Mr. S. C. Manchanda, Sr. Advocate (M/s. B. B. Ahuja, S. P. Nayar and R. N. Sachthey, Advocates with him), for appellants M/s. N. D. Karkhanis, Rameshwar and Miss Seita Vaidialingam, Advocates of M/s. Rajendra Narain & Co., Advocates, for Respondents.

Judgment

HEGDE, J. :- These appeals by certificate arise from several writ petitions filed by the H.U.F. M/s. Raj Singh s Deb Singh Bist and its Karta Thakur Mohan Singh Bist, challenging the validity of certain notices issued under Section 34 (1) (a) of the Indian Income-tax Act, 1922 (in short the Act) by the Income-tax Officer, Central Circle Delhi. The High Court of Delhi allowed these writ petitions and quashed the impugned notices. Hence these appeals.

2. The assessee in these cases in an H.U.F. The assessment years with which we are concerned in these appeals range from 1942-43 to 1953-54. The assessee filed its return for these years in due time. The assessee s account-books showed considerable cash credits in the name of the brother-in-law of the 2nd respondent, the Karta of the H.U.F. Those alleged creditors were living in Nepal. The account books also showed certain credit entries in the name of Rana Anand Nar Singh alleged to be in connection with expenses incurred by him for getting trees cut on behalf of the assessee. The assessee was a forest contractor. He had taken large tracts of forests for felling trees in Nepal. The Income-tax Officer went into the genuineness of the cash credit entries standing in the name of the alleged creditors of the assessee as well as to the alleged amount due to one of them. The contention of the assessee was substantially accepted either by the Appellate Assistant Commissioner or by its Revenue Appellate Tribunal with regard to the assessment for the assessment years 1943-44 to 1949-50, the final, assessments were made in pursuance of an agreement or settlement arrived at between the assessee and the Deputy Director of Inspection (Investigation) New Delhi on October 18, 1954, Long after the assessments in question were finalised the Income-tax Officer issued notices to the appellant under Section 34(i)(a) of the Act seeking to reopen the assessment already finalised. The validity of those notices is in issue.

3. Before an Income-tax Officer can issue a statutory notice under section 34(1)(a), he must have reason to believe that by reason of omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessments for the years in question income profits or gains chargeable to income-tax have escaped assessment during those years, further before doing so he must have recorded his reasons for acting under Section 34 (1)(a) and the Central Board of Revenue must have been satisfied on those reasons that it is a fit case for the issue of the notice. The recording of the reasons in support of the belief formed by the Income-tax Officer and the satisfaction of the Central Board of Revenue on the basis of the reasons recorded by the Income-tax Officer that it is a fit case for issue of notice under S.34 (1)(a) are extremely important circumstances to find out whether the Income-tax Officer had jurisdiction to proceed under S.34 (1)(a).

4. In Calcutta Discount Co. Ltd. v. Income-tax Officer 11 ITR 191this Court laid down (1) that to confer jurisdiction under Section 34 oto issue notice in respect of assessments beyond the period of four years but within a period of eight years from the end of the relevant year two conditions had to be satisfied. The first, was that the Income-tax Officer must have reason to believe that Income, profits or gains chargeable to Income-tax had been under - assessed. The second was that he must also have reason to believe that such "under-assessment" had occurred by reason of either (1) omission or failure on the part of an assessee to make a return of his income under Section 22, or (2) omission or reailure on the part of an assessee to disclose fully and truly all mate