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TMI Blog1979 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that the Appellate Assistant Commissioner was not justified in cancelling them for want of jurisdiction ? " Shri B. N. Kirpal, learned counsel for the respondents, has raised a threshold objection to the maintainability of the writ petition, in view of the availability of alternative remedy and has, therefore, contended that all that we need to do is to answer the reference on the material contained in the statement of the case, and on the basis of refusing to go behind the findings of fact set out in the statement of the case. We do not agree, that the writ petitions are liable to be dismissed on the suggested short ground because in the first instance no alternative remedy is provided by the Income-tax Act against the very issue of such a notice and, secondly, because the jurisdiction of the ITO to issue a, notice under s. 148 is conferred only if the prerequisite conditions of s. 147(a) are available and the court is not precluded from examining whether these jurisdictional facts which confer such jurisdiction exist or not. We are undoubtedly and emphatically of the opinion that we should not exercise our high prerogative powers under art. 226 of the Constitution of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neficiaries. After the scrutiny of the claim, the Income-tax Officer made the following observations in the assessment order for the year 1947-48 : 'Assessee has holding in shares of joint stock companies which stand in the joint names of himself and certain other persons. Income of the said investments is shared by 23 beneficiaries. Reference had been made to, the Commissioner of Income-tax, Bombay City, whether on the authority of the decision of the Bombay High Court in S. C. Cambatta v. Commissioner of Income-tax [1946] 14 ITR 748, assessment be levied on the whole of the income from the investments on the joint names as an association of persons. The Commissioner of Income-tax has obtained the Central Board of Revenue's directions according to which the assessments are required to be made on the beneficiaries separately provided the Income-tax Officer is satisfied regarding the genuineness of the claims. Mr. Advani has produced the original of the trust deed executed by the assessee in support of the claims. Relevant abstracts of the deed are filed in the permanent notes record (I.T. III). The shares of the various beneficiaries are shown in the schedules. Income arising to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated further certain aspects of these propositions. It appears unnecessary to quote from the numerous judgments starting from the Calcutta Discount Co.'s case and coming up to judgments delivered this year. We set out below the propositions on the above quoted portions of s. 147(a) and concerning the facts of this case that in our view emerge from these judgments. 1(1) The ITO gets jurisdiction to issue a notice under s. 148 in respect of cases falling under s. 147(a) only if he has reason to believe that (a) income chargeable to tax has escaped assessment, and (b) such escapement has been occasioned by omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year. 1(2) The ITO must have some reasonable ground to support the aforesaid belief. What is required is not belief in the existence of reasons including the belief but belief induced by the existence of reasons. 1(3) The belief of the ITO must be based on information/material and not on mere suspicion or a vague feeling. 1(4) Rational connection between the reasons which exist and the formation of belief postulates that there must be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that could reasonably be drawn from the primary facts. He is not required to inform the ITO, as to what legal inference should be drawn from the facts disclosed by him to advise the ITO on a question of law. Therefore a notice under s. 148 in respect of s. 147(a) cannot be based on such omission or failure on the part of the assessee. 2(2) The word " truly " in s. 147(a) means as much as it says, and escapement of income from any omission or failure to disclose the true primary facts would satisfy the requirement of jurisdiction pertaining to this part of s. 147(a). If the primary facts placed before the ITO are false, put up, made up or manipulated, the provision of s. 147(a), will be attracted, subject to the other requirement. 2(3) Escapement of income from assessment either due to a particular view of law or facts taken by the ITO or due to a mistake otherwise on the part of the ITO is not an escapement relevant to s. 147(a) as such escapement is not on account of the omission or failure of the assessee to discharge his obligation under s. 147(a). Therefore a notice and a consequent reassessment based on a change of opinion on the part of the ITO is not sustainable in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nger son, Maj. Genl. Brahma S. S. J. B. Rana in 1951 by giving him shares and cash over which late General Baber S. S. J. B. Rana had full control, Genl. Brahma separated from his father by renouncing all his rights of the ancestral property on receipt of shares, etc., from his father. (3) On 3rd February,1952, Maharani Beda Kumari Devi, assessee's stepmother, died at Banaras leaving a very large estate in the form of shares and securities, gold, etc., to the extent of Rs. 1,70,00,000. There was a dispute between her legal heirs and they filed a suit in Bombay High Court in 1957 and it was ultimately settled by consent decree by the High Court laying down the mode of distribution of the assets. It is evident from the plaint and the decree that she received the estate under the will of her husband, and treated it as her absolute property at all times and none of her children or any one else questioned her right to dispose of or to deal with the same in any manner she liked. According to the Will of late Prime Minister, Maharaja Chandra S. S. J. B. Rana, she came in possession of this property in the same manner as the assessee did along with his other brothers. (4) Genl. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , none of the items mentioned above by him is relevant to the point at issue. The fact that the father of the late assessee divided his entire assets excluding a sum of Rs. 54 lakhs among the sons is totally irrelevant. In fact, the ITO says that it can be presumed that the sons and his widow received their share of property without any obligation to any beneficiaries. I do not see how this helps the ITO in any way. Once the assessee inherited the wealth from his father, it was, definitely open to him to create or set up a trust in respect of these properties or any other property which he had with him. Similarly, the second reason given by the ITO, viz., that the assessee transferred a portion of hi s assets to his younger brother in 1951 and that the younger brother separated from his father by renouncing all his rights in respect of ancestral property has equally no bearing on the point at issue. Then the ITO had made some reference to some litigation in the Bombay High Court. Here again I fail to see how this constitutes fresh material for reopening these assessments. The 4th, 5th and 6th items mentioned by the ITO are really very strange. In two instances, the ITO concludes th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1953-54. For the other years, even though the number of beneficiaries who filed the returns was less, the names are all common. Hence there can be possibly no force in the ITO's argument regarding the change in the number of beneficiaries. 14. I am clearly of the opinion that the argument of Shri Ananthacharl that there was want of jurisdiction is well founded. The Income-tax Officer has not brought out any material to show that there was any omission or failure on the part of the assessee to disclose fully and truly all the primary facts at the time of the original assessment. " The department appealed against the order of the AAC. By separate orders of the 2 members of the Income-tax Appellate Tribunal, the appeals were allowed. We have carefully gone through the orders but curiously there is nothing in these orders which militates against the appreciation by the AAC of the 6 grounds/reasons/material facts which led the ITO to issue notices under s. 148. In fact, the Income-tax Appellate Tribunal has failed to consider if any of these 6 so-called material facts are either material or even relevant for the assessment of the assessee or that whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that even though at the time of the original assessment the ITO, in his order, noted that : " Mr. Advani has produced original of the trust deed executed by the assessee in support of the claims. Relevant abstracts of the deed are filed in the permanent notes record (I.T. III). The shares of the various beneficiaries are shown in the schedules." but such documents are not on the record now. In the first instance, the non-production of the trust deed by the assessee during the reassessment proceedings cannot be pressed in aid as a factor contributing to " reason to believe " and in justifying the issue of notices under s. 148 because this non-production, was occasioned after the issue of notices and was not before the ITO then and the Income-tax Appellate Tribunal erred in affirming the validity of " reason to believe ", on this ground. Secondly, the fact that during the assessment of 1946-47, in 1947, the ITO notes in his order that the trust deed was produced and assessment for the next 10 years followed on this basis whereas 20 years later, in 1967, the same was not found on record, it cannot be inferred that there never was a trust deed and such an inference is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of this case the High Court was justified in examining the correctness of the inference drawn by the Tribunal on the basis of the primary facts found by that Tribunal. " Even though, an assessee should not be allowed to take advantage of his own failure to carry out his obligations under the law merely on the ground of a long passage of time so long as he is to be fastened with the consequences of such failure in accordance with law yet it cannot be emphasised enough that in cases where documents/informations are asked to be produced after 20 years, as in this case, failure to produce the same occasioned by various circumstances and developments in a long passage of time cannot be summarily and lightly brushed aside. In S. Hastimal v. CIT [1963] 49 ITR 273, a Division Bench of the Madras High Court had occasion to observe at page 277 : " It must be noted that the proceedings under section 34 were started in the year 1957, calling upon the assessee to explain a capital credit in his favour in the books of account for Hastimal Jayantilal and Co. made in the year 1947. The difficulty on the part of any assessee to explain a transaction which is a decade old has to be born ..... X X X X Extracts X X X X X X X X Extracts X X X X
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