Judgment

GROVER, J.: This is an appeal by certificate from the judgment of the Calcutta High Court.

2. The assessee who is the appellant was at all material times a share-holder of a number of companies engaged in the business of managing Hotels. He had also been a Director and Managing Director of various companies. Gradually he came to own a large block of shares of Spence s Hotel Limited and also became its Managing Director. He was Incharge of the Management thereof at the material time. He further purchased interest in Associated Hotels of India Limited and Hotels (1938) in association with M. S. Oberoi. In 1944, M. S. Oberoi purchased from the assessee his share holding in the Associated Hotels of India Limited for an amount of Rs. 20,657,05/13/0. Similarly in or about 1949, the holding in Hotels (1938) Limited was purchased by the said M. S. Oberoi. It was maintained by the assessee that he had filed returns of his income in respect of the relevant assessment years and that during the assessment for the year 1945-46, the assessee had disclosed to the Income-tax Officer, District II (2) Calcutta that he had received the aforesaid amount for the sale of the shares of the Associated Hotels. That amount was held to be a capital receipt on which no income-tax was payable. During the subsequent years, the assessee continued to show in his returns the interest received on the amount of Rs. 20,657,05/13/0.

3. It appears that the case of M. S. Oberoi was referred to the Investigation Commission set up under the Taxation On Income (Investigation Commission) Act, 1947. The assessee was also served a notice by the Commission on or about 18th August, 1951 under section 5 (4) of the aforesaid Act in respect of the assessment years 1940-41. The assessee filed a Writ Petition in March 1953 in the Punjab High Court (Circuit Bench) Delhi to quash the proceedings before the said Commission. According to the assessee, the Solicitor General, who appeared in the High Court after a rule had been issued, gave an undertaking that all proceedings against the assessee would be dropped. Upon such undertaking being given, the rule was discharged. The Income-tax Officer, District II (2) Calcutta issued seven notices dated 5th November, 1954 to the assessee under S. 34 (1-A) of the Income Tax Act, 1922 in respect of assessment years 1940-41 to 1946-47 alleging therein that the income of the appellant had partly escaped assessment. In spite of the objection of the assessee that in the absence of any material on record, the Income Tax Officer had no jurisdiction to issue any notice under section 34 (1-A), the said Officer proceeded to make assessment in respect of the assessment years 1942-43, 1943-44, 1944-45 and 1945-46. The assessee filed an appeal to the Appellate Assistant Commissioner of Income Tax who remanded the case to the Income Tax Officer to submit a report on various matters. One of such matters was that the Income Tax Officer should state as to what fresh material was before him to satisfy him that the sum of Rs. 20,000,00/- which was previously treated as capital should be treated as income. In 1961, the assessee filed a petition under Art. 226 of the Constitution in the Calcutta High Court challenging the order of the Appellate Assistant Commissioner. This Writ Petition was dismissed on 6th October, 1966.

4. In clause (v) of Para (22) of the writ petition, the assessee had stated that at the time when the notice had been issued under S. 34 (1-A) of the Act, the Income Tax Officers concerned did not have any material before them constituting reason to believe that any income, profits or gains of the assessee had escaped assessment for any year. It was asserted that the only material before the Income Tax Officers concerned on which they had purported to issue the notices consisted of the fact of the receipt of about Rs. 22,00,000/- which the assessee had received for the sale of his shares in the Associated Hotels of India Limited in the ye