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High Court Of Delhi
RAI SINGH - Appellant
Versus
UNION OF INDIA - Respondent
Civil 67 of 1968
Decided On : 09/09/1968
INCOME TAX - SECTION 34(1)(A) - REASSESSMENT - JURISDICTION OF INCOME TAX OFFICER - DISCLOSURE OF MATERIAL FACTS - INFERENCES DRAWN FROM SUBSEQUENT FACTS - SALE DEED EXECUTED AFTER ASSESSMENT - NOT A MATERIAL FACT - NOTICES ISSUED WITHOUT JURISDICTION.
Fact of the Case:
The petitioners, a Hindu Undivided Family, were assessed to income tax for the assessment years 1942-43 to 1953-54. The assessments were finalized either in appeals to the Tribunal or by the Appellate Assistant Commissioner. With regard to the assessments years 1943-44 to 1949-50, the final assessments were made in pursuance of an agreement or settlement dated 18/10/1954 arrived at between the petitioners and the Deputy Director of Inspection (Investigation), New Delhi.
Finding of the Court:
The Income Tax Officer had reason to believe that the income of petitioner No. 1 had escaped assessment or had been under assessed and that the credits in the names of the Rana s were false. Further enquiries were made from the vendees themselves by a letter dated 9/10/1961\10/10/1961 from the Income Tax Officer to Rana Nar Singh in which a request was made to furnish particulars of the properties purchased; annual income from these properties mode of payment of the consideration and the name of the recipient of the consideration.
Issues: Whether the Income Tax Officer had jurisdiction to issue notices under section 34(1)(a) of the Indian Income Tax Act, 1922, for reopening assessments for the assessment years 1942-43 to 1953-54.
Ratio Decidendi: A material fact which is not in existence right upto the time of assessment cannot possibly be disclosed. Therefore, a fact which comes into existence subsequent to the making of the assessment cannot, in my view, be a material fact within the purview of clause (a) of section 34 (1).
Final Decision: The impugned notices dated 23/3/1962 issued under section 34 (i) (a) for re-assessment proceedings relating to assessment years 1942-43 to 1953-54 arc quashed and the respondents are restrained by a writ of lnandamlls from taking any further proceedings in pursuance thereof.
( 1 ) COMMON questions of law and fact arise in Civil Writs Nos. 67 to 78 and they will be disposed of by this judgment.
( 2 ) THE writ petitions have been filed to quash the several notices dated 23/3/1962 issued by respondent No. 3 under Section 3 (1) (a) of the Indian Income Tax, 1922, for reopening assess- ments for the assessment years 1942-43 to 1953-54 and also for prohibiting the respondents from proceedings further with assessment proceedings in pursuance of the aforesaid notices. The several letters under cover of which these several notices were sent bear the date 23/3/1962\24/3/1962. The notices were, according to the respondents, sent in three sets-one set by registered acknow- ledgment due post to one address of the petitioners; another set also by registered acknowledgment due post to another address of the petitioners and third set by messenger. It is not disputed that the notices which were sent by registered acknowledgment due post were received by the petitioners on 11/4/1962, i. e. after the commencement of the Income Tax Act, 1961. In so far as the notices sent by messenger are concerned, the petitioners deny service thereof while it is the case of the respondents that these were served according to law by affixation on 30/3/1962 i. e. , before the commencement of the Income Tax Act, 1961.
( 3 ) THE first petitioner is the assessee and it was assessed as a Hindu Uadivided Family. The second petitioner is the present Karta of this family. It is not disputed that the first petitioner carried on extensive business, infer alia, as forest contractors and had considerable income from such business. The forest business was in respect of forests which were situate in Nepal. Contractors were employed by the petitioners for felling the trees, converting them into logs and floating them down a river in Nepal to reach Indian territory and for all this the Contractors were paid what have been described as conversion charges.
( 4 ) THE petitioners had, originally, filed their returns under Section 22 (1) of the Indian Income Tax Act, 1922 for all the assessment years from 1942-43 to 1953-54 and assessment orders were made by the Income Tax Officer which were finalized either in. appeals to the Tribunal or by the Appellate Assistant Commissioner. With regard to the assessments years 1943-44 to 1949-50. the final assessments were made in pursuance of an agreement or settlement dated 18/10/1954 arrived at between the petitioners and the Deputy Director of Inspection (Investigation), New Delhi.
( 5 ) THERE are two main items with respect to which it is the contention of the respondents that the petitioners did not disclose fully and truly all material facts necessary for assessment in the assessment years in question. The first item is an item of deposits which stood in the names of Ram Anand Nar Singh; Rana Judh Nar Singh and Rana Ek Nar Singh of Nepal, hereinafter REFERRED TO to as "the Ranas", and the contention of the respondents, generally speaking, is that these deposits were not deposits or loans as contended by the petitioner but were merely the secreted profits of the petitioners themselves. The second item is the item of conversion charges shown as an expense relating to the business of the petitioner in respect of which the contention of the respondents is that the conversion charges shown in the returns and claimed by the petitioners were inflated and these also represent to a large extent the secreted profits of the petitioners. On the other hand, the contention of the petitioners is that the aforesaid three Ranas were really creditors of the petitioners and they advanced various loans to the petitioners from time to time on interest paying deposits. Further, it is the case of the petitioners that conversion charges which were payable to Rana Anand Nar Singh were not wholly paid and the unpaid amount of the conversion charges were credited to him. The details of these deposits and conversion c
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