Judgment

HEGDE, J.: - In these appeals by special leave, the only question of law that arises for decision is whether the respondent was competent to initiate proceedings under Section 34 of the Indian Income-tax Act, 1922 (which will hereinafter be referred to as the Act).

2. The respondent initiated proceedings under Section 34 of the Act against the appellant by issuing notices under that section on December 26, 1960 in respect of the assessment years 1953-54, 1954-55 and 1955-56. The appellant challenged the validity of those proceedings by means of writ petitions under Article 226 and 227 of the Constitution in the High Court of Judicature at Bombay (Nagpur Bench). Those petitions were summarily dismissed. The appellant thereafter appealed to this Court after obtaining special leave from this Court. This Court allowed those appeals on April 8, 1965 holding that the High Court was not justified in summarily dismissing the writ petitions as the allegations made therein merited examination. Thereafter the High Court issued rule nisi in those petitions. The respondent opposed those petitions. After hearing the parties, the High Court again dismissed those writ petitions. Hence these appeals.

3. The facts of the case material for deciding these appeals have been set out in detail in this Court s order dated April 8, 1965. We shall briefly refer to them.

4. The above appeals relate to proceedings under Section 34 of the Act in respect of three assessment periods. It would be sufficient if we set out the facts relating to the assessment year 1953-54. There is no dispute that if the proceedings relating to that year are held to be invalid, similar would be the position regarding the proceedings relating to the other two assessment periods. On the other hand, if they are held to be valid, the same would be true in respect of the other assessment periods.

5. The appellant, Madhya Pradesh Industries Ltd. (hereinafter referred to as the company), is engaged in the business of mining manganese ore. On March 18, 1952, the Company appointed M/s. J. K. Alloys Ltd., (hereinafter called Alloys) as its settling agents. In the account year relating to the assessment year 1953-54, the company paid as commission, Rupees 1,13,052/8/9 to the selling agents and claimed that amount as a revenue outgoing in the computation of its profits for that year. The Income-tax Officer made the order of assessment without expressly referring to the said deduction but proceeding on the basis that it is a permissible deduction. On December 26, 1960, the Income-tax Officer issued a notice to the Company in exercise of his powers under Section 34 of the Act reciting therein that he having reasons to believe that the income of the company assessable to income-tax for the assessment year 1953-54 had (a) escaped assessment and (b) under-assessed, he proposes to reassess the income that had escaped assessment or had been under-assessed. He called upon the company to deliver a return of the total income of the company assessable for the said assessment year 1953-54. In response to a letter sent by the company, the Income-tax Officer informed the company that the notice issued by him was under Section 34 (1) (a). Thereafter there was some correspondence between the Income-tax Officer and the company. The Income-tax Officer required the company to give him the information called for in the questionnaire issued by him. The company did not send any reply to the said questionnaire. On December, 21, 1961, the Income-tax Officer informed the company that since the questions asked were not replied to, he presumed that no correspondence with Alloys existed and the payment of commission had been made without any justification, Alloys having rendered no service as selling agents.

6. On April 2, 1962, the company moved the High Court of Judicature of Bombay (Nagpur Bench) praying for the issue of a writ of certiorari under Article 226 of the Constitution or an appropriate directio