JUDGMENT

MISRA, J. :— Civil Appeal No. 1970 of 1975 is by the Revenue by certificate of the High Court while the other is an appeal by the assessee by special leave. Both arise out of the same judgment of the Allahabad High Court dated 22-4-1974 in an application under Art. 226 of the Constitution by the assessee challenging the notices issued under S. 148 read with Ss. 142(l) and 143(2) of the Income-tax Act of 1961, all dated 7th of March, 1973 relating to the assessment year 1965-66. The notice under S. 148 was on the basis of three cash credit entries dated 22nd of August, 1964 from Messrs Meghraj Dulichand, Messrs Associated Commercial Organisation Private Limited and Messrs Laxminarain Atmaram, the first two being for a sum of Rs. 30,000 each and the last one for a sum of Rs. 40,000/-. The High Court ultimately found :

"The result is that the notice dated 7th March 1973, was within jurisdiction only in regard to the cash credit entry from the firm Meghraj Dulichand of Calcutta. In regard to the other two transactions, the case did not fall within the purview of Cl. (a) of S. 147.

As seen above, the Income-tax Officer had no material in his possession on the basis of which he could have reason to believe (mere suspicion apart) that income had escaped assessment. For this reason the case was not covered by Cl. (b) of S. 147 either. In regard to those two items the notice was totally without jurisdiction. The Income-tax Officer had no jurisdiction to re-open the assessment in respect of these two cash credit entries.

In this view it is unnecessary to decide whether the notice was barred by time on the footing that it was covered by Cl. (b) to S. 147.

In the result, the petition succeeds and is allowed in part. The respondent Income-tax Officer is directed not to re-open the assessment of the petitioner firm for the Assessment year 1965-66 in relation to the cash credit entries of Rs. 30,000 from M/s. Associated Commercial Organisation Private Ltd. and of Rs. 40,000 in respect of M/ s. Laxminarain Atmaram."

2. The appeal by the Revenue is in relation to the two transactions totalling Rs. 70,000 and the appeal by the assessee is in regard to the remaining one in respect of a sum of Rs. 30,000.

3. Dr. Gouri Shankar appearing for the Revenue has contended that it was not for the High Court to go into the question as to whether the notice under S. 148 of the Act was partly valid and partly not because if the Income-tax Officer proceeded to issue notice under S. 148 of the Act for reopening the assessment, he would require the assessee to furnish a fresh return and the entire assessment proceeding has to be re-done after the assessee furnishes the return. In the present case, along with the notice under S. 148 of the Act the Income-tax Officer did call upon the assessee to furnish a return as required under S. 142 of the Act. That notice casts an obligation on the assessee to make a fresh return and therein it was obliged to make a complete disclosure of its income in accordance with law and it was open to the Income-tax Officer to examine not only the three items referred to in the notice but also whatever came within the legitimate ambit of an assessment proceeding. This being the legal position, Dr. Gouri Shankar for the Revenue contends, once the High Court sustained the notice in respect of a sum of Rs. 30,000, that gave full jurisdiction to the Income-tax officer to reopen the assessment and take to a fresh assessment proceeding. The High Court should not have examined the tenability of the assessees contention in regard to the two transactions of Rs. 30,000 and Rs. 40,000 and that aspect should have been left to be considered by the Income-tax Officer while making the reassessment.

4. A Division Bench of the Punjab High Court in Commr. of Income-tax, Punjab, Himachal Pradesh and Bilaspur, Simla v. Jagan Nath Maheshwary, 32 ITR 418 examined this aspect of the matter with reference to a proceeding for reassessment under S. 34 of th