TMI Blog1974 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 30, 1958. The Income-tax Officer estimated the income of the petitioner-firm at Rs. 22,863. The partners of the firm paid tax separately on the share of income of the firm. The petitioner-firm thereafter received a letter No. B-312/58-59 dated July 12,1968, from the respondent, Income-tax Officer, " A " Ward, Jorhat, by which he asked the petitioner-firm to produce evidence on July 23, 1968, in respect of the loans obtained from the following parties relating to the assessment year 1958-59 : Rs. 1. M/s. Narayandas D. K., 35, Upper Chitpur Road, Calcutta 25,000 2. M/s. Bhagwandas Purshottomdas, 2/1, Dinanath Mathura Lane, Calcutta 10,000 3. M/s. Bhagwan Singh Srichand, 40, Bijoytiatola, Calcutta 20,000 4. M/s. Nandalal Ramchandra, 48, Vivekananda Road, Calcutta 15,000 -------------- 70,000 ------------- As it was a very old matter the petitioner-firm applied for time to produce evidence in respect of the aforesaid loans. By a letter dated August 13, 1968, the petitioner stated that the said loans were genuine and the transactions were in the course of business and that the loans were taken against hundis and after repayment of the loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the instant case is whether the conditions precedent laid down in section 147(a) of the 1961 Act are existent in the instant case for issue of notice under section 148 of the 1961 Act. Sections 147 and 148 of the 1961 Act are quoted below : " 147. Income escaping assessment.--If-- (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer 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, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153 assess or reassess such income or re-compute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereinafter in sections 148 to 153 referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned if the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment for that assessment year by reason of the omission or failure on the part of an assessee to make a return under section 139 for that assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year. Under section 148 of the 1961 Act, before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer has to serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the Income-tax Officer before issuing any notice under section 148 has to record reasons for doing so. In the instant case the assessee submitted his return for the assessment year 1958-59. The impugned notice under section 148 is dated May 12, 1969, and thus the notice under section 148 was issued after the expiry of 8 years from the end of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year in question, income chargeable to tax had escaped assessment for that year. In Calcutta Discount Co. Ltd. v. Income-tax Officer, while considering section 34(1)(a) of the Indian Income-tax Act, 1922, the Supreme Court has observed as follows : " Before we proceed to consider the materials on record to see whether the appellant has succeeded in showing that the Income-tax Officer could have no reason, on the materials before him, to believe that there had been any omission to disclose material facts, as mentioned in the section, it is necessary to examine the precise scope of disclosure which the section demands. The words used are 'omission or failure to disclose fully and truly all material facts necessary for his assessment for that year'. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries in account books, particular portions of documents, and documents and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. Does the duty, however, extend beyond the full and truthful disclosure of all primary facts ? In our opinion the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else far less the assessee--to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences--whether of facts or law--he would draw from the primary facts ...... It may be pointed out that the Explanation to the sub-section has nothing to do with 'inferences' and deals only with the question whether primary material facts not disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief ; in other words, the Income-tax Officer must on information at his disposal believe that income has been under-assessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief, be it said, may not be based on mere suspicion : it must be founded upon information.... If the conditions precedent do not exist, the jurisdiction of the High Court to issue high prerogative writs under article 226 of the Constitution to prohibit action under the notice may be exercised. But if the existence of the conditions is asserted by the authority entrusted with the power and the materials on the record prima facie support the existence of such conditions, an enquiry whether the authority could not have reasonably held the belief which he says he had reason to hold and he did hold, is, in my judgment, barred. " In Commissioner of Income-tax v. Burlop Dealers Ltd., the Supreme Court has held as follows : " We are of the view that under section 34(1)(a) if the assessee has disclosed primary facts relevant to the assessment, he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent investigation it transpired that the aforesaid parties were bogus lenders, that is to say, the names of these non-existent parties were shown falsely in the accounts. The assessee is legally bound to disclose fully and truly all material facts necessary for its assessment. In other words, if the assessee discloses all the primary facts necessary for its assessment and the Income-tax Officer draws some inferences therefrom then, even if subsequently some other facts come to light and a different set of inferences may be drawn from the primary facts already disclosed, such a case may not attract section 147(a). Similarly, if the primary facts are fully and truly disclosed and the authority draws some inferences therefrom, then the same authority or its successor cannot change its inferences from the same set of primary facts by changing its earlier opinion and resort to section 147(a). But if facts which may be considered as primary facts disclosed by the assessee are found to be false and non-existent on subsequent inquiry or if some of the material primary facts disclosed by the assessee are found to be false or non-existent on subsequent enquiry, can it be said that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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