedings for the assessment years 1946-47 to 1950-51 initiated by five notices under section 148 of the Income-tax Act, 1961. The original assessments for these years were completed under the Indian Income-tax Act, 1922. A settlement was reached in 1955, where the petitioner agreed to the determination of his total undisclosed income, which was then reassessed under section 34 of the old Act.

2. Justification for Reassessment Notices:
The reassessment notices were based on several grounds:
- The petitioner had unexplained deposits in the National Bank of India Ltd. amounting to Rs. 4,00,000 during the relevant assessment year 1950-51.
- Consistent credit accounts in the petitioner's balance sheet since 1948-49, with no withdrawals or interest credited, totaling Rs. 1,75,450.
- Deposits in the Netherlands Trading Society amounting to Rs. 7,00,000 in 1950-51 and Rs. 7,66,250 in 1951-52.
- Purchase of a valuable house property in the name of the petitioner's wife for Rs. 4,50,000, with unexplained funds transferred from Pondicherry.

The court noted that these amounts were considered for the assessment year 1951-52, but the Commissioner of Income-tax had set aside the assessment with a direction for fresh assessment. The Income-tax Officer had reason to believe that these amounts represented accumulated concealed income from earlier years.

3. Reopening Multiple Years' Assessments Under Section 147(a):
The petitioner contended that the assessment for several years could not be reopened under section 147(a) as the failure to disclose must be specific to a particular year. However, the court referenced the Supreme Court judgments in Kantamani Venkata Narayana & Sons v. First Addl. Income-tax Officer and Sowdagar Ahmed Khan v. Income-tax Officer, where multiple years' assessments were validly reopened. The court found that the large deposits and transfers in the petitioner's accounts raised a reasonable presumption of accumulated concealed profits over several years. The Income-tax Officer was justified in his belief that these amounts represented the petitioner's concealed income for the years 1946-47 to 1950-51.

Conclusion:
The court dismissed the application, discharging the rule, and upheld the reassessment notices under section 148. The Income-tax Officer had bona fide grounds for believing that the petitioner's income had escaped assessment, justifying the reopening of multiple years' assessments. The petitioner's failure to provide satisfactory explanations for the large deposits and transfers supported the department's case. The court emphasized that the department must satisfactorily establish that the amounts constitute the income for the particular years if they wish to assess them in other years.

Order:
The application was dismissed, and the rule was discharged with no order as to costs.

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