9911796707
TMI Blog1969 (10) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... company went into voluntary liquidation on the 26th June, 1958, and the present petition has been filed on behalf of the petitioner-company by the liquidators. The company's accounting year ended on the 30th September, in each year. The petitioner-company's assessment for 1956-57 was completed by the then Income-tax Officer, Ward-A, District II, Calcutta, on the 29th December, 1960, and after considering the aforesaid conveyance of sale, the said Income-tax Officer purported to include the excess of the sale price over the written down value of the assets in the total income of the petitioner under the proviso to section 10(2)(vii) of the Income-tax Act, 1922. The petitioner preferred an appeal against the aforesaid assessment order to the Appellate Assistant Commissioner, but did not challenge the inclusion of the said profits under section 10(2)(vii). The petitioner's assessment for the assessment year 1958-59, for which the corresponding accounting year ended on the 30th September, 1957, was completed by the same Income-tax Officer on the 28th February, 1961. In the order of the said assessment it was recorded as follows : " The company sold all its collieries to M/s. Bhowra K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequently, by an order under section 35 of the Income-tax Act, 1922, the Tribunal purported to rectify its aforesaid order by deleting the words "liable to be included in the total income of the appellant in the assessment year 1958-59" in paragraph 9 of the said order following the decision of the Supreme Court in Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das. The following notice, purported to be under section 148 of the Act, dated the 7th December, 1965, was issued by the present Income-tax Officer being respondent No. 1 herein to the petitioner : " Whereas I have reason to believe that your income chargeable to tax for the assessment year 1958-59 has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961: I, therefore, propose to reassess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your income assessable for the said assessment year. This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, W. B.-II, Calcutta. " In respect of the said, notice the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that year." It is a very strange statement affirmed as true to knowledge in the face of the record, namely, the original assessment order for 1958-59, where it is expressly recorded that the petitioner had sold its collieries under the indenture dated September 28, 1957, with effect from January 1, 1955, and a copy of the said indenture was on the record. There is a limit to irresponsible statements being made on oath. But in this case, in my opinion, even such limit has been exceeded. Whatever be the result of this application I direct that the respondent No. 1 do personally pay the petitioner's costs of this application. Dr. Pal pointed out that before the decision of the Supreme Court in Bhurangya Coal Co. case, it was, more or less, accepted that the profits arising out of a sale was assessable under section 10(2)(vii) in the year in which the sale became effective irrespective of the date of the registration of the conveyance of sale. In this case both the petitioner and the Income-tax Officer acted under that impression when the profit under section 10(2)(vii) was included in the petitioner's assessment for 1955-56. It was only at the stage of the appeal before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng all these together, to decide what the legal inference should be. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet the possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the legislature has put in the Explanation, which has been set out above. In view of the Explanation it will not be open to the assessee to say, for example--' I have produced the account books and the documents: You, the assessing officer, examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account books and the documents.' His omission to bring to the assessing authority's attention those particular items in the account books, or the particular portions of the documents, which are relevant, will amount to 'omission to disclose fully and truly all material facts necessary for his assessment' ....... and the position remains that so far as primary facts are concerned, it is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make a return of his income under section 22, or (b) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year were conditions precedent to be satisfied before the Income-tax Officer acquired jurisdiction to issue a notice under the section. If there were in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice. Whether these grounds were adequate or not was not a matter for the court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue. The other decision cited by Dr. Pal, a decision of this court in Sudhir Kumar Bhose v. Income-tax Officer, " H " Ward, District III (I), is relevant as the facts are somewhat similar to the facts here. In that case the assessee sold his share in a certain property in August, 1960. At the time of the original assessment for 1961-62, the income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 147(b) had already expired in terms of section 149(1)(b). Lastly, Dr. Pal referred me to a very recent decision in Income-tax Reference No. 44 of 1965 of this court in Commissioner of Income-tax v. Kallu Babu Lalchand. where, in the facts of that case, it was held that the income had escaped assessment because of the view of law taken by the Income-tax Officer which was subsequently reversed by the Supreme Court and not because of any omission or failure on the part of the assessee to disclose any material facts. The facts in that case were as follows: One Rohatgi was the karta of a Hindu undivided family which held a substantial part of the shares in a company called the India Electric Works Ltd. Sri Rohatgi was appointed as the managing director of the company for life and in accordance with the articles and the agreement between Sri Rohatgi and the company he was entitled to certain remuneration and commission on the net income of the company. The question arose as to whether such income of Rohtagi was his personal income or the income of the joint family. Following a decision of the Calcutta High Court, the Income-tax Officer excluded Rohtagi's remuneration from the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court decision in Kantamani Venkata Narayana Sons v. First Addl. Income-tax Officer, Rajahmundry, but in that case the court was satisfied that the assessee had failed to disclose the unexplained increase in its investment and its wealth. What was relied on by Mr.Sen was the observation in that case that the assessee does not discharge his duty to disclose fully or truly material facts necessary for his assessment by merely producing the books of account and other documents; he has to bring to the notice of the Income-tax Officer particular items in the books of account or portions of documents which are relevant. But similar observations had already been made in the Calcutta Discount case in connection with the Explanation to section 34(1). The above decision was followed in Sowdagar Ahmed Khan's case, where a bank account maintained in the benami of the assessee's father-in-law was not disclosed at the time of the original assessment. The main contention of Mr. Sen was that in any event there was a failure on the part of the petitioner to disclose truly and fully all material facts necessary for its assessment for the year 1958-59. Mr. Sen referred to the origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's income had escaped assessment. I am entirely unable to accept this contention of Mr. Sen. There does not appear to have been any misunderstanding of the contents of the sale deed by the Income-tax Officer making the original assessment on the petitioner. Both the Income-tax Officer and the petitioner accepted the position that the declaration in the deed of sale that the sale became effective from the 1st January, 1955, resulted in the transfer and sale of the colliery to the purchaser on and from that date. It was only on the subsequent decision of the Supreme Court in Bhurangya's case that it was realised that the transfer of immovable property was not effected till the registration of the relevant sale deed and as such the immovable property of the petitioner was not transferred to the purchaser till the 28th September, 1957. The reason for the escapement of assessment, if there was any such escapement, was not due to any omission or failure on the part of the assessee, but to the ignorance. of the legal effect of non-registration of the document of sale of immovable properties as pointed out by the Supreme Court in the aforesaid case. As such the ratio of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction contained in the said order." Mr. Sen submitted that the said Explanation empowered the respondent-Income-tax Officer to issue a notice under section 148 to give effect to the order of the Tribunal which had held that the profit under section 10(2)(vii) was not assessable for the assessment year 1956-57, and as such the same could be assessed in the year 1958-59. On the face of it this argument appears to be a plausible one. Mr. Sen further submitted that under the provisions of section 297(2)(d)(ii) of the Act the notice of reassessment in this case could be issued under section 148 subject to the provisions of sections 149 and 150, as no such notice had been issued under section 34 of the old Act. Accordingly, the respondent-Income-tax Officer could have issued such a notice without any time limit and the notice in this case should be sustained on the ground that in any event the respondent-income-tax Officer had jurisdiction to issue such a notice. Mr. Sen relied on the decision of the Supreme Court in Damodhar Bhat's case, where it was held that in a case failing under section 297(2)(j) of the 1961 Act a notice of demand under section 156 of that Act could be valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the provision of the new Act to apply to proceedings under the old Act it was careful to say so expressly and Bhat's case, relied on by Mr. Sen, had no application, as in that case a garnishee order was issued under the new Act and the contention was that unless the assessee was in default no notice under section 226 was permissible and this was rejected. It is further submitted that the said decision is under section 297(2)(j) which deals with a procedural matter, namely, recovery of tax. It does not cover a case where jurisdiction is to be assumed on the fulfilment of certain conditions. An interpretation which would tend to nullify a procedural section should not be accepted. These are very substantial questions to be considered on a proper occasion. I think Dr. Pal is justified in his objection to Mr. Sen being allowed to raise the last contention. In any event if Mr. Sen's contention is correct the department would not be prejudiced because the respondent-Income-tax Officer would be justified in issuing a fresh notice under section 148 in accordance with sections 150 and 153(3). In the premises the rule must be made absolute. A writ of certiorari would be issued quashi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
