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1976 Supreme(Cal) 393
High Court Of Calcutta
Salil Kumar Datta, H. N. Sen
BRITISH ELECTRICAL AND PUMPS P.LTD. - Appellant
Versus
INCOME-TAX OFFICER, b WARD AND ORS. - Respondent
Appeal From Original Order 527 Of 1976
Decided On : 12/22/1976
BALAI LAL PAL, D.P.Pal, Nanda Lal Pal, R.C.DE, SANJOY BHATTACHARJEE
The Income-tax Officer is not bound to disclose the materials on which he formed his reason to believe that income chargeable to tax had escaped assessment at the initial stage of the proceeding.
Headnote:
INCOME TAX - REASSESSMENT - JURISDICTION - CONDITIONS PRECEDENT - INFORMATION - ANONYMOUS PETITION - DISCLOSURE OF MATERIALS - NATURAL JUSTICE - SECTION 147(b), 148 - INCOME TAX ACT, 1961.
Fact of the Case:
The assessee-company filed its return along with its balance-sheet and profit and loss account for the assessment year 1969-70, showing an income of Rs. 2,61,307. The Income-tax Officer, 'E' Ward, Comp. Dist. I, Calcutta, by his order dated November 29, 1969, assessed the total income of the company for the said year under Section 143(3) at Rs. 3,13,059 disallowing various claims. On appeal, the Appellate Assistant Commissioner of Income-tax by order dated January 6, 1970, revised the total income to Rs. 2,92,208. The company thereupon became entitled to a refund of Rs. 11,026.04 and the same was given effect to by the Income-tax Officer. The company preferred an appeal to the Income-tax Appellate Tribunal against disallowance of the remuneration paid to the director for Rs. 23,000 and by its order dated September 29, 1972, the Appellate Tribunal allowed the remuneration, reducing the total income to Rs. 2,69,208 and increasing the refund to Rs. 12,650 and the order giving effect to the same was also served on the company.
Finding of the Court:
1. The Income-tax Officer had reason to believe that the income of the assessee had escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961. 2. The anonymous petition contained information of such a nature which prompted the Income-tax Officer to examine the facts in a little more detail and then to infer whether there was escapement of income. 3. The Income-tax Officer is not bound to disclose the materials on which he formed his reason to believe that income chargeable to tax had escaped assessment at the initial stage of the proceeding. 4. The proper stage for full disclosure of all relevant materials had not yet reached and the contention put forward by the learned counsel for the appellant appears to be rather premature.
Issues: 1. Whether the Income-tax Officer had reason to believe that the income of the assessee had escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961? 2. Whether the anonymous petition contained information of such a nature which prompted the Income-tax Officer to examine the facts in a little more detail and then to infer whether there was escapement of income? 3. Whether the Income-tax Officer is bound to disclose the materials on which he formed his reason to believe that income chargeable to tax had escaped assessment at the initial stage of the proceeding? 4. Whether the proper stage for full disclosure of all relevant materials had not yet reached and the contention put forward by the learned counsel for the appellant appears to be rather premature?
Ratio Decidendi: 1. The information from an external source of any kind, which includes discovery of new and important matters or knowledge of fresh facts not present at the time of assessment, would satisfy the conditions of applicability of the relevant section. 2. An information anonymous is information from unknown authorship but none the less it constitutes information and not the less an information though anonymous. 3. The Income-tax Officer is not required by the section to convene the assessee or to intimate to him the nature of the alleged escapement or give him an opportunity of being heard, before he decides to operate the power conferred by the section. 4. The proceeding under Section 147 actually commences as a quasi-judicial proceeding after the return and books of account are filed by the assessee.
Final Decision: The appeal is dismissed.
( 1 ) THIS is an appeal against the judgment and order of Sabyasachi Mukharji J. , dated May 14, 1976, discharging the rule obtained by the petitioner. The facts relevant arc as follows : The petitioner, appellant (hereinafter referred to as " the company ") duly filed its return along with its balance-sheet and profit and loss account for the assessment year 1969-70, showing an income of Rs. 2,61,307. D. K. Gupta, the Income-tax Officer, ' E ' Ward, Comp. Dist. I, Calcutta, by his order dated November 29, 1969, assessed the total income of the company for the said year under Section 143 (3) at Rs. 3,13,059 disallowing various claims. On appeal, the Appellate Assistant Commissioner of Income-tax by order dated January 6, 1970, revised the total income to Rs. 2,92,208. The company thereupon became entitled to a refund of Rs. 11,026. 04 and the same was given effect to by the Income-tax Officer. The company preferred an appeal to the Income-tax Appellate Tribunal against disallowance of the remuneration paid to the director for Rs. 23,000 and by its order dated September 29, 1972, the Appellate Tribunal allowed the remuneration, reducing the total income to Rs. 2,69,208 and increasing the refund to Rs. 12,650 and the order giving effect to the same was also served on the company.
( 2 ) IT was alleged that at the time of the original assessment the company produced all its books of accounts and evidence relevant for the purpose and on full examination and satisfaction, the income was computed by the officer. There was, it was further alleged, no omission or failure on the part of the company to disclose fully and truly all material facts necessary for the assessment.
( 3 ) ALL on a sudden, on March 22, 1974, the company was served with a notice under Section 148 issued by D. P. Majumdar, Income-tax Officer, ' E ' Ward, C1, Calcutta, calling upon the company to deliver to him within thirty days of service a return in the prescribed form of its income for assessment year 1969-70 for reassessment by him. The notice recited that the said officer had reason to believe that the income of the company for the aforesaid assessment had escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961.
( 4 ) THE company filed its return under protest and submitted through its representative that the notice was without jurisdiction as the condition precedent to the issue of the notice was not satisfied. By its letter of June 10, 1974, the company pointed out that the said officer had no such information in his possession on the basis whereof he could assume jurisdiction and in any event the material should be furnished or otherwise the notice should be cancelled.
( 5 ) THEREAFTER on June 18, 1974, the company moved an application under article 226 of the Constitution contending, in addition to the above contentions, that there was no omission or failure on its part to disclose truly and fully all primary facts necessary and material for assessment. Accordingly, the purported action was a roving and fishing investigation without any information or material as the basis of the alleged belief and thus a colourable exercise of power on mere change of opinion. The company accordingly prayed for issuance of appropriate writs quashing the impugned notice and directing the authority to withdraw and cancel the same.
( 6 ) ON this application' a rule nisi was issued on June 18, 1974, calling upon the respondents, the Income-tax Officer, ' E' Ward, Companies Dist. I, Calcutta, the Commissioner of income-tax, West Bengal, Calcutta, as also the Union of India, to show cause why appropriate writs prayed for should not be issued. An interim order was passed staying further proceedings on the basis of the impugned notice.
( 7 ) A return to the rule was made by the respondents by filing an affidavit-in-opposition affirmed by B. G. Agarwal, the Income-tax Officer, 'b1 Ward, Companies Dist. I, verified on April 5, 19
