Judgment

GUPTA, J.:- The appellant a partnership firm, was assessed to income-tax for the assessment year 1956-57 on a turnover of Rupees fifteen lacs by the Income- tax officer by his order dated January 22, 1958. The Income-tax Officer did not accept the return filed by the assessee and the books of account produced by it and made a best judgment assessment. The turnover so assessed was reduced by the Appellate Assistant Commissioner and further reduced by the Appellate Tribunal. On March 31, 1965 the Income- tax Officer issued a notice under Sec. 148 of the Income-tax Act, 1961 stating that he had reasons to believe that income chargeable in respect of the assessment year 1956-57 had escaped assessment within the meaning of Section 147 of the Act and directing the assessee to file a return as he proposed to reassess the income for the said assessment year. The assessee filed a writ petition before the High Court at Allahabad challenging the validity of the notice dated March 31, 1965 on the ground that the Income-tax Officer had no jurisdiction to issue the notice. A learned single Judge of the High Court dismissed the writ petition and his order was affirmed in appeal by a Division Bench. The appeal to this Court is by the assessee on certificate granted by the High Court.

2. The justification for taking action under Section 147 and 148 of the Income-tax Act. 1961 as stated by the Division Bench of the High Court is:

"The firm utilised certain drafts for making purchases at Madras and Calcutta. These drafts represented undisclosed income of the firm. This aspect of the matter was not considered at the time of the original assessment. It is proposed to take this income into consideration for purposes of reassessment. The amounts, for which drafts were purchased by the firm were not recorded in the disclosed account of the firm. It is, therefore, proposed to tackle that income for purposes of reassessment."

The learned single Judge took the view that the income-tax Officer did not apply his mind to the question as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assess, and as the assessee did not disclose the source of these amounts which were not recorded in the account books produced by the assessee, all the conditions for invoking the jurisdiction under Section 147 (a) were present. This was also the view taken by the Division Bench.

3. It appears that the Income-tax Officer had written a detailed order in making his best judgment assessment. Having found out all about the drafts which were not mentioned in the assessee s books of account, the Income-tax Officer gave the partners of the firm opportunity to explain the drafts. Referring to the statement of one of the partners. Shri Om Prakash, the Income-tax Officer observed in his order:

"He has said that the drafts which were sent by him relating to Messrs. Gemini Leather Stores were entered in the books of the firm while other drafts which he has made would be of others whose name , he does not remember. As he is unable to tell to -whom other drafts sent by him relate in spite of specific opportunities given to him, the obvious inference is that moneys of the drafts are that of the firm with which he is connected."

Referring to the circumstances in which these drafts had been sent or received the Income-tax Officer further observed:

"Since these drafts have been sent or received in such circumstances and by such persons connected with the firm the conclusion is obvious that these drafts relate to the firm."

4. It is not disputed that the case falls under clause (a) of Section 147. The question is whether the Income-tax Officer had reason to believe that income chargeable to tax had escaped assessment for the assessment year in question by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The law on the point has been settled by this Court in Calcu