1972 (12) TMI 9 - HC - Income Tax

Whether reasons for reopening the assessment should be disclosed to the assessee - - assessee cannot compel the income-tax officer to disclose all the materials which formed the basis of notice u/s 148 before he files his return in pursuance of this notice

Issues Involved:
1. Validity of the notices issued under Section 148 of the Income-tax Act for reopening assessments.
2. Jurisdiction of the Income-tax Officer to issue the notices under Section 148.
3. Alleged non-disclosure of material facts by the petitioner.
4. Whether the trust was genuine and whether its income was applied for charitable purposes.

Issue-wise Detailed Analysis:

1. Validity of the Notices Issued Under Section 148:
The petitioner challenged the validity of the notices issued under Section 148 of the Income-tax Act, contending that the Income-tax Officer had no material to believe that income had escaped assessment. The court examined whether the conditions under Section 147(a) were satisfied, which include the Income-tax Officer having reason to believe that income chargeable to tax had escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment.

2. Jurisdiction of the Income-tax Officer:
The court considered whether the Income-tax Officer had jurisdiction to issue the notices. The court noted that for the Income-tax Officer to have jurisdiction, there must be a reasonable belief based on prima facie grounds that there had been non-disclosure of material facts leading to under-assessment. The court reviewed the materials and reasons recorded by the Income-tax Officer for each assessment year to determine if the jurisdiction was properly invoked.

3. Alleged Non-disclosure of Material Facts:
The petitioner argued that there was no failure on their part to disclose material facts necessary for the assessments. The court examined whether the materials now relied upon by the Income-tax Officer were new and whether they were relevant to justify the belief that income had escaped assessment. The court referred to the Supreme Court decisions in Calcutta Discount Co. Ltd. v. Income-tax Officer, S. Narayanappa v. Commissioner of Income-tax, and Commissioner of Income-tax v. Hemchandra Kar, which establish that the Income-tax Officer must have reasonable grounds for believing that there has been non-disclosure of material facts.

4. Genuineness of the Trust and Application of Income for Charitable Purposes:
The court evaluated whether the trust was genuine and whether its income was applied for charitable purposes. The court noted that the Income-tax Officer had previously granted exemptions based on thorough investigations. The court also considered subsequent materials, including a judgment in Criminal Appeal No. 810 of 1965, which suggested that funds of the trust were misapplied for personal purposes by the founder. The court held that the subsequent conduct of the founder does not affect the genuineness of the trust if a valid and complete dedication had already taken place.

Conclusion:
The court concluded that:
- The notices issued for the assessment years 1957-58, 1959-60, 1965-66, 1966-67, and 1967-68 were valid as there were reasonable grounds to believe that income had escaped assessment due to non-disclosure of material facts.
- The notices for the assessment years 1956-57, 1958-59, 1960-61, and 1961-62 were invalid as the grounds for reopening did not indicate any non-disclosure of primary facts by the petitioner, and thus, the jurisdiction under Section 147(a) was not properly invoked.

The court dismissed Writ Petitions Nos. 3353, 3355, and 1557 to 1559 of 1969 and allowed Writ Petitions Nos. 3352, 3354, 3356, and 3357 of 1969, making the rule nisi absolute in those cases. There was no order as to costs.

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