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TMI Blog1969 (2) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... anaging director in its total income and was assessed accordingly. For the assessment year 1943-44 it was contended by the assessee that the remuneration earned by Rohatgi was his personal income and was not liable to be included in the assessable income of the family. This contention was rejected by the Income-tax Officer and the Appellate Assistant Commissioner. On appeal, the Tribunal held that a part of the remuneration was attributable to the personal services rendered by Mr. Rohatgi and as such was his personal income and the balance was assessable as income of the Hindu undivided family. On a reference, this court held that the managing director's remuneration was earned by Mr. Rohatgi under contract of service and should not be treated as the income of the family. The decision of the High Court was pronounced on the 8th September, 1955. The assessments of the assessee-Hindu undivided family for 1951-52, 1952-53 and 1953-54 were completed after the High Court's decision on 17th December, 1955, 31st October, 1956, and 30th July, 1957, respectively. In accordance with the decision of the High Court, the managing director's remuneration from the company was excluded from assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were made. There was according to the Tribunal, therefore, no failure or omission on the part of the assessee to disclose any material fact which could attract the provisions of section 34(1)(a) of the Indian Income-tax Act, 1922. The Tribunal further held that the escapement of income was due to the change in the judicial decision. The Tribunal, in the premises, came to the conclusion that there was no valid reason for issuing notices under section 34(1)(a) of the Indian Income-tax Act 1922. The Tribunal further observed that, inasmuch as the reassessment proceedings were started beyond 4 years from the end of the respective assessment years, they were barred and the Tribunal was of the opinion that this bar of limitation could not be saved under the second proviso to section 34(3) of the Income-tax Act as the order of the Supreme Court was not, according to the Tribunal, an order under section 66A of the Indian Income-tax Act, 1922. In that view of the matter the Tribunal allowed the appeals in respect of these years. On an application being made, the Tribunal has referred to this court under section 66(1) of the Income-tax Act the following questions: " (1) Whether, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed or otherwise, the assessing authority has to draw inferences as regards certain other facts ; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. " It is clear, therefore, that even though there might not have been a disclosure by the assessee of this income in its return, inasmuch as the assessee was contending at that time that it was not the income of the Hindu undivided family, all the primary facts relating to this income were known to the Income-tax Officer. These were in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the High Court, it is clear that the escapement, if any, has taken place due to the decision of the High Court and not due to any omission on the part of the assessee. In that view of the matter the second condition necessary for attracting the provisions of section 34(1)(a) of the Indian Income-tax Act, 1922, is not present in this case. As was observed by the Supreme Court in the case of S. Narayanappa v. Commissioner of Income-tax, that in order to attract jurisdiction for the issue of notice under section 34(1) two conditions must be satisfied - (i) the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to income-tax had been under-assessed or escaped assessment and (ii) he must have reason to believe that such under-assessment or escapement had occurred by reason of either (a) omission or failure on the part of the assessee to make a return of his income under section 22 or (b) by omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. It is open for the court, the Supreme Court further observed, to examine whether the reasons for the belief hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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