TMI Blog1965 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the petition be tried - - - - - Dated:- 8-4-1965 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SHAH J.---Madhya Pradesh Industries Ltd.---hereinafter called "the company"---is engaged in the business of mining manganese ore. On March 18, 1952, the company appointed Messrs. J. K. Alloys Ltd.---hereinafter called "Alloys"---as its selling agent. In the account year relating to the assessment year 1953-54, the company paid Rs. 1,13,052-8-9 to the selling agents and claimed it as a revenue outgoing in the computation of its profits for that year. The Income-tax Officer made an order of assessment without expressly referring to the claim for allowance to Alloys. On December 26, 1960, the Income-tax Officer issued a notice to the company in exercise of the power under section 34 of the Indian Income-tax Act reciting that having "reason to believe that" the income of the company assessable to income-tax for the assessment year 1953-54 had "(a) escaped assessment, (b) been under-assessed", he proposed to reassess the said income that had "(a) escaped assessment, (b) been under-assessed" and directed the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total profits according to its books of account. In the statement under section 38(3) of the Act filed with the return the company disclosed that it had paid Rs. 1,13,052-8-9 as "commission sales" on "different dates" by cheques to Alloys, and Rs. 6,091-4-0 to J.S.Williams on October 4, 1952, by cheque as commission on sales. In the profit and loss account of the company filed with the return an amount of Rs. 29,76,067-10-8 was disclosed as received "by sales less commission". On December 7, 1953, R. K. Gupta, a director of the company, made a statement before the Income-tax Officer stating that commission was paid to Williams on the sales accounted for during the year ended March 31, 1953, and that the same should be allowed as deduction, and that "similar was the case with the commission payable to J. K. Alloys Ltd,, which had already been paid subsequently". On February 11, 1954, the Income-tax Officer called upon the company to produce, amongst other documents, a certificate whether any receipt included in the income, profits or gains had been credited or transferred to any assets, capital account, or any other liability account, a similar certificate regarding any credit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and in breach thereof." Propriety of the order dismissing the petition of the company must be considered on the assumption that the facts averred are true. Section 34(1)(a) of the Indian Income-tax Act, at the relevant time, provided : " 34. (1) 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 of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b) ... he may in cases falling under clause (a) at any time within eight years ... serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains . . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the aggrieved party has been guilty of misrepresentation or suppression of material facts, and whether notwithstanding the apparent breach it would be inequitable to grant relief. It is unfortunate that the learned judges of the High Court have not indicated the considerations which persuaded them to reject the petition in limine. There can be no doubt that the averments made in the petition by the company if proved may justify the issue of the writs claimed, for it is the case of the company that the facts which alone invest the Income-tax Officer with jurisdiction to issue the impugned notice did not exist. The company has also submitted that the power under section 34 was sought to be utilised as a mere cloak or pretence for making a "fishing enquiry or investigation with the object of reviewing the previous order". Whether the disclosure made by the company was full and true in respect of all material facts necessary for the assessment cannot obviously be determined in the absence of an affidavit by the Income-tax Officer. Again the plea that the impugned notice was issued with a collateral object could not be rejected without an enquiry. Jurisdiction of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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