An assessee has a legal obligation to disclose all material facts in his income tax return, including particulars of capital gains, and failure to do so may result in the issuance of a notice under Section 147(a) of the Income Tax Act, 1961.

( 1 ) THIS is an appeal against the judgment of A. N. Sen J. dated September 2, 1966, in Matter No. 185 of 1966 Sudhir Kumar Bhose v. Income-tax Officer, H-Ward, Dist. III (I), [1968] 69 I. T. R. 446 (Cal.), by which he made the petitioner's rule absolute, quashing the notice issued by the respondent, Income-tax, Officer, under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), dated February 22, 1966, which is set out in the judgment.

( 2 ) THE notice is to the effect that the Income-tax Officer has reason to believe that the income of the petitioner chargeable for the assessment year has "escaped assessment", that the assessment was accordingly proposed to be reopened and that the petitioner was therefore called upon to submit a fresh return of his assessable income for that year within a given time. The petitioner, in reply, wrote the letter at page 16 of the paper book, dated March 21, 1966, challenging the jurisdiction of the respondent to issue the notice and asked him to furnish the materials upon which his belief that the petitioner's income had escaped assessment was based. Not receiving any reply to that letter, the petitioner moved this court under Article 226 of the Constitution on March 23, 1966, and obtained this rule.

( 3 ) SEN J. held that the respondent had no jurisdiction to issue the notice, upon findings which will appear from below. The Income-tax Officer (hereinafter referred to as "the officer") and the Commissioner have preferred this appeal against that judgment.

( 4 ) AS usual, the notice itself did not disclose, as it was not necessary under the law to disclose, the reasons upon which the Income-tax Officer's belief under Sub-section (1) of Section 147 (corresponding to Section 34 of the Act of 1922) was founded. But, in the affidavit-in-opposition to the petition, it was stated in paragraph (5) by the officer that his action was based upon the failure of the petitioner to fill in Part VII of the return which the petitioner had admittedly filed, in respect of the relevant year. Sen J. rejected this plea of the respondent on two-fold grounds : (i) that omission to fill in Part VII of the return under the Act does not amount to any failure or omission within the meaning of Section 147 (a) of the Act. (ii) that there was no legal obligation on the part of an assessee to fill in Part VII of the return "when the assessee believes that there is no question of any capital gain"

( 5 ) MR. Mitra, on behalf of the appellant, has challenged the soundness of each of the foregoing findings of Sen J. and it is around these two propositions that the controversy at the hearing before us mainly centered.

( 6 ) THERE is no doubt that a notice cannot be issued under Section 147 (a) unless the conditions precedent to the exercise of the power conferred by that section are satisfied. This provision says :" If the Income-tax Officer has reason to believe that, by mason of the omission or failure on the part of an assessee to make a return under Section 139. . . or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year,. . . . he may, subject to the provisions of Sections 148 to 153, assess or reassess such income. . . "

( 7 ) SINCE, in the instant case, there was admittedly no failure on the part of the assessee to make a return for the relevant year, the officer has to rely on the second part of the provision, namely, that--the assessee failed to disclose fully and truly all material facts necessary for the assessment for the relevant year.

( 8 ) TWO questions, therefore, arise-- (a) Was the petitioner-respondent under any legal obligation to disclose the particulars specified on Part VII of the return ? (b) Whether there was any failure on the part of the petitioner to discharge that obligation ?

( 9 ) THERE is no denying the fact that the petitioner had kept Part VII of the fo