1971 Supreme(Cal) 100

HIGH COURT OF CALCUTTA
K. L. RAY
NAND KISHORE JHAJHARIA - Appellant
Versus
INCOME-TAX OFFICER - Respondent
Matter 249  Of  1965
Decided On : APRIL 02, 1971

The Income-tax Officer has the jurisdiction to reopen the assessment for several years under Section 147(a) if he has a bona fide belief that the assessee's income has escaped assessment.

Headnote:

INCOME TAX - Reassessment - Validity - Income-tax Officer's belief that income escaped assessment - Whether justified - Whether amounts deposited in bank accounts and received by transfer from Pakistan and Pondicherry represented accumulated concealed profits of several earlier years - Whether notices under Section 148 of the Income-tax Act, 1961, validly issued.

Fact of the Case:

The petitioner challenged the validity of certain reassessment proceedings initiated by five several notices purported to be under Section 148 of the Income-tax Act, 1961, for the assessment years 1946-47 to 1950-51. The original assessments for these years had been completed under Section 23 or under Sections 34/23 of the Indian Income-tax Act, 1922, before September 1955. The petitioner had filed a petition of disclosure and a settlement was arrived at between the petitioner and the Commissioner of Income-tax, West Bengal, on 20th September 1955, wherein the petitioner agreed to the determination of his total undisclosed income at Rs. 6,87,527. Reassessments for the years 1945-46 to 1949-50 were made under Section 34 of the old Act in accordance with the agreement. On 27th March 1956, the assessment for the year 1951-52 was made under Section 23(3) on a total income of Rs. 90,139. This assessment was set aside on appeal by the Appellate Assistant Commissioner on 29th May 1959, who directed a fresh assessment. On 29th March 1967, the Income-tax Officer made a fresh assessment for the year 1951-52 on a total income of Rs. 18,08,294, including therein remittances from Pakistan, deposits in Netherlands Trading Society, and amounts received by T. T. from Pondicherry. However, this assessment was again set aside by the Commissioner of Income-tax under Section 33a(2) on 10th March 1969, who directed the Income-tax Officer to make a fresh assessment for that year. The Income-tax Officer, by a letter dated 1st July 1970, asked the petitioner to explain certain deposits in the Netherlands Trading Society and the remittance from Pakistan and receipt from Pondicherry. In the meantime, on 23rd March 1963, five several notices purported to be under Section 148 of the Income-tax Act, 1961, in respect of the assessment years 1946-47 to 1950-51, were served on the petitioner, requiring him to file his returns for these years as his income had escaped assessment. The petitioner filed five several returns under protest in response to the said notices on 25th April 1963. The petitioner's application under Article 226 of the Constitution was dismissed on 12th July 1965. An appeal was preferred from the order of dismissal, and by an order of the court of appeal dated 1st July 1966, the appeal was allowed, a rule was issued in terms of the prayers of the petition, and the trial court was directed to hear the rule. The Income-tax Officer filed a further affidavit in opposition to the petition, explaining the substance of the reasons supplied to the petitioner and annexing a copy of the proposal for reopening the assessment of the petitioner for the years 1946-47 to 1950-51 under Section 147(a).

Finding of the Court:

The court held that the Income-tax Officer had a bona fide belief that the petitioner's income had escaped assessment for the years 1946-47 to 1950-51, and that the notices under Section 148 of the Income-tax Act, 1961, were validly issued. The court relied on the fact that the petitioner had made a disclosure petition disclosing certain concealed income of previous years, but such disclosure could in no way account for the huge deposits and transfers received during the years 1950-51 and 1951-52. The court also noted that the petitioner had not provided any explanation for the source and nature of these deposits and receipts.

Issues: 1. Whether the Income-tax Officer had a bona fide belief that the petitioner's income had escaped assessment for the years 1946-47 to 1950-51? 2. Whether the notices under Section 148 of the Income-tax Act, 1961, were validly issued?

Ratio Decidendi: The court held that the Income-tax Officer had a bona fide belief that the petitioner's income had escaped assessment for the years 1946-47 to 1950-51, and that the notices under Section 148 of the Income-tax Act, 1961, were validly issued. The court relied on the following principles: 1. The Income-tax Officer has the jurisdiction to reopen the assessment for several years under Section 147(a) if he has a bona fide belief that the assessee's income has escaped assessment. 2. The Income-tax Officer's belief that the assessee's income has escaped assessment can be based on various factors, including a disproportionate increase in the assessee's wealth, unexplained deposits in bank accounts, and unexplained receipts from foreign countries. 3. The assessee has the burden of explaining the source and nature of any unexplained deposits or receipts.

Final Decision: The court dismissed the petitioner's application and discharged the rule. There was no order as to costs.