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TMI Blog1962 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, they called for a supplementary statement of case from the Appellate Tribunal to enable the High Court to determine the question as to whether action under section 34 was justified during the years 1947-48, 1948-49 and 1950-51. Obviously, the inclusion of the year 1948-49 in the years mentioned above is due to some mistake as no reference was made to the High Court in regard to the said year. 3. Now coming to the material question as to on what material and on what basis the Income-tax Officer came to the conclusion that the relationship of master and servant has been established between the assessee and Princess Sita Devi, we would respectfully refer their Lordships to the order of the Income-tax Officer in regard to the year 1946-47, which is made annexure A hereto forming part of the case. Even in the statement of the case originally submitted a request has been made for a reference to the statement of case submitted in regard to the assessment years 1946-47 and 1951-52 covered by Referred Case No. 11 of 1960, which their Lordships have decided against the assessee. Further it is important to go through the proposal made by the Income-tax Officer to the Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Maharani Sita Devi. (v) The estate manager of the former Vuyyur estate has informed the Income-tax Officer who enquired of him that the assessee was a servant maid attached to Sita Devi on a salary of ₹ 8 per month and that the assessee had helped the princess in her venture to dissolve the first marriage. 5. Both the Appellate Assistant Commissioner and the Tribunal have not dealt in great detail in regard to the present years as in their orders in regard to the year 1946-47 they have exhaustively dealt with the same. The reason for coming to the conclusion that the relationship of master and servant was established between Princess Sita Devi and the assessee has been brought out in the said orders where it will be found reliance has been placed on a letter from the Bombay Garage Ltd., where the assessee had been called the Private Secretary to Princess Sita Devi, etc. A perusal of the Income-tax Officer's proposal to the Commissioner of Income-tax for sanction together with the orders of the Income-tax Officer, Appellate Assistant Commissioner and the Tribunal in regard to the year 1946-47, will bear out the relationship of master and servant between Princess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment had information that these sums of money represented the remuneration in lieu of services rendered by the assessee to the Princess Sita Devi. Thereupon, the concerned Income-tax Officer conducted an enquiry and, on the information that, was available to him both in the shape of statements made by persons who were acquainted with the assessee and certain documents, he initiated proceedings under section 34 of the Indian Income-tax Act. Before issuing the notice under section 34, the proper Income-tax Officer called upon the assessee to give particulars about several matters contained therein and bearing upon the amounts received by her from Princess Sita Devi. The assessee sent a reply explaining in detail the circumstances under which these payments were made to her. She was examined in 1954 in support of the explanation given by her. After taking into account the sworn statement of the assessee and after holding further enquiry, a notice was issued to the assessee in March, 1954, under section 34. As required under section 22, the assessee filed a return of her income for the relevant years and also produced her accounts and such other documents as in her opinion would suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 of the Act: 34. (1) If-- (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time and in cases falling under clause (b) at any time with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason that she had not told the Income- tax Officer the real relationship that existed between her and Princess Sita Devi. She appears to have stated to the department that she was her loyal friend and that Sita Devi was induced to make these presents to the assessee out of love and affection. It cannot, therefore, be predicated that she had made a disclosure of all the basic facts. It is urged by learned counsel for the department that it is this non-disclosure of the most material facts bearing on the relationship between the assessee and Sita Devi that misled the department into the belief that this was not income that could be brought to tax. In such a situation, we do not think that Calcutta Discount Co. Ltd. v. Income-tax Officer, Calcutta* or Dhanwate v. Commissioner of Income-tax [1961] 41 I.T.R. 191; [1961] 2 S.C.R. 241, has any analogy here. In the first of the cases, at the time of the original assessment, all the material facts necessary for the assessment were revealed to the Income-tax Officer. A return was filed by the assessee company which set out all the particulars regarding the sale of shares made by it and it stated that they were casual transactions. On f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which could have been discovered by the assessing authority, from the documents and other evidence disclosed. What the learned judges meant by these remarks is that all the facts which have a bearing on the assessment must be placed before the department for the purpose of assessment. In this case, as we have already stated, the real relationship between the assessee and her benefactress, i.e., of master and servant, has not been disclosed to the department. It is altogether a different matter to say that, in fact, no such relationship existed between her and Sita Devi. Whether there was material for the Income-tax Officer to believe that there was a true disclosure of all the facts or not will be dealt with in the appropriate context. Dhanwate v. Commissioner of Income-tax* is of similar character, and it does not carry the assessee very far, the principle enunciated in that case being in consonance with that underlying in Calcutta Discount Co. Ltd. v. Income-tax Officer, Calcutta [1961] 42 I.T.R. 253. For these reasons, we are unable to subscribe to the view pressed upon us by learned counsel for the assessee. It was next urged by Sri Rajah Ayyar, learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the Income-tax Officer that is envisaged by that section. But that test is not in any way destructive of the decision reached by the Income-tax Officer to put into operation section 34. We have already referred to the various circumstances which led the Income-tax Officer to believe that there was non-disclosure of the primary facts by the assessee at the time of the original assessment. The sufficiency of the reasons is not justiciable and as such it is not open to this court in the exercise of its jurisdiction under section 66 of the Income-tax Act to consider whether the material was sufficient to warrant the belief entertained by the Income-tax Officer. We are supported in this opinion of ours by the observations of this court in Parimisetti Seetharamamma v. Commissioner of Income-tax [1961] 41 I.T.R. 175. Even assuming that the question as to adequacy of reasons could be gone into by this court, we are satisfied that the material on record is sufficient to form the basis of belief that there was omission or failure on the part of the assessee to make a true disclosure of the material facts. The next limb of the argument of Sri Rajah Ayyar in this behalf is that si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the taxing authority such facts as would entitle him to claim the exemption. As pointed out by their Lordships of the Privy Council in Maharajkumar Gopal Saran Narain Singh v. Commissioner of Income-tax [1935] 3 I.T.R. 237, 242 (P.C.), the word income is not limited by the words profits and gains and anything which can properly be described as income is taxable under the Act, unless expressly exempted. Having regard to this principle, learned counsel sought to distinguish an original assessment from a reassessment made under section 34 of the Income-tax Act. In support of his submission he cited to us Commissioner of Income-tax v. Manohar [1935] 3 I.T.R. 372 and Lakshman Shenoy v. Income-tax Officer. We do not think that neither of these two decisions comes to the rescue of the assessee. In the first of the cases cited above, the Division Bench of the Bombay High Court consisting of Beaumont C.J. and Rangnekar J. was not dealing with the distinction between the two categories of assessments. The learned judges were concerned with a question arising under the first part of section 34. Similarly, in the second case, their Lordships of the Supreme Court did not discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of section 34 empowers the Income-tax Officer to proceed de novo under sub-section (2) of section 22, and that in turn leads, if there should still be a question of the accuracy of the return, to an enquiry under section 23(2) and (3) and in that enquiry the assessee has a statutory right to appear and to produce evidence. In the same trend of thought is Govindarajulu Iyer v. Commissioner of Income-tax*. It is unnecessary to labour this point any further. Suffice it to say that there is no real distinction between the two kinds of assessments and the same considerations govern both the cases. If so, the doctrine regarding burden of proof stated above is applicable even to proceedings initiated under section 34. It is not disputed in this case that the assessee had not discharged the onus. She had not produced any evidence in support of her case. When she was asked to lead evidence to substantiate her contention, she pleaded her inability to do so. She even denied correspondence which would throw any light upon the question but simply contended herself by making bald statements like Her Highness Sita Devi used to give me these gifts according to the will and pleasure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to this case. In that case, the assessee was the Chief Dewan of the native State of Bhavnagar from 1937, till January, 1948, when responsible Government was introduced by the Maharaja. On January 22, 1948, the Maharaja passed an order to the effect that the assessee should be paid a monthly pension of ₹ 2,000. Shortly thereafter, the Bhavnagar State merged in the United State of Saurashtra with the result that the Maharaja ceased to be the ruler of the State. This led the Maharaja to direct his bankers to pay by cheque to the assessee a sum of ₹ 5,00,000 (rupees five lakhs). In accordance with these instructions, this amount was paid to the assessee on 12th June, 1950. Six months later, when the accountant of the Maharaja asked for instructions as to how the amount of ₹ 5,00,000 was to be adjusted in the accounts, the Maharaja passed the following order: In consideration of Sri Anantrai P. Pattani, the ex-Diwan of our Bhavnagar State, having rendered loyal and meritorious services, ₹ 5,00,000 (Rupees five lakhs) are given to him as gift. Therefore, it is ordered that the said amount should be debited to our personal expense account. ..... 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