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PATNA HIGH COURT
V.Ramaswami and Raj Kishore Prasad JJ.
Bhimraj Panna Lal
Versus
Commissioner Of Income Tax
Miscellaneous Judicial Case No. 653 of 1954 ; 654 of 1954 ; 655 of 1954 ;
Decided On : APRIL 24, 1957
INCOME TAX - Assessment - Income escaping assessment - Meaning of - Section 34 of the Income-tax Act, 1922 - Scope and procedure - Burden of proof - Whether income assessed under Section 34 had "escaped assessment" - Whether there was material to support the assessment under Section 34.
Fact of the Case:
The assessee was assessed to income-tax under Section 34 of the Income-tax Act, 1922, on a sum of money, which varied in each case, for different years of assessment. The assessee challenged the validity of the assessment on the ground that the income had not "escaped assessment" within the meaning of Section 34 and that there was no material to support the assessment.
Finding of the Court:
The Court held that the income had "escaped assessment" within the meaning of Section 34 and that there was material to support the assessment. The Court observed that the assessee had admitted that he had business transactions with a firm in Aligarh, which were not recorded in his books of account, and that he had not produced any accounts or evidence to establish that these transactions did not result in a profit. The Court also held that the Income-tax Officer was justified in making a best judgment assessment under Section 23(4) of the Act, as the assessee had failed to produce his account books.
Issues: 1. Whether the income assessed under Section 34 had "escaped assessment" within the meaning of Section 34 of the Income-tax Act, 1922? 2. Whether there was material to support the assessment under Section 34 of the Act?
Ratio Decidendi: 1. The Court held that the income had "escaped assessment" within the meaning of Section 34, as the assessee had failed to make a return of his income or to disclose fully and truly all material facts necessary for his assessment, leading to a reasonable belief that his income had wholly or partially escaped assessment. 2. The Court held that there was material to support the assessment under Section 34, as the assessee had admitted that he had business transactions with a firm in Aligarh, which were not recorded in his books of account, and that he had not produced any accounts or evidence to establish that these transactions did not result in a profit.
Final Decision: The Court answered the question in each of the three references in the affirmative against the assessee and in favour of the Department. The assessee was ordered to pay a consolidated cost of Rs. 300 to the Income-tax Department for all the three references.
Raj Kishore Prasad, J.
1. These three references are under Sec. 66 (2) of the Indian Income-tax Act, 1922 "(11 of 1922), end, as a common question of law arises in each of these three cases, which are in respect of different years of assessment, they have been heard together.
2. On the requisition of the High Court under Sec. 66 (2) of the Act, the Income-tax Appellate Tribunal has stated a combined case in all the three cases and referred it to the High Court to determine the common question of law raised thereby.
3. The question of law raised in these cases raises the validity of assessment of a certain sum of money, the amount of which varies in each case, to income-tax in the hands of the assesses under Sec.34 of the Income-tax Act.
4. In M. J, C. No, 653, the assessment year is 1944-45 and the corresponding accounting year is 1999-2000 Sambat Diwali year ending on the 2nd July, 1943. The original estimate was made by the Income-tax Officer on the 15th June, 1943, under Sec.23 (31 of the Act, on a sum of Rs 93,887, which was reduced on appeal by the Appellate Assistant Commissioner to Rs. 91,887. Subsequently, the Income-tax Officer came to know certain facts, which will be mentioned herepfter, about the assessee carrving on business with M/s. Mangalchand Basantilal of Khurja in Aligarh District.
The Income-tax Officer, after satisfying himself and believing that the assessees income had escaped assessment, started a proceeding under Sec.34, with the previous sanction of the Commissioner on the 10th December, 1949, and, after the statutory notices under Sec.22 of the Act assessed the assessee to income-tax on the 2nd August, 1950, on a sum of Rs. 40,000, which was reduced by the Appellate Assistant Commissioner on the 4th April, 1952, to Rs. 32,000, which, also, however, was further reduced by the Tribunal on the 31st March, 1951, to Rs. 28,000. The question of law, which has been referred to the High Court in this case, is as below : "Whether in the circumstances of the case the assessment of a sum of Rs. 28,000 to income-tax in the hands of the assesses is legally valid under Sec.34 of the Income-tax Act"?
5. In M. J. C. No. 654, the assessment year is 1945-46, the corresponding accounting year of which ends in July, 1944. The original assessment was made by the Income-tax Officer on the 31st August, 1949, under Sec.23 (3) of the Act at Rs. 77,034, but it was reduced on appeal to Rs. 46,854. In this case also, subsequently the Income-tax Officer came to know of the facts stated earlier, and, therefore, he on being satisfied started a proceeding under Sec.34, and, after a notice under Sec.22, assessed the assessee on the 2nd August, 1950, on a sum of Rs. 40,000, which was reduced by the Appellate Assistant Commissioner on the 10th February, 1952 to Rs. 30,000, which was further reduced by the Tribunal on the 31st March, 1953 to Rs. 26,000. In this case also, the question of law is the same, but the amount involved is Rs. 26,000.
6. In M. J. C. No. 655, the assessment year is 1946-47, the corresponding accounting year of which ended in July, 1945. The original assessment made by the Income-tax Officer on the 31st August, 1949, under Sec.23 (3) was on Rs. 65.833, which was reduced on appeal to Rs. 65,011 which was affirmed on appeal by the Tribunal. In this case also, the Income-tax Officer subsequently on knowing the facts stated above and on being satisfied started a proceeding under Sec.34 of the Act which resulted in an assessment by the Income-tax Officer on the 3rd August, 1950, on a sum of Rs. 15,000, which was affirmed by the Appellate Assistant Commissioner on the 3rd June. 1952, but it was reduced by the Tribunal on the 31st March, 1953 to Rs. 12.000. The question of law referred in this case also is the same, but the amount involved is Rs. 12,000.
7. In each of these cases, the Tribunal refused to refer the case on the 9th November, 1953 under Sec. 66 (1) of the Act to the High Court. The assessee, theref
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