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1973 Supreme(Cal) 190
HIGH COURT OF CALCUTTA
Gupta, Salil Kumar Datta
GIRINDRANATH PAUL - Appellant
Versus
INCOME-TAX OFFICER - Respondent
Appeal From Original Order 545 Of 1971
Decided On : JUNE 27, 1973
D.PAL, Nanda Lal Pal, SANJAY BHATTACHARJEE
The disclosure required under Section 34 (1) (a) must be a full and true disclosure of all material facts necessary for assessment and, assuming that there was a full disclosure of all material facts, it has to be examined if the assessee had also truly disclosed all material facts for the assessment. If an assessee purports to make disclosure of all material facts necessary for assessment and also produces documents and evidence in support of a transaction which in reality never took place, it cannot be said that there was a true disclosure of material facts by the assessee.
Headnote:
INCOME TAX - Reassessment - Jurisdiction of Income-tax Officer - Conditions precedent - Omission or failure on the part of the assessee to make a return of his income or to disclose fully and truly all material facts necessary for assessment in that year - Income-tax Officer has reason to believe that thereby income, profits or gains chargeable to income-tax has escaped assessment for that year or has been under-assessed or assessed at too low a rate or have been granted excessive relief - Assessee had filed return and disclosed all material facts - Income-tax Officer had reason to believe that the income escaped assessment on account of the omission or failure of the assessee to disclose fully and truly all material facts as the transaction explained by the assessee to be a genuine transaction is not so but a fictitious transaction - There will be no illegal assumption of jurisdiction by the Income-tax Officer in the circumstances as there was no true disclosure by the assessee as required - Assumption of jurisdiction in this state of affairs on the contrary will be in terms with the section as the disclosure of the primary or material facts by the assessee transpired to the Income-tax Officer, on discovery of further primary facts, to be not a true disclosure as required by law.
Fact of the Case:
The petitioner was originally assessed for 1959-60 by A. K. Sanyal, Income-tax Officer, "j" Ward, District 1 (2), Calcutta, respondent No. 1 in the rule under Section 23 (3 ). On July 3, 1961, N. C. Addy, the Income-tax Officer, "c" Ward, District 1 (2), Calcutta, the respondent No. 2, issued a notice under Section 34, advising the petitioner that as he had reason to believe that the income assessable to income-tax for assessment year 1959-60 had escaped assessment, he proposed to assess the said income that had escaped assessment. The petitioner was thereby required to deliver within thirty-five days of receipt of notice, a return in the attached form for the said year ending March 31, 1960. It was further stated that the notice was being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Calcutta.
Finding of the Court:
The Income-tax Officer had the material or primary facts before him as the basis of his reasonable belief that a specified amount had escaped assessment leading to the initiation of the proceeding on the satisfaction of the Commissioner as required in law.
Issues: Whether the Income-tax Officer had jurisdiction to issue notice under Section 34 (1) (a) of the Indian Income-tax Act, 1922, when the assessee had already filed his return and disclosed all material facts.
Ratio Decidendi: When the assessee makes a disclosure about a transaction and supports it by explanation and evidence, and a party to the transaction is found on enquiry never to have his place of business at the disclosed address, it becomes obvious that the disclosure by the assessee at the time of assessment prima facie may appear to the Income-tax Officer not to be a true disclosure as contemplated in the section and such conclusion is not for the court's investigation. Accordingly, the assessee cannot be heard to complain that the assumption of jurisdiction by the Income-tax Officer in initiating proceedings under Section 34 (1) (a) is not warranted by law.
Final Decision: Appeal dismissed.
( 1 ) THIS is an appeal by the petitioner against an order dated July 2, 1971, passed by Banerjee J. discharging the rule obtained by the petitioner against proceedings initiated against him under Section 34 of the Indian Income-tax Act, 1922. The facts as stated in the petition are as follows: The petitioner was originally assessed for 1959-60 by A. K. Sanyal, Income-tax Officer, "j" Ward, District 1 (2), Calcutta, respondent No. 1 in the rule under Section 23 (3 ). On July 3, 1961, N. C. Addy, the Income-tax Officer, "c" Ward, District 1 (2), Calcutta, the respondent No. 2, issued a notice under Section 34, advising the petitioner that as he had reason to believe that the income assessable to income-tax for assessment year 1959-60 had escaped assessment, he proposed to assess the said income that had escaped assessment. The petitioner was thereby required to deliver within thirty-five days of receipt of notice, a return in the attached form for the said year ending March 31, 1960. It was further stated that the notice was being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Calcutta. The said notice is annexure "b" to the petition.
( 2 ) IN the assessment year 1959-60, as already stated, the respondent No. 1 completed the assessment of the petitioner under Section 23 (3) of the Act and computed the income of the petitioner at Rs. 23,590. At the time of this assessment the petitioner produced all books of account, documents and other evidence relevant for the purpose for the assessment year 1959-60, and the petitioner's representative had discussion with the Income-tax Officer regarding various points of assessment including sales effected by the petitioner; The Income-tax Officer on due consideration of the materials and on full satisfaction about the sources of income and the genuineness of the sales effected by the petitioner computed the income as stated above as will appear from the assessment order, annexure "a". At the time of this assessment there was no omission or failure on the part of the petitioner to disclose fully and truly all material facts necessary.
( 3 ) THE petitioner thereafter submitted a return under protest showing the income as shown in the return at the time of original assessment. On September A, 1964, the petitioner received a notice under Section 22 (2) of the Act calling upon him to produce the books of accounts and papers for the financial year 1958-59 and for three preceding years. Again, by three notices dated September 14, 1964, under Section 23 (2) of the Act, addressed to the individual members of the then non-existent Hindu undivided family, including the petitioner, the respondent No. 1 called upon them either to attend his office personally or through a representative or to produce documents and evidence in support of the return. On receipt of the said notices the petitioner made an application on September 24, 1964, to the respondent No. 2 stating that in compliance with the said notice under Section 34 he had already submitted a return under protest and also filed an application dated September 14, 1964, to which there was no reply. The petitioner by the said application again requested the respondent No. 2 to disclose the material facts on which the case of the petitioner was reopened. By another application dated September 24, 1964, the petitioner stated that at the time of the original assessment he produced all books of account and disclosed all material facts to the Income-tax Officer and there was no failure on his part to disclose fully and truly all materials necessary for assessment for 1959-60, and accordingly, the condition precedent for assumption of the jurisdiction was not satisfied. The petitioner further stated that if the respondent No. 2 was determined to proceed under Section 34 of the said Act, the petitioner requested him to furnish the material facts on which the Income-tax Officer had reason to belie
