TMI Blog1971 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer made the assessment on November 27, 1963, and it appears from the assessment order that the profit from the construction work was taken into account in making the assessment. The appellant, however, had filed a revised return showing the general profit of Rs. 2,092 as also the profit from the construction work aggregating Rs. 12,797.65. After having made the assessment order on the basis of the first return the Income-tax Officer issued a notice to the appellant under section 147 of the Income-tax Act, 1961 (hereinafter referred to as " the Act "). The ground for issue of this notice was that the revised return was not before the Income-tax Officer when the assessment order was made, but came to her possession later on, when it was forwarded to her on December 3, 1963 . On receiving the notice under section 147 the appellant wrote to the Income-tax Officer challenging her jurisdiction to issue such a notice and also alleging that there were no grounds for issue of the notice. Thereafter, not being satisfied with the explanation given by the Income-tax Officer, the appellant made an application under article 226 of the Constitution, and obtained a rule nisi which was discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit from construction work was clearly shown, but it is evident from the assessment order itself that this particular item of profit or income was taken into consideration by her in making the assessment order. If this item was not taken into consideration the contention of counsel for the respondents would, in our view, have prevailed. But, since that is not so, and we find that the particular item was in fact considered by the Income-tax Officer, we are not persuaded that the omission to include that item from the first return and the submission of a revised return including-that item conclusively proved escapement of income. In the revised return the profit or income from all sources has been stated to be Rs. 12,797.65. In the balance-sheet, which was submitted with the first return, the profit from construction work was shown at Rs. 10,718.46. According to the appellant, a loss of Rs. 18.07 (shown in the balance-sheet) has to be deducted from this amount and, if so deducted, the profit comes to Rs. 10,700.39. If the profit disclosed in the first return of Rs. 2,096.26 is added to the amount of Rs. 10,700.39 the total amount comes to Rs. 12,796.65. It thus appears tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged the rule only on the finding that the revised return was not before the Income-tax Officer when the assessment order was made. It is clear to us that the basic questions are, firstly, whether any income or profit has escaped assessment and, secondly, whether there were any materials to provide grounds for issue of a notice under sections 147 and 148 of the Act, were not considered by the court below. The foundation for a notice under sections 147 and 148 of the Act are the existence of materials to provide grounds for being satisfied that income has escaped assessment which should, therefore, be re-opened. Reliance was placed by Mr. Gupta on a decision of the Supreme Court in Commissioner of Income-tax v. A. Raman and Co. In that case it was held that the jurisdiction of the Income-tax Officer to reassess income arose if he had in consequence of information in his possession reason to believe that income chargeable to tax had escaped assessment. In this appeal it is clear to us that there was information in the possession of the Income-tax Officer to provide grounds for reason to believe that income had escaped assessment. But, what is important is that in that decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of being heard before he decided to, exercise the powers conferred by that section. The next case relied on was a decision of the Supreme Court in A. N. Lakshman Shenoy v. Income-tax Officer, Ernakulam. In that case, dealing with the nature and quality of the information which the Income-tax Officer must have in his possession, it was held at page 288 of the report : " There is no doubt, however, that the information must be definite, that is, more than mere guess, gossip or rumour. There must also be a causal connection between the information and the discovery; but ' discovery ' in the context of the section does not mean a conclusion of certainty at the stage of notice. What is necessary at the stage is that the Income-tax Officer should have formed an honest belief upon materials which reasonably supports such belief. " Reliance was next placed on another decision of the Supreme Court in S. Narayanappa v. Commissioner of Income-tax. In that case dealing with the question of " reason to believe " in section 34 of the 1922 Act, it was held that the expression did not mean a purely subjective satisfaction on the part of the Income-tax Officer and that the belief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the information presented before him that income had escaped assessment. Relying upon these decisions Mr. Gupta contended that in the original return a loss from business and profession to the extent of Rs. 4,422-89 was shown and there was a profit from other sources to the extent of Rs. 6,519.15 and therefore there was a net profit of Rs. 2,096.26 which was taxable. But in the revised return the appellant had shown a profit from business and profession to the extent of Rs. 7,461.42 and also a profit from other sources to the extent of Rs. 5,336.23 and taxable income was shown at Rs. 12,797.65. He, therefore, submitted that the figures disclosed as profit from business and other sources could not be readily obtained from the figures disclosed in the balance-sheet and the profit and loss account. Such figures could be obtained, it was argued, by process of back calculation with a view to reconcile the profit or income disclosed in the revised return with those disclosed in the balance-sheet. He argued that in view of that position, namely, that the figures disclosed in the first return and the balance-sheet filed with it could not be readily reconciled with the profit disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch showed a credit of Rs. 3,06,000. in this return the assessee also disclosed Rs. 57,040 as income outside the Indian, Union but brought into the Indian Union. The income of Rs. 57,040 disclosed by the assessee was not accepted by the income-tax Officer who raised it to Rs. 79,351. More than six years afterwards the assessment was reopened under- section 34(1)(a) as doubts were entertained about the receipt of Rs. 3,06,000 by the assessee and upon reassessment that amount was included as income under other sources. The assessee went up on appeal, firstly, to the Appellate Assistant Corn misgioner who confirmed the assessment, and then to the Tribunal which held that proceedings under section 34(1)(a) were bad in law. Thereafter, there was a reference to the High Court under section 66(2) of the Act. After taking into consideration the various decisions of the Supreme Court and the different High Courts and particularly the decision of the Supreme Court in Calcutta Discount Co v. Income-tax Officer, it was held that the proceedings under section 3 4(1)(a) were bad in law. In doing so reliance was placed on the following observations of the Supreme Court in Calcutta Discount Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant submitted, could not be done. It seems to us that the materials disclosed by the appellant in the revised return were not materials with regard to which it can be said that they were disclosed in the balance-sheet and profit and loss account filed by the appellant. It is true that the income from business and profession and the income from other sources disclosed in the revised return can be arrived at after a process of calculation and addition of the various figures disclosed in the revised return. But, it is also equally true that the figures of income from business and profession and income from other sources shown in the revised return are entirely different from those in the first return. The income disclosed in the revised return, in our view, are such that the Income-tax Officer may have a bona fide ground for believing that income chargeable to tax had escaped assessment. The notice under section 147(b) of the Act, it is to be remembered, is only for the purpose of reopening the previous assessment and make a fresh assessment of the income. If the appellant can satisfy the Income-tax Officer at such reassessment proceedings that, the income disclosed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not open to the High Court exercising powers under article 226 of the Constitution to set aside or vacate the notice for assessment on a reappraisal of the evidence. Reliance was also placed by Mr. De on a Bench decision of this court in P. R. Mukherjee v. Commissioner of Income-tax , and also a Bench decision of the Allahabad High Court in Mahabir Prasad Munna Lal v. Commissioner of Income-tax. These decisions do not throw any further light in the matter. I now turn to a question which, though not raised by counsel for the respondents, appears to me to be formidable so far as the appellant's contentions are concerned. The appellant had filed a revised return which prima facie disclosed higher profits and by filing such a return it invited the Income-tax Officer to make an assessment on the basis of such a return. According to the appellant this revised return was filed before the assessment order was made. The trial court had rejected this contention of the appellant and came to the conclusion that the revised return was not before the Income-tax Officer when the assessment order was made. But, even assuming that the appellant's contention is right that the revised return wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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