1968 (8) TMI 4 - SC - Income Tax

Revised assessments u/s 34 - validity - assessee had failed to show that he did not know and was not aware of the true position in respect of the sum of Rs. 27, 000 odd which was invested in the Sarpat and bamboo business - Assessee s appeal dismissed

Summary

Issues Involved:
1. Validity of the first revised assessment dated October 16, 1952.
2. Validity of the second revised assessment dated March 18, 1954.
3. Applicability of the limitation period under section 34(1)(a) and 34(1)(b) of the Indian Income-tax Act, 1922.
4. Jurisdiction of the Income-tax Officer to issue a notice under section 34.
5. Requirement of wilful and deliberate omission for applicability of section 34(1)(a).

Detailed Analysis:

1. Validity of the First Revised Assessment (October 16, 1952):
The first revised assessment was challenged on the grounds of being barred by time under section 34(1)(b) and the applicability of section 34(1)(a). The Tribunal held that the income from the firm, Rajnarain Durga Prasad, had escaped assessment due to the assessee's failure to disclose fully and truly all necessary facts, thus attracting section 34(1)(a) with an eight-year limitation period. The High Court concurred, noting that the assessee failed to show that the Income-tax Officer was aware of the income from the firm at the time of filing the return.

2. Validity of the Second Revised Assessment (March 18, 1954):
The second revised assessment was contested on the grounds that the Income-tax Officer had no jurisdiction to issue a notice under section 34, as all necessary material facts were disclosed during the assessment proceedings for the year 1945-46. The Tribunal dismissed this argument, stating that the Income-tax Officer had reason to believe that income had escaped assessment due to the assessee's failure to disclose material facts. The High Court upheld this view, emphasizing that the investment represented income from undisclosed sources and should be taxed in the assessment year 1944-45.

3. Applicability of Limitation Period under Section 34(1)(a) and 34(1)(b):
The assessee argued that the first revised assessment was barred by the four-year limitation period under section 34(1)(b). The Tribunal and the High Court found that section 34(1)(a), with an eight-year limitation period, was applicable due to the assessee's failure to disclose all material facts. The High Court noted that the assessee did not prove that the Income-tax Officer knew about the income from the firm when the return was filed.

4. Jurisdiction of the Income-tax Officer to Issue Notice under Section 34:
The assessee contended that the Income-tax Officer had no jurisdiction to issue a notice under section 34, as all material facts were disclosed. The Tribunal and the High Court rejected this argument, stating that the Income-tax Officer had reason to believe that income had escaped assessment due to the assessee's failure to disclose material facts. The Tribunal noted that the investments were made in the financial year relevant to the assessment year 1944-45, necessitating the use of section 34.

5. Requirement of Wilful and Deliberate Omission for Applicability of Section 34(1)(a):
The assessee argued that for section 34(1)(a) to apply, the omission or failure to disclose must be wilful and deliberate. The High Court did not find it necessary to decide on this point, as the assessee failed to show that he was unaware of the true position regarding the sum invested in the sarpat and bamboo business.

Conclusion:
The Supreme Court upheld the decisions of the Tribunal and the High Court, dismissing the appeals. The Court found that the first revised assessment dated October 16, 1952, and the second revised assessment dated March 18, 1954, were valid and legal. The Court also held that the eight-year limitation period under section 34(1)(a) was applicable, and the Income-tax Officer had jurisdiction to issue the notice under section 34. The appeals were dismissed with costs.