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TMI Blog1970 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... t of interest on borrowed moneys ; and the question for us to consider is whether such reopening was valid in the light of the facts and circumstances. The relevant portion of section 147(a) provides that, if the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to disclose fully and truly all material facts necessary of his assessment for any assessment year, income chargeable to tax has escaped assessment for that year, he may assess or reassess such income, etc. There are three aspects to be considered in cases like these ; and they are all considered by the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District, Calcutta, which was a case under the corresponding section 34(1)(a) of the Income-tax Act of 1922. The first aspect relates to the powers or the jurisdiction of the Income-tax Officer to reopen. The majority judgment of three judges has stated that to confer jurisdiction under section 34 to issue notice in respect of assessments beyond the period of four years, but within the period of eight years from the end of the relevant year, two conditions have to be satisfied, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts gives jurisdiction to the Income-tax Officer to reopen. These are laid down by the majority judgment; and we may also refer to portions of the judgment of Hidayatullah J. Hidayatullah J. (as he then was) has observed that the mere production of evidence before the Income-tax Officer was not enough ; and that there might be an omission or failure to make a full and true disclosure, if some material for the assessment lay embedded in that evidence which the assessee could uncover but did not. If there was such a fact, it was the duty of the assessee to disclose that too. And the third aspect is the scope and meaning of the expression " reason to believe ". The majority judgment has said that if there were reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any primary fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to reopen. Whether the grounds were adequate or not is not open for the court to investigate. On this aspect, Shah J. has observed that the belief must be held in good faith ; it cannot be merely a pretence. The expression does not me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personal drawing by the assessee for non-business purposes from the borrowed moneys, for which no deduction by way of interest payment could be allowed. The second amount is a sum of Rs. 41,194 representing amounts advanced by the assessee for the construction of a tin printing factory. And the third is a debit balance in the folio of Sri S. N. Padmanabhan, the assessee's father-in-law. In the opinion of the Income-tax Officer, the first sum, as indicated already, represented withdrawals by the assessee for non-business purposes, and the second sum was not an amount spent on the business of the assessee, since the tin printing factory was a partnership business of the assessee, his wife and his minor children. Regarding the third figure, we may straightaway observe that the Appellate Assistant Commissioner has stated in his order that, so far as the loan to Sri Padmanabhan is concerned, the assessing Income-tax Officer was aware of the nature of the loan. And the Appellate Assistant Commissioner has accepted this too. But, he has held that, for the other reasons given by the reopening Income-tax Officer, the reassessment proceedings were justified. Thus, we need consider only the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts by the assessee from the business. Thus, regarding this figure also there was no reasonable ground for believing that there was non-disclosure of material facts by the assessee. And this concludes I.T.R. No. 4 of 1968. Then about the other case (I.T.R. No. 3 of 1968) relating to assessment year 1958-59. This case and another case relating to assessment year 1956-57 were disposed of by the Income-tax Officer giving common reasons and one additional reason in the present case. The common reasons were found against by the Appellate Assistant Commissioner in the appeal relating to assessment year 1956-57 ; and those grounds are not before us either. We have, therefore, not to consider the reasonableness or the bona fides of the belief of the Income-tax Officer basing on those grounds. The only ground available in the present case is an advance of Rs. 10,000 to Sri S. N. Padmanabhan, the father-in-law of the assessee. The Income-tax Officer says that the loan of Rs. 10,000 was given to the assessee's fatherin-law, Sri S. N. Padmanabhan, and at the time of the original assessment, no information was furnished to the then officer regarding the nature of the advance (vide annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 110 of the reports, but, a little surprisingly, these decisions are not referred to in the subsequent portion of the judgment. As pointed out by us already, the duty of the assessee is only to disclose the material or primary facts necessary, and if, on the same set of facts, different inferences are drawn by different Income-tax Officers, that is no reason for reopening the assessment. That is the correct legal position ; and that is what is pointed out by the two decisions followed by the Appellate Tribunal in the Calcutta case. Therefore, if the conclusion of the Calcutta Division Bench is contrary to the principle pointed out by the Patna and the Nagpur High Courts (which, we hope, not), we, with due respect to the learned Judges of the Calcutta High Court, disagree with them. If, on the other hand, what they have done is to follow the same principle pointed out by the Patna and the Nagpur High Courts (which, we think, is what they have done) but, in the application of the principle they have disagreed with the conclusion of the Tribunal, then there is nothing in this decision which will help the revenue in the cases before us. Our answer to the common question referred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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