1976 Supreme(Cal) 398

High Court Of Calcutta
Ramendra Mohan Datta, Hazra
INCOME-TAX OFFICER, g WARD - Appellant
Versus
SELECTED DALURBAND COAL CO.P.LTD. - Respondent
Appealfromoriginalorder 55  Of  1974
Decided On : 12/24/1976

To confer jurisdiction under Section 148 of the Act to issue notice for the assessment beyond the period of four years but within the period of eight years from the end of the relevant assessment year the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been underassessed and he must have also reason to believe that such "under assessment" has occurred by reason of either, (i) omission or failure on the part of an assessee to make a return of his income, or (ii) omission are failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent.

Headnote:

INCOME TAX - Reopening of assessment - Condition precedent - Omission or failure to disclose fully and truly all material facts - Report of mining officials regarding under-raising of coal - Whether sufficient material for formation of belief - Held, no.

Fact of the Case:

The assessee-company, a colliery owner, filed its return of income for the assessment year 1961-62 and the assessment was completed under Section 143(3) of the Income-tax Act, 1961. The assessee-company preferred an appeal against the order of assessment before the Appellate Assistant Commissioner of Income-tax and a further appeal to the Tribunal. The Tribunal passed its order on March 26, 1970. For the assessment year 1963-64, the Income-tax Officer disallowed certain sum. Against this order of assessment, the assessee-company preferred an appeal. The assessee-company was given certain relief by the Appellate Assistant Commissioner by order dated January 13, 1969. For the assessment year 1965-66 the assessee-company could not file its return on account of a dispute between the directors of the company. Therefore, the assessment for the said year was made under Section 144 of the Act. The assessee-company preferred an appeal before the Appellate Assistant Commissioner, but the order of the Income-tax Officer was affirmed by the Appellate Assistant Commissioner. The assessee-company preferred a further appeal before the Tribunal. That appeal is still pending. Thereafter, on March 24, 1970, and on November 10, 1970, the assessee-company received the said three notices dated March 12, 1970, and November 6, 1970, under Section 148 of the Act issued by the Income-tax Officer, "g" Ward, whereby the assessee-company was called upon to submit a return of income for the said assessment years within 30 days from the date of service of the notices as the Income-tax Officer had reason to believe that the petitioner's income chargeable to tax for the said assessment years had escaped assessment within the meaning of Section 147 of the Act. The assessee-company filed return of income for the said assessment years in response to the said notices under protest as no income had escaped assessment due to omission or failure on the part of the assessee-company to disclose fully and truly all primary and relevant facts. Subsequently, it was ascertained that the notices under Section 148 of the Act were issued as a result of the report of the underground measurement made by the mining officials of the Government of West Bengal as disclosed by the Income-tax Officer in his letter dated February 27, 1970, addressed to the principal officer of the assessee-company. Thereafter, the assessee-company made this application under article 226 of the Constitution.

Finding of the Court:

The learned judge in his judgment quoted a letter dated May 14, 1969, from the Deputy Assistant Coal Controller to the Commissioner of Income-tax with enclosure, being a copy of letter dated January 30, 1969, from the Chief Mining Officer, Government of West Bengal, Asansol, to the Coal Superintendent, Dhanbad, and others on the subject of under-reporting of coal raising and shortage of surface coal stock by Selected Samla Colliery for taking necessary action. The learned judge also quoted in his judgment the recorded reasons of S. K. Bhattacharyya, the Income-tax Officer, "g" Ward, Company Dist II, Calcutta, for issue of notices under Section 148 of the Act. The learned judge, in his judgment, has observed : "the expression 'omission or failure to disclose fully and truly all material facts' refer only to facts within the knowledge of the assessee at the material time. A person cannot be said to have omitted or failed to disclose something when of such thing he had no knowledge. Nor can a person be expected to disclose a thing or said to have failed to disclose it unless it is a matter which he knows. " The learned judge held :"there has been no failure on the part of the assessee to make a return of his income, because he had no knowledge at the material time that there was under-reporting of raising of coal which fact has been revealed after 11 years of the assessment from the report of the mining authorities. " According to the learned judge :"the Income-tax Officer cannot take any action under Section 147 (a) except under Clause (b) of Section 147 where the Income-tax Officer has in consequence Si information in his possession reason to believe that income has escaped assessment. " Then the learned judge observed :"from the facts disclosed in the instant case, it leads to the only conclusion, that the Income-tax Officer in consequence of information in his possession received from the Commissioner of Income-tax, has reason to believe, that income of the petitioner (assessee-company) has escaped assessment in respect of the aforesaid years. " Then the learned judge held :"in the instant case it appears that the information was derived by the Income-tax Officer from an extraneous source concerning the facts relating to the matter of assessment. Nowhere it is stated in the affidavit-in-opposition that the Income-tax Officer had made an independent enquiry. " The learned judge observed that the Income-tax Officer acted merely upon the information on the report received from the mining authorities and, solely relying upon that information, he issued notice under Section 147 (a) of the Act. Therefore, according to the learned judge, the proceedings under Section 147 (a) of the Act could not be initiated against the assessee-company and the learned judge cancelled the notices by writ of mandamus and made the rule absolute.

Issues: None

Ratio Decidendi: The condition precedent for exercise of jurisdiction to issue notices under Section 148 of the Act by the Income-tax Officer did not exist.

Final Decision: Appeal dismissed.