1973 (2) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under section 148 read with section 147 of the Income-tax Act, 1961.
2. Alleged omission or failure by the assessee to disclose all material facts.
3. Justification for reopening assessments based on alleged misrepresentation of expenses.

Issue-wise Detailed Analysis:

1. Validity of Notices Issued Under Section 148 Read with Section 147:
The petitioner, The Hong-Kong and Shanghai Banking Corporation, challenged several notices issued under section 148 read with section 147 of the Income-tax Act, 1961, for assessment years 1950-51 to 1960-61. The notices were impugned on the grounds that there was no omission or failure on the part of the assessee to disclose all material facts relevant for its assessment during the respective assessment years, rendering the notices without jurisdiction and void.

2. Alleged Omission or Failure by the Assessee to Disclose All Material Facts:
The petitioner-bank, a worldwide organization, claimed deductions for expenses incurred by its head office, London office, and U.S.A. offices referable to Indian offices. The Income-tax Officer had detailed discussions with the petitioner's representatives, and the petitioner provided various details supporting its claim. The assessment order for 1950-51 accepted the petitioner's computation method. This method was consistently followed in subsequent years without further discussion, indicating acceptance by the Income-tax Officers.

3. Justification for Reopening Assessments Based on Alleged Misrepresentation of Expenses:
The revenue authorities alleged that the petitioner suppressed the fact that the expenses claimed in India were also claimed in the respective foreign countries. The recorded reasons for reopening assessments stated that the assessee misrepresented facts by claiming the same expenses in both India and foreign countries. However, the court found that the primary facts were within the knowledge of the Income-tax Officers during the original assessments. The court noted that if the Income-tax Officers had considered the claim for deduction in foreign countries relevant, they could have made the necessary enquiries. The court emphasized that the duty of disclosing primary facts lies on the assessee, and the assessing authority must make intelligent enquiries based on those facts.

Conclusion:
The court concluded that the assessee disclosed all primary facts during the original assessment proceedings, and the Income-tax Officers failed to make further enquiries. The court held that the reopening of assessments based on the alleged misrepresentation was not justified. The application succeeded, and the rule was made absolute, directing the respondents to recall and cancel the impugned notices and to forbear from giving effect thereto. There was no order as to costs, and the operation of the order was stayed for eight weeks. The interim order granted continued for the same period.