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TMI Blog1947 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... y from presuming or inferring that the receipt evidenced by the credit entry is a revenue receipt? (3) Whether in the circumstances of this case the initiation of the proceedings under Section 34, Income-tax Act, by the respondent was contrary to law and for that reason the assessment is invalid? We may at the outset say that the questions have not been happily worded and do not clearly bring out the points that have been urged before us. The assessee, Messrs. Mahabir Prasad Munna Lal, is a Hindu undivided family carrying on business as cloth merchants in Generalganj, Cawnpore. Mr. Reoti Raman, Income-tax Officer, completed the assessment for the year 1938-39 on the 19th January, 1939, on the basis of the income from the previous year 1937-38, the total of which after necessary deductions was ₹ 22,325. There was no appeal from this assessment by the assessee and there was no trouble till the next year when the assessment proceedings for the year 1939-40 were in progress. The Income-tax Officer for that year was Mr. N.K. Saksena. While examining the books of account for the year 1938-39, which was the relevant year, the Income-tax Officer noticed a credit entry in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the 21st December, 1940. The assessee then appealed to the Income-tax Appellate Tribunal, but was unsuccessful and his appeal was dismissed by the Tribunal on the 4th April, 1941. He then applied that a case be stated to this Court under Section 66(1) of the Income-tax Act for answer of certain questions formulated by him. This application was granted by the Tribunal. The questions of law which, according to the Tribunal, arose for decision were reframed and in the form in which they now are, they have been set out at the beginning of the judgment. The greater part of our time was, however, taken by the counsel for the assessee on question No. (3), which, according to him, was the main question for decision. We have already said that the question has not been happily framed. Learned counsel for the assessee has, however, urged that his objection to the initiation of the proceedings under Section 34 is based on the ground that the Income-tax Officer had no definite information, which had come into his possession, from which he could discover that any income, profit or gain had escaped assessment in the year 1938-39. So far as we have been able to understand learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence. The word discover, they have pointed out, must necessarily always involve a measure merely of belief, and, provided that that belief is the belief of an honest and reasonable person based upon reasonable grounds that is quite enough. We have already set out the facts that had come to the Income-tax Officer's possession before he issued the notice under Section 34. It may be that he had informed himself in the course of the assessment proceedings for the year 1939-40, but all that information, howsoever it may have come into his possession, was available to him before he issued the notice under Section 34, and we are not prepared to say that the information that he had received was not such as could lead a reasonable person acting honestly to believe that a part of the income of the assessee had escaped assessment. Our attention has been drawn to another decision of this Court in the case of Kedar Nath v. Commissioner of Income-tax, U.P., C.P. and Berar Since reported at [1947] 15 I.T.R. 224 (Miscellaneous Case No. 14 of 1945). In that case the assessee had been assessed for the year 1940-41. When, however, the successor of the Income-tax Officer took up the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me into his possession in the course of his enquiry for assessment for a subsequent year he cannot rely on that information and issue notice under Section 34 if he honestly believes that the income has escaped assessment. The facts stated in the statement of the case that the definite information that had come into the possession of the Income-tax Officer in the course of the enquiry for 1941-42 which made him believe that some income had escaped assessment was not in his possession when the assessment for the year 1940-41 was made were, we say so with great respect, not given due weight by the Honourable Judges who decided the case of Kedar Nath [1947] 15 I.T.R. 224, referred to above. We are in full agreement with the view expressed in the case of Badar Shoe Stores [1946] 14 I.T.R. 431, already mentioned in an earlier part of the judgment, and we feel it, therefore, unnecessary to discuss the meaning of Section 34 in any great length. Our answer to the third question referred to us is, therefore, in the negative. As regards the first question, we cannot say that there were no grounds for the Income-tax Officer to suspect the genuineness of the credit entry. We have alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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