1967 (11) TMI 10 - SC - Income Tax

Reopening of the assessment - notices under s. 34(1)(a) - limitation - notices issued after March 31 1956 were not barred by time and there was material before the ITO which justified his belief that the income chargeable to tax had escaped assessment - Assessee s appeal dismissed

Summary

Issues Involved:
1. Barred by Limitation under Section 34(1A).
2. Jurisdiction of Income-tax Officer to Issue Notices under Section 34(1)(a).
3. Duty of Assessee to Disclose Material Facts.

Issue-wise Detailed Analysis:

1. Barred by Limitation under Section 34(1A):
The first question raised was whether the reassessment proceedings for the assessment years 1943-44 to 1946-47 were barred by limitation under section 34(1A) of the Act since the notices were issued after March 31, 1956. It was conceded by the appellant's counsel that this question is concluded by the decision in Commissioner of Income-tax v. Shahzada Nand and Sons. The court held that notice can be issued under section 34(1)(a) of the Indian Income-tax Act, 1922, as amended by the Finance Act, 1956, after March 31, 1956, in respect of any assessment year whose relevant previous year falls within the period September 1, 1939, to March 31, 1946. The court clarified that sub-section (1A) ceased to be operative after March 31, 1956, and the wide phraseology of sub-section (1)(a) as amended takes in all escaped and concealed incomes during all the years commencing from 1941, allowing the Income-tax Officer to issue notices without any bar of limitation.

2. Jurisdiction of Income-tax Officer to Issue Notices under Section 34(1)(a):
The appellant contended that it was not permissible for the Income-tax Officer to issue notices under section 34(1)(a) because all accounts were produced during the original assessment proceedings, and the cash credits had been accepted. The appellant argued that there was no material before the Income-tax Officer to form the belief that there was an omission or failure to disclose material facts, leading to income escaping assessment. However, the court found that the Income-tax Officer had informed the assessee about suspicions regarding cash credits and benami properties. The Income-tax Officer had reason to believe that the assessee had not disclosed the existence of a bank account in the name of his father-in-law and the sources of cash credits. The court concluded that there was some material before the Income-tax Officer to form a prima facie belief that the assessee had omitted to disclose fully and truly all material facts, leading to income escaping assessment. Therefore, the Income-tax Officer had jurisdiction to issue notices under section 34(1)(a).

3. Duty of Assessee to Disclose Material Facts:
The court also addressed the contention that the Income-tax Officer had no jurisdiction to issue notices under section 34(1)(a) because the original assessment orders showed that the cash credits were considered and accepted. The court referred to Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry, which stated that merely producing books of account does not discharge the duty to disclose fully and truly all material facts necessary for assessment. The assessee must bring relevant items in the books of account to the notice of the Income-tax Officer. The court emphasized that even if the Income-tax Officer could have discovered the truth from the books, he is not precluded from reassessing escaped income. The court concluded that the duty to disclose is not discharged merely by producing books of account; the assessee must highlight relevant facts to the Income-tax Officer.

Conclusion:
The appeals were dismissed as the court found no merit in the arguments presented by the appellant. The court upheld the jurisdiction of the Income-tax Officer to issue notices under section 34(1)(a) and confirmed that the reassessment proceedings were not barred by limitation. The court reiterated the duty of the assessee to fully and truly disclose all material facts necessary for assessment. The judgment emphasized that mere production of books of account does not suffice to discharge this duty. The appeals were dismissed with costs.