9911796707
TMI Blog1970 (6) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... sales effected by the petitioner went on for a number of years. In Samvat year 1991, being year of account corresponding to the assessment year 1936-37, the petitioner sold 208 plots and, as a result of the sales, he realised an aggregate sum of Rs. 65,870. The Income-tax Officer assessing the petitioner for the assessment year 1936-37 included in the total income of the petitioner a sum of Rs. 56,980 on account of profit earned by him from the sale of 208 plots after giving him credit for the expenditure incurred by him and taxed him on the basis of such profit. The petitioner carried the matter in appeal to the Appellate Assistant Commissioner but the view taken by the Income-tax Officer as regards the taxability of the amount of profit was confirmed by the Appellate Assistant Commissioner and the only relief granted to the petitioner was that the amount of profit was reduced from Rs. 56,980 to Rs. 47,533. The petitioner thereupon asked for a reference and the following question of law, namely : " Whether there is any evidence to support the finding of the Assistant Commissioner that the said amount of Rs. 47,533 is profit earned by the assessee in the business of purchasing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e promise to show our profit no sooner than the whole transaction is completed. " The Income-tax Officer, accepting this contention of the petitioner, passed an assessment order dated 18th August, 1961, excluding the profit embodied in the sale proceeds of the plots from computation of the total income of the petitioner, for the following reasons : " This year the family has received Rs. 44,330, on account of sale of land. However, it was decided by the High Court earlier that the profit from land transactions should be taken on the final disposal of all the plots. Therefore, the profits from this is not considered here as the complete sales of all the lands have not been effected so far. " Nothing transpired thereafter for a period of about 7 1/2 years until 28th March, 1969, when the Income-tax Officer issued a notice dated 28th March, 1969, against the petitioner under section 148 seeking to reopen the assessment of the petitioner for the assessment year 1960-61. The petitioner immediately filed the present petition challenging the validity of this notice issued by the Income-tax Officer. Now, it is obvious that since the impugned notice has been issued by the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment and that by reason of such omission or failure, income of the assessee escaped assessment for the assessment year in question. Before we proceed to consider whether the petitioner has succeeded in showing that on the material on record the Income-tax Officer could have no reason to believe that there was any omission or failure on the part of the petitioner to disclose material facts necessary for his assessment resulting in income escaping assessment, it is necessary to understand what is meant by the expression " material facts " which it is the duty of the assessee to disclose before the Income-tax Officer at the time of the assessment. The Supreme Court had occasion to consider the scope and meaning of this expression in Calcutta Discount Co. Ltd. v. Income-tax Officer, Calcutta where Das Gupta J., speaking on behalf of the majority, said : " . . . it is necessary to examine the precise scope of disclosure which the section demands. The words used are 'omission or failure to disclose fully and truly all material facts necessary for his assessment for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awn and his failure to communicate to the assessing authority the proper and correct inferences to be drawn from the primary facts cannot be regarded as a failure to disclose " material facts ". The effect of accepting the contrary view would be to impose an intolerable burden on the assessee and to compel him to argue against himself which would be neither just nor reasonable. We must, therefore, inquire whether in the present case any primary facts material and necessary for the purpose of the assessment were omitted to be disclosed by the petitioner at the time of the original assessment. Two primary facts, according to the revenue, were not disclosed by the petitioner at the time of the original assessment and they were : (i) the true ratio of the judgment of the Bombay High Court in In re K. H. Mody ; and (ii) the fact that before the relevant year of account the petitioner had already recouped out of the sale proceeds of the plots the whole of the amount laid out by him in the purchase and development of the entire piece of land and the non-disclosure of these two facts, said the revenue, had resulted in the escapement of the amount of profit earned during the relevant year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losure of this fact, the amount of profit would still have been not taxable in the view of the law taken by the Income-tax Officer. It is, therefore, not possible to accede to the argument of the revenue that the profit embedded in the sale proceeds of the plots sold in the relevant year of account escaped tax by reason of non-disclosure of this particular fact by the petitioner. We must, in this view of the matter, reach the conclusion that the Income-tax Officer could have no reason to believe that by reason of any omission or failure on the part of the petitioner to disclose any material facts necessary for the purpose of assessment for the assessment year 1960-61, income of the petitioner chargeable to tax had escaped assessment. The second condition limiting the exercise of the power under section 147(a) was, therefore, not satisfied and the Income-tax Officer had no jurisdiction to reopen the assessment of the petitioner by issuing the impugned notice. We, therefore, allow the petition and make the rule absolute by issuing a writ of mandamus quashing and setting aside the notice dated 28th March, 1969, issued by the Income-tax Officer under section 148 of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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