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TMI Blog1974 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax inspector, was estimated to be valued at Rs. 30,000. Accordingly, a proceeding under section 147(a) was started and in response to notice under section 148 the assessee filed the return along with a letter explaining that the main portion of the construction was completed in the year 1958 and subsequent years and the total cost of construction had already been shown in the assessee's books of account which had been produced before the Income-tax Officer at the time of the original assessment at Rs. 7,041. The Income-tax Officer, however, held that the construction of the house was completed during the year 1958-59 and he also estimated the cost of construction at Rs. 30,000 on the basis of the report of the income-tax inspector. After deducting Rs. 7,041 as cost of construction already shown in the assessee's books of account, the Income-tax Officer made an addition of Rs. 22,959 as unexplained investment within the meaning of section 69 of the Act and thus completed the reassessment under sections 143(3) and 147(a). The assessee having preferred an appeal before the Appellate Assistant Commissioner challenged the legality of the reassessment under section 147(a), but this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made obscure or misleading or confusing in any of the entries therein or that the figure of Rs. 7,041 was not borne out by the entire books of account ; and (4) thereupon the Income-tax Officer initiated a proceeding under section 147(a) and made the addition as stated earlier on the basis of such estimate. It is well-settled that to confer jurisdiction under section 147(a) to issue notice in respect of the assessments beyond a period of four years but within a period of eight years from the end of the relevant year two pre-requisite conditions have to be satisfied. Firstly, the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax had been under-assessed and secondly, that be must have also reason to believe that such under-assesssment had occurred by reason of either an omission or failure on the part of an assessee to make a return of his income or an omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. In the instant case, while it is not disputed that the Income-tax Officer may have reason to believe that income, profits or gains had been u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish. If, on the contrary, the law does not impose any obligation upon the taxpayer to disclose any fact, then the non-disclosure of such a fact will not amount to a non-disclosure of any primary fact. Reference in this connection may be made to the decision of the Supreme Court in the case of Muthiah Chettiar v. Commissioner of Income-tax. This principle has been reiterated by the Supreme Court in the case of Commissioner of Income-tax v. Gillanders Arbuthnot Co. where Hegde J. observed as follows : So far as the primary facts arc concerned, it is the assessee's duty to disclose all of them-including particular entries in the account books, particular portions of documents and documents and other evidence which could have been discovered by the assessing authority from the documents and other evidence disclosed. The duty, however, does not extend beyond the full and truthful disclosure of all primary facts. Once all the primary facts are before the assessing authority, it is for him to decide what inferences of facts could be reasonably drawn and what legal inferences have ultimately to be drawn. It was not for anybody else--far less the assessee to tell the assessing aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reasons which I shall presently give. In the case of Muthiah Chettiar the Supreme Court was seized with the point of applicability of section 34(1)(a) of the Income-tax Act, 1922 (hereinafter referred to as, "the 1922 Act") to the case of non-disclosure by the assessee in his return of the income received by his wife or minor child admitted to the benefits of partnership in a firm of which he was a partner. In that connection reliance was sought to be placed by the revenue on the provisions of section 16(3) of the 1022 Act under the provisions of which in computing, the total income of an assessee the income of a wife or minor child could be included. While repelling this contention Shah J. (as he then was) held as follows : " Section 16(3) imposes an obligation upon the Income-tax Officer to compute the total income of any individual for the purpose of assessment by including the items of income set out in clauses (a)(i) to (iv) and (b),but thereby no obligation is imposed upon the taxpayer to disclose the income liable to be included in his assessment under section 16(3). For failing or omitting to disclose that income proceedings for reassessment cannot, therefore, be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission, however, proceeds upon a misconception. The aforesaid Explanation cannot have an application to the facts of the present case, inasmuch as, on the admitted facts there was nothing in the account books produced before the Income-tax Officer from which he could discover any material evidence with due diligence. The sole foundation for the action of the Income-tax Officer in issuing a notice under section 148 of the Act is the report of the Income-tax inspector valuing the house in question on estimate independently of anything to be found in the assessee's books of account. From whatever point of view the matter be judged, the instant case cannot justify any action of the department in resorting to the provisions of section 147(a) of the Act. An identical question came up before the Assam High Court in the case of Ba ranglal Beria, where Goswami C.J, dealing with this matter, observed as follows : The dispute is with regard to the quantum spent on the house in question. While the assessee gives in his accounts a certain sum, the Income-tax Officer after subsequent enquiry came to the conclusion that the amount shown in the account books is less than what it should be acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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