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TMI Blog1972 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... e trading accounts of the petitioner-firm after examining its books and did not doubt that the profits from the sale of wool-tops had been under-stated. The assessment order was made on August 31, 1966. On January 2, 1969, the Inspecting Assistant Commissioner, Jamnagar, addressed a letter to the Inspecting Assistant Commissioner of Income-tax, Amritsar, and enclosed therewith a report of the Income-tax Officer, Jamnagar, who was processing the assessment of Messrs. Digvijay Woollen Mills, Jamnagar; and in that connection made investigations into the purchases made by it. The said Income-tax Officer had gone to Amritsar in connection with the investigation to examine certain parties and found that eleven bales of wool-tops imported under the licence of the petitioner-firm were sold by Tara Chand Dwarka Dass to Digvijay Woollen Mills on March 31, 1965. The Inspecting Assistant Commissioner of Amritsar was requested to make enquiries into the matter as it had come to the notice of the Income-tax Officer, Jamnagar, that the importers of wool-tops were indulging in concealment of their real profits by introducing bogus intermediaries for selling the wool-tops to the woollen mills. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in respect of which you are assessable for the said assessment year." In reply to this notice, the petitioner-firm submitted its return on December 14, 1969, with a note that no income had escaped assessment and that the assessment had already been completed on the income of Rs. 2,12,042 on August 31, 1966. The Income-tax Officer, after receipt of the return from the petitioner-firm, started investigations into the matter and recorded the statements of the representatives of the petitioner-firm, Ramesh Woollen Mills and others believed to be involved in the racket. On January 1, 1971, the petitioner-firm received a letter from the Incometax Officer informing it that efforts had been made to contact Messrs. Ganga Ram Aggarwal and Sons, Katra Ahluwalia, Amritsar, but without any success as no such party was traceable. The petitioner-firm was directed to appear before the Income-tax Officer on January 8, 1971, and to produce Messrs. Ganga Ram Aggarwal and Sons or their account books in order to enable him to complete the pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d no jurisdiction to issue that notice. The prayer for the quashing of that notice has been made. Written statement has been filed by the Income-tax Officer justifying the issue of the notice. The notice under section 148 of the Act was issued to the petitioner-firm on November 14, 1969, and was within time for reassessment both tinder clause (a) and clause (b) of section 147 of the Act as it had been issued within four years from the end of the relevant assessment year. In the notice no mention was made either of clause (a) or clause (b) of section 147 of the Act. Therefore, in pursuance of that notice, the assessment could be made by the Income-tax Officer under either of the two clauses. It is not disputed by the learned counsel for the petitioner that the notice was perfectly valid and within the jurisdiction of the Income-tax Officer under clause (b) of section 147, as the Income-tax Officer had obtained information after making the order of assessment with regard to that assessment year on the basis of which he had reason to believe that the income of the petitioner-firm chargeable to tax had escaped assessment. But he vehemently asserts that the Income-tax Officer had no jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been purchased by Ramesh Woollen Mills from the petitioner-firm, had been ultimately made to Digvijay Woollen Mills at Rs. 18.37 per pound on March 31, 1965, that is within 15 days of the sale made by the petitioner-firm in favour of Ramesh Woollen Mills. After obtaining this information, the Income-tax Officer made further enquiries and came to the conclusion that certain intermediaries had been introduced which were bogus. During the course of the enquiries, it was revealed that Ramesh Woollen Mills sold the wool-tops purchased from the petitioner to Messrs. Tara Chand Ashok Kumar, who sold to Messrs. Ganga Ram and Sons. The latter firm further sold the same wool-tops in favour of Tara Chand Dwarka Dass who ultimately sold them to Digvijay Woollen Mills. There was no trace of the firm, Ganga Ram Aggarwal and Sons. There was, thus, sufficient material on the record for the Income-tax Officer to believe that income of the petitioner-firm chargeable to tax had escaped assessment. The only question to be answered is whether the escapement was due to the failure of the petitioner-firm to disclose fully and truly all material facts for assessment of the entire profits earned fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that case, the assessee had filed its balance-sheet along with the return showing the correct entries in the names of various firms. The Income-tax Officer issued notice under section 143(2) of the Act for appearance before him and asked the assessee to prove the cash credits which appeared in its balance-sheet and file the account of zeera, etc. The assessee submitted the details of the credit entries of all the parties in whose names the credits stood in its books along with the dates of payment, letters of confirmation and copies of accounts. On the basis of the documents filed, the Income-tax Officer felt satisfied with respect to the cash credits of five firms with regard to whose credits notice under section 148 of the Act was issued on December 23, 1970. While making the original assessment order, the Income-tax Officer had stated : " The balance-sheet was examined and loans were satisfactorily proved by the assessee." On those facts, I held that the assessee had disclosed fully and truly all the material facts for its assessment and that the Income-tax Officer had further enquired into the genuineness of the entries found in the account books and after being satisfied a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l facts for purposes of its assessment. The mere production of its account books containing the account of wool-tops by the petitioner-firm did not amount to full and true disclosure of all material facts necessary for the assessment of the real income of the petitioner within the ambit of the Explanation to section 147 of the Act. After the investigation, if it is found by the Income-tax Officer that the sale in favour of Digvijay Woollen Mills was in fact made by the petitioner-firm and Ramesh Woollen Mills and other firms mentioned above were bogus intermediaries, then it will be evident that the petitioner-firm did not truly disclose the purchaser to whom it sold the wool-tops and the actual price received from their sale. The learned counsel for the petitioner has then relied on a judgment of their Lordships of the Supreme Court in Commissioner of Income-tax v. Bhanji Lavji . But the facts of that case are also distinguishable and no help can be derived from the observations made in that judgment. In that case, the assessee carried on business in ghee at Porbandar, which at the material time was outside the taxable territories. For the assessment years 1947-48, 1948-49 and 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the action under section 34(1) was not valid. On appeal, it was held by the Supreme Court: (i) That the Tribunal had misconceived the nature of the proceedings and the duty imposed upon the assessee by section 34(1)(a). It is not for the assessee to satisfy the Income-tax Officer that there was no concealment with regard to any income; it was for the Income-tax Officer, if that issue was raised, to establish that the assessee had failed to disclose fully and truly certain facts material to the assessment of income which had escaped assessment. Failure to disclose how the delivery of ghee was given at Porbandar was wholly irrelevant. (ii) That in regard to the years 1947-48 and 1948-49, the assessee had disclosed that the sale proceeds in respect of ghee supplied were received in Bombay and subsequently transferred to Porbandar. No more detailed disclosure was necessary to comply with the requirement that the assessee had, fully and truly disclosed all material facts necessary for the purpose of assessment. It was not the assessee's duty to disclose to or instruct the Income-tax Officer that there were " profits embedded in the receipts " of the money at Bombay. The Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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