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TMI Blog1963 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... lore. Assessments for the years 1943-44 to 1949-50 were made between 1944 and 1950. In the course of the assessment for the assessment year 1957-58, the assessing authority seems to have detected that several cash credits in the names of the petitioner's near relations appeared to be bogus. Further investigation led him to the belief that there was concealment of income, and that the petitioner had not disclosed fully and truly all the material facts. Consequent upon this, the concerned officer, by a notice issued in 1958, called upon the petitioner to prove the various credits which had been brought forward from year to year. The assessee declined to comply with this demand, contending that these credits were already considered previously. This attitude of the petitioner obliged the Income-tax Officer to issue a show-cause notice to the petitioner asking him why the assessments for the years 1943-44 to 1949-50 should not be reopened under section 34, the amount escaped being more than a lakh of rupees. The petitioner replied that there was no case for invoking section 34 and that, in any event, no action could be taken for reopening the assessment after 31st March, 1956. Thereup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 underassessed, 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 within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section : Provided that the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontaining all or any of the requirements which may be included in a notice under sub-section (2) of section 22, and may proceed to assess or reassess the income, profits or gains of the assessee for all or any of the years referred to in clause (i), and thereupon '-he provisions of this Act (excepting those contained in clauses (i) and (iii) of the proviso to sub-section (1) and in sub-sections (2) and (3) of this section) shall, so far as may be, apply accordingly : Provided that the Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so, and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice : Provided further that no such notice shall be issued after the 31st day of March, 1936. (1B) Where any assessee to whom a notice has been issued under clause (a) of sub-section (1) or under sub-section (1A) for any of the years ending on the 31st day of March of the years 1941 to 1948 inclusive applies to the Central Board of Revenue at any time within six months from the receipt of such notice or before the assessment or reassessment is made, whichever is ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood then, could not at that time help the department to achieve the object of reopening the assessments for the war years on the ground of non-disclosure of all the material facts since the limitation prescribed for the issue of notice under that clause was 8 years and hence no notice could issue in respect of the assessment year prior to 1946-47. The resultant position was that the Government could not bring to tax escaped income during the war years. It is to get over this difficulty that Parliament inserted section 34(1A) in the Income-tax Act so that cases which have been started under the provisions declared invalid by the Supreme Court could be taken over. This section conferred powers on the officers concerned to reopen all cases of tax evasion during the war years of more than rupees one lakh. It is also manifest from the section that this power could be exercised only up to 31st March, 1956. It is thus clear that except for the accounting year ending 31st March, 1946, section 34(1)(a) and section 34(1A) cannot be said to operate simultaneously. In such a situation, it is difficult to posit that the maxim generalia specialibus non derogant comes into play in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount involved amounted to a lakh of rupees or more in the aggregate. If we interpret this section as being subject to section 34(1A), that will be nullifying the provisions of this Act in so far as the war years are concerned. As already remarked, the only limitation imposed by the sub-section is that this notice should not cover any period prior to 31st March, 1941. It means that proceedings could be initiated under that section for any year subsequent to 1st April, 1941, at any time, and the duration of the operation of this section is not limited, whereas under section 34(1A), no action could be taken after 31st March, 1956 ; in other words, it ceases to be operative after 31st March, 1956. This intendment could also be gathered from the language employed in the proviso, viz., " provided that no such notice shall be issued after the 1st day of March, 1956 ", thereby implying that resort could not be had to section 34(1A) after that date. The proviso does not preclude the department from issuing a notice under section 22 of the Act invoking section 34(1)(a). Here, we may contrast the language of this proviso with that of the proviso to section 34(1), viz., " provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 34(1)(a) on the ground of limitation. In our considered judgment, this sub-section proceeds on the assumption that the only operative provision for reopening the assessment after 1956 was the one contained in clause(1)(a) and that sub-section (1A) was no longer operative. If section 34(1A) was still applicable in respect of some years, say up to the assessment years 1946-47, and to that extent section 34(1)(a) was inapplicable, sub-section (4) would have been cast in a mould which would take in notices to be issued under section 34(1A). If sub-section (1A) was still in the field, there was no ostensible reason why Parliament would have thought of omitting the war years from the purview of this section. The whole scheme of section 34 is to bring to tax income which has escaped assessment or was under-assessed by reason of the non-disclosure of material facts at any time in respect of any year subsequent to 31st March, 1941. That being the object and purpose of this section, there is no justification to think that Parliament, in enacting sub-section (4), excluded the war years from the scope of that section. We feel that this sub-section establishes that, after 1956, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the mere production of accounts or other evidence from which material facts with due diligence could be discovered will not amount to disclosure of material facts. It was the duty of the assessee to disclose all the primary facts including particular entries in the account books, particular portions of documents and other evidence which could have been discovered by the assessing authority from the documents and other evidence. For the purpose of computing the proper tax from the assessee, the assessing authority requires to know all the facts which help him in coming to correct conclusions. If subsequent to the assessment, the entries or cash credits which were overlooked in the original assessment were detected, it was open to the department to reopen the proceedings. Further, as laid down by their Lordships of the Supreme Court in Kale Khan Mohammed Hanif v. Commissioner of Income-tax, the taxing authorities are not precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appeared in the books of a business whose income they had previously computed on a percentage basis. It is also laid down there that in reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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