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TMI Blog1972 (2) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... on of this court is : " Whether, on the facts and in the circumstances of the case, and on the findings given and referred to above, the Appellate Tribunal was justified in holding that the reassessment proceedings under section 147(a) of the Income-tax Act, 1961, were not validly initiated in the case ? " The assessee is an individual and the assessment in question relates to the assessment year 1957-58, the corresponding accounting period being the year ending on March 31, 1957. The assessee derived income under the heads "salary, property and share income from business". He filed a return declaring a total income of Rs. 9,518. When the assessment proceedings were pending, the Income-tax Officer came to know of the fact that the assessee was found in possession of 2,000 tolas of gold and that in the month of February, 1957, the Central Excise authorities had seized the said gold as contraband. On the basis of the said information the Income-tax Officer examined the assessee on the 3rd of March, 1958, and asked the source of money for the purchase of the said gold. It is relevant to state that the assessee is not a dealer in gold. When questioned by the Income-tax Officer, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, the Income-tax Officer sought permission of the Commissioner of Income-tax for initiating proceedings for reassessment under section 147(a) of the Act. The permission sought was accorded and the notice under section 148 of the Act was served on the assessee on April 27, 1963. The assessee filed a return under various heads as originally assessed. He also raised objections to the reassessment questioning the validity of the action taken under section 147(a) and also on the merits. The Income-tax Officer rejected the legal contention of the assessee concerning jurisdiction, and on merits he held that the assessee had purchased the gold with his own money from undisclosed sources and consequently added a sum of Rs. 1,80,000 as income from undisclosed sources. The assessee then preferred an appeal to the Appellate Assistant Commissioner. He rejected the assessee's contention that the proceedings do not fall within the purview of section 147(a) of the Act. However, he set aside the assessment and remitted the case back to the Income-tax Officer to make a fresh assessment in accordance with law after placing before the assessee all the materials which had been gathered or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied before the Income-tax Officer issues a notice for assessment or reassessment of escaped income beyond a period of four years. In the instant case the first condition has been satisfied. It is not the case of the department that the Income-tax Officer had reason to believe that the escapement of income is by reason of the omission or failure on the part of the assessee to make a return. Their case was that the escapement is by reason of the omission or failure to disclose fully and truly all material facts necessary for his assessment for the relevant year. What constitutes "omission or failure to disclose fully and truly all material facts necessary for his assessment for the relevant year " has been laid down by the dictum of the Supreme Court in the leading case of Calcutta Discount Co. Ltd. v. Income-tax Officer". The Supreme Court has not in any subsequent case departed from the law as laid down in the Calcutta Discount Company's case. The principles laid down therein were applied to the facts and circumstances of each case as they arose and the cases were decided. In Calcutta Discount Company's case that is what the Supreme Court has stated: " The words used are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the meaning of section 34(1), but where on the evidence and the materials produced the Income-tax Officer could have reached a conclusion other than the one which he has reached, a proceeding under section 34(1)(a) will not lie merely on the ground that the Income-tax Officer has raised an inference which he may later regard as erroneous." In Commissioner of Income-tax v. T.S.P.L.P. Chidambaram Chettiar, the facts were these : " For the assessment year 1944-45, the assessee, Chidamaram Chettiar, as karta of his undivided Hindu family was assessed under section 23(3) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as 'the Act'), on February 12, 1946, on a total income of Rs. 78,556 which, on appeal, was reduced to Rs. 53,153. When the assessment proceedings of the assessee were pending before the Income-tax Officer, Trichy, that Income-tax Officer received information from the Income-tax Officer, Erode, that the mortgagor had paid secretly to the mortgagee a sum of Rs. 1,50,000 during the year ended on April 1, 1944, and that the same was not included in the compromise decree. When the Income-tax Officer asked the assessee about the same, he denied having r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of Rs. 1,50,000) should come up for consideration only in the assessment year 1944-45, as only the excess over Rs. 2,76,000 plus legal expenses can be treated as interest income in the hands of the assessee and so, the assessment for 1944-45 should not be held up pending further investigation in the order sheet does not amount to a decision taken by him. it may be noted that those remarks were not made in the order assessing the income of the assessee. It must also be remembered that the Income-tax Officer, at the time he made those remarks, was not satisfied about the correctness of the information given by the Income-tax Officer, Erode. Hence, these remarks must be treated as casual observations and not a decision taken on the basis of facts found." Shri S. R. Rajasekhara Murthy, learned counsel for the department, placed strong reliance on the above passage in support of his contention that the fact that the Income-tax Officer in the original assessment proceedings could have made further enquiry into the question of the genuineness of the borrowings for the gold purchase, but that fact did not take the case out of section 147(a) of the Act. In our opinion, on the facts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding in appeal before the Supreme Court. In our opinion, the matter is covered by the clear enunciation of the principles laid down by the Supreme Court in the decisions referred to above, and we are not persuaded to accept some of the observations made by the Andhra Pradesh High Court in the decision relied on by Sri S. R. Rajasekhara Murthy. All the primary facts necessary for making the assessment were before the Income-tax Officer. It is settled law that an assessee is bound to be quite candid in the matter of placing all material facts before the department without in any way trying to hoodwink the authorities and to escape taxation. Equally, the department is bound to discharge its statutory duty of making assessment by examining with care and caution all the materials that have been made available. If the assessee has done all that he could or need do in the matter, the assessing authority cannot quite perfunctorily act as he did in the instant case with the hope of expectation that any error which he might commit, by not making a proper assessment, could subsequently be rectified by resorting to the machinery of section 147 of the Act. The Income-tax Officer cannot certai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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