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1964 (1) TMI 36
Issues:
- Interpretation of exemption under section 8 read with entry 28 of the Fifth Schedule of the Mysore Sales Tax Act, 1957.
- Validity of rules 25A and 25B in relation to the exemption claimed by the assessee.
- Applicability of entry 28 of the Fifth Schedule from 1st January, 1959, or from the date rules 25A and 25B came into force.
- Requirement of passing on tax liability to purchasers for the validity of sales tax assessment.
Analysis:
The judgment pertains to revision petitions filed under section 23(1) of the Mysore Sales Tax Act, 1957, concerning the assessment of the assessee for the years 1958-59 and 1959-60. The central issue revolves around whether the assessee is entitled to the exemption claimed under section 8 read with entry 28 of the Fifth Schedule. The court notes that the transactions in question fall within the scope of the Act, and the dispute primarily concerns the interpretation of the exemption criteria under the relevant entry.
The court delves into the evolution of entry 28 of the Fifth Schedule, highlighting the changes brought about by an amendment on 1st January, 1959. The amendment introduced new requirements for exemption, including recognition by the Commissioner and adherence to prescribed limits on production units and employment. The absence of specific rules for implementing these requirements raised questions regarding the timing of the entry's applicability and the validity of the exemption claimed by the assessee.
Regarding the applicability of rules 25A and 25B, the court analyzes whether their enforcement date should dictate the commencement of entry 28. The court opines that the benefit of the entry was available even before the rules came into force, emphasizing that the absence of prescribed limits rendered the entry's conditions ineffective. The court rejects the argument that the lack of rules precluded the assessee from seeking recognition, citing precedents and principles to support its conclusion.
Furthermore, the judgment addresses the contention that the assessee's inability to pass on tax liability to purchasers rendered the assessment invalid. The court clarifies that while such provisions are common in sales tax laws, they are not a prerequisite for the validity of assessments. Citing a Supreme Court decision, the court establishes that sales tax can be imposed without granting dealers the power to transfer the tax burden to others, affirming the competence of the Legislature in this regard.
In conclusion, the court allows the petitions, setting aside the Tribunal's order and reinstating that of the Deputy Commissioner. The judgment does not award costs to any party, considering the circumstances of the case and the legal arguments presented.
This comprehensive analysis of the judgment highlights the intricate legal interpretations and considerations made by the court in resolving the issues raised by the revision petitions under the Mysore Sales Tax Act, 1957.
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1964 (1) TMI 35
Issues Involved:
1. Validity of the assessment order passed by the Sales Tax Officer.
2. Interpretation of Section 8(2) of the Central Sales Tax Act.
3. Applicability of exemptions under the U.P. Sales Tax Act to the Central Sales Tax Act.
4. Correct rate of tax on the turnover of packing materials.
Issue-wise Detailed Analysis:
1. Validity of the Assessment Order Passed by the Sales Tax Officer:
The petitioner sought certiorari to quash an assessment order dated 24th March, 1962, by a Sales Tax Officer and an order by the Sales Tax Commissioner dated 23rd October, 1961. The petitioner was a dealer in khandsari sugar and was assessed for sales tax for the year 1957-58 on the turnover of inter-State sales of khandsari sugar. The court examined whether the assessment was valid under the Central Sales Tax Act.
2. Interpretation of Section 8(2) of the Central Sales Tax Act:
Section 8(2) of the Central Sales Tax Act states, "The tax payable by any dealer in any case not falling within subsection (1) shall be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate State." The petitioner argued that this provision meant that the manner of calculation, including exemptions under the U.P. Sales Tax Act, should apply. The State contended that the dealer should be deemed liable to pay tax under the State Act, ignoring any exemptions.
The court found that the manner of calculating the State tax payable by a dealer includes not only the procedure prescribed in section 7 but also the consideration of other provisions, such as section 4, which exempts turnover on certain goods. The court held that the tax payable under the Central Act should be calculated after considering these exemptions.
3. Applicability of Exemptions Under the U.P. Sales Tax Act to the Central Sales Tax Act:
The petitioner contended that under the Central Sales Tax Act, the exemptions under the U.P. Sales Tax Act should also apply. Specifically, a notification under section 4 of the U.P. Sales Tax Act exempted khandsari sugar sold by non-manufacturers and non-importers from tax. The court agreed with the petitioner, stating that if the turnover of khandsari sugar is exempt under the State Act, it should also be exempt under the Central Act. The court emphasized that the legal fiction in section 8(2) meant that the dealer is deemed liable to pay the State tax, but the exemptions for certain goods should still be considered.
4. Correct Rate of Tax on the Turnover of Packing Materials:
The petitioner also questioned the rate at which the turnover of packing materials used in packing khandsari sugar was taxed. Section 8(3) of the Central Sales Tax Act specifies that containers or materials used for packing goods mentioned in the certificate of registration are taxed at 1% if sold to the Government or a registered dealer. However, in this case, the petitioner did not sell to such entities. Therefore, the court held that the tax on packing materials should be calculated according to the rates mentioned in the State Act, and the Sales Tax Authorities had applied the correct rate.
Conclusion:
The court concluded that the petitioner should not have been assessed under the Central Act for the turnover of khandsari sugar, as it was exempt under the U.P. Sales Tax Act. However, the petition was dismissed because the petitioner had an alternative remedy through an appeal. The court emphasized that certiorari should not be used to bypass the departmental remedy. The petition was dismissed without any order as to costs.
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1964 (1) TMI 34
Issues Involved:
1. Validity of notices issued under section 22(4)(a) of the Madhya Pradesh General Sales Tax Act, 1958.
2. Jurisdiction of the Sales Tax Officer to issue notices without reopening the assessment.
3. Allegations of fraud in the payment of sales tax.
4. Requirement of providing an opportunity to the petitioners to prove actual payment of tax.
5. Applicability of section 45 of the Act regarding rectification of mistakes.
Detailed Analysis:
1. Validity of Notices Issued Under Section 22(4)(a):
The petitioners challenged the notices issued under section 22(4)(a) of the Madhya Pradesh General Sales Tax Act, 1958, which called upon them to deposit specified amounts of sales tax into the Government Treasury. They sought a writ of certiorari to quash these notices. The court found that the controversy centered around the legality of proceedings initiated for the recovery of part of the sales tax amounts to which the petitioners had been assessed. The court held that the notices issued were valid as they did not involve any reopening or review of the assessment and did not result in any modification of the assessment made against the petitioners.
2. Jurisdiction of the Sales Tax Officer:
The petitioners argued that the Sales Tax Officer had no jurisdiction to issue any notice of demand under section 22(4)(a) without reopening and modifying the assessment. The court rejected this contention, stating that sections 17, 18, and 22 of the Act deal with distinct matters: filing of returns, assessment of tax, and recovery of tax, respectively. The court clarified that the assessment of sales tax is based on the taxable turnover and not on the payment details provided in the return. The court concluded that the Sales Tax Officer was within his rights to issue notices under section 22(4)(a) for the recovery of unpaid amounts.
3. Allegations of Fraud:
The opponents alleged that the petitioners, in conspiracy with some clerks of the treasury and the sales tax office, had practiced fraud by fabricating challans to show larger deposits than were actually made. The petitioners denied these allegations. The court noted that the question of whether the petitioners had committed fraud could not be determined in proceedings under Articles 226 and 227 of the Constitution and should be subject to appropriate criminal investigation and action.
4. Requirement of Providing an Opportunity to Prove Actual Payment:
The petitioners contended that they should have been given an opportunity to prove that they had actually paid the amounts shown in the challans. The court agreed that the petitioners should be given such an opportunity. However, it noted that the petitioners had already replied to the notices, claiming that they had made the payments. The court emphasized that before initiating recovery proceedings as arrears of land revenue, the Sales Tax Officer must come to a definite conclusion that the amounts claimed were not paid. The court suggested that if criminal proceedings were likely, it would be proper to stay the recovery until the conclusion of those proceedings.
5. Applicability of Section 45 Regarding Rectification of Mistakes:
The petitioners argued that the notices constituted rectification of mistakes in the assessment, which should be done in conformity with section 45 of the Act. The court dismissed this argument, stating that even if the issue was considered a mistake, no notice was required under section 45 as the rectification did not enhance the tax amount or reduce the refund. The court reiterated that the notices were for the recovery of part of the tax amount assessed and did not alter the assessment itself.
Conclusion:
The court dismissed all the petitions, holding that the notices issued under section 22(4)(a) were valid, and the Sales Tax Officer had the jurisdiction to issue them without reopening the assessment. The court also emphasized the need for a proper enquiry into the actual payment of tax amounts and suggested staying recovery proceedings if criminal prosecutions were likely. The applications were dismissed with costs, and the outstanding security deposits were ordered to be refunded to the petitioners.
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1964 (1) TMI 33
Whether the relief of repayment has to be sought by the taxpayer by an action in a civil court?
Whether such an order can be made by the High Court in exercise of its jurisdiction under Article 226 of the Constitution?
Held that:- Appeal allowed. The period of limitation prescribed for recovery of money paid by mistake under the Limitation Act is three years from the date when the mistake is known. If the mistake was known in these cases on or shortly after January 17, 1956, the delay in making these applications should be considered unreasonable. If, on the other hand, as Mr. Andley seems to argue, the mistake was discovered much later, this would be a controversial fact which cannot conveniently be decided in writ proceedings. In either view of the matter we are of opinion the orders for refund made by the High Court in these seven cases cannot be sustained.
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1964 (1) TMI 25
Issues Involved:
1. Liability for payment of fees.
2. Authority of Kapoor to engage the plaintiffs.
3. Ostensible authority and estoppel.
4. Application of the rule in Royal British Bank v. Turquand.
5. Relevance of the articles of association.
Detailed Analysis:
1. Liability for Payment of Fees:
The plaintiffs, architects and surveyors, sought to recover fees for work done in 1959 for the Buckhurst Park Estate, owned by the defendant company. The central question was whether the liability for these fees rested with the defendant company or the second defendant, Kapoor. The trial court found in favor of the plaintiffs, and the defendant company appealed, arguing that Kapoor was personally liable.
2. Authority of Kapoor to Engage the Plaintiffs:
Kapoor, a director of the defendant company, instructed the plaintiffs to undertake work related to the Buckhurst Park Estate. The plaintiffs executed the work, and the fees were undisputed. The defendant company argued that Kapoor lacked the authority to engage the plaintiffs on its behalf. The trial judge found that Kapoor had been acting as managing director with the board's knowledge, thus implying he had the authority to engage the plaintiffs.
3. Ostensible Authority and Estoppel:
The plaintiffs contended that Kapoor had either actual or ostensible authority to engage them. The trial judge concluded that Kapoor acted within the scope of his ostensible authority, which the defendant company could not deny. The judge relied on principles from Biggerstaff v. Rowatt's Wharf Ltd., which established that a company is bound by the acts of persons who act with the knowledge of the directors, provided such acts fall within their apparent authority.
4. Application of the Rule in Royal British Bank v. Turquand:
The rule in Turquand's case was invoked, which allows third parties to assume that internal company procedures have been followed, provided the act appears to be within the agent's authority. The judge found that Kapoor, acting as managing director, had ostensible authority to engage the plaintiffs, and the defendant company was estopped from denying this.
5. Relevance of the Articles of Association:
The articles of association of the defendant company were examined to determine if they conferred the necessary authority. Although Kapoor was never formally appointed as managing director, the board's conduct implied his authority. The articles allowed for delegation of powers to a managing director, which supported the finding of ostensible authority.
Separate Judgments:
Willmer LJ:
Willmer LJ emphasized the evidence showing Kapoor acted as managing director with the board's knowledge. He noted that the plaintiffs' belief that Kapoor had authority was reasonable given the circumstances. The judge's finding that Kapoor had ostensible authority was upheld, and the appeal was dismissed.
Pearson LJ:
Pearson LJ agreed with the trial judge's findings, highlighting that Kapoor's actions were within the ordinary scope of the company's business. He reiterated that the plaintiffs were entitled to rely on Kapoor's ostensible authority, as the company had held him out as having such authority.
Diplock LJ:
Diplock LJ provided a detailed analysis of the legal principles governing actual and apparent authority. He confirmed that the plaintiffs relied on Kapoor's apparent authority, which was supported by the board's conduct. The judge's decision was affirmed, and the appeal was dismissed.
Conclusion:
The judgment affirmed that Kapoor had ostensible authority to engage the plaintiffs, binding the defendant company to pay the fees. The principles of ostensible authority and estoppel, along with the rule in Turquand's case, were crucial in reaching this conclusion. The appeal was dismissed, upholding the trial court's decision.
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1964 (1) TMI 24
Issues Involved:
1. Maintainability of the application under section 123 of the Indian Companies Act, 1913.
2. Legality of the transfer of debentures from Jhunjhunwala to the appellant.
3. Right of the company to refuse registration of the transfer.
4. Alleged suspicious nature of the transaction.
Detailed Analysis:
1. Maintainability of the Application under Section 123 of the Indian Companies Act, 1913:
The primary issue was whether the application made by the appellant to the District Judge, Varanasi, was maintainable under section 123 of the Act. Section 123 mandates that every company must keep a register of mortgages and enter therein all mortgages and charges affecting the company's property, including the names of the mortgagees or persons entitled thereto. The court held that this section requires entries to be made in respect of transfers of mortgages or debentures by their holders in favor of third parties. The court emphasized that section 38 of the Act, which confers the power to rectify a register, should be read in conjunction with section 123. The court concluded that the application was indeed maintainable, as the law requires the maintenance of an up-to-date register of mortgages, including debentures.
2. Legality of the Transfer of Debentures:
The court examined whether the transfer of 50 debentures from Jhunjhunwala to the appellant was genuine. The appellant provided evidence, including a declaration from Jhunjhunwala before a Magistrate and testimony from Kishori Lai Gupta, the cashier of the appellant, confirming the transfer and payment of consideration. The court found no reason to disbelieve this evidence, concluding that the transfer was genuine and legally valid.
3. Right of the Company to Refuse Registration:
The court addressed the company's refusal to register the transfer of debentures on the grounds that the appellant's name was not entered in the company's registers. The court held that no company has the right to refuse to do something that the law requires it to do. The law mandates the maintenance of a register of mortgages, and the transferee is entitled to have the register rectified to include the transfer of debentures. The court found no justification for the company's refusal to register the transfer.
4. Alleged Suspicious Nature of the Transaction:
The District Judge had dismissed the application on the grounds that the transaction was suspicious. The court analyzed the circumstances cited by the District Judge, such as the timing of the transfer and the method of payment. The court found these circumstances explainable and not indicative of any wrongdoing. The court concluded that the transaction was neither suspicious nor colorable and had been fully proved.
Conclusion:
The court allowed the appeal, set aside the order passed by the District Judge, Varanasi, and directed the official liquidator to enter the appellant's name in respect of 50 debentures in the register of mortgages of the company. The court emphasized the importance of maintaining up-to-date registers for the proper functioning and management of the company and for the benefit of the public and creditors.
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1964 (1) TMI 23
Issues Involved:
1. Status of the appellant as a secured creditor.
2. Entitlement of the appellant to payment.
3. Applicability of Section 230, Indian Companies Act, 1913.
Issue-wise Detailed Analysis:
1. Status of the Appellant as a Secured Creditor:
The court examined whether the appellant retained the status of a secured creditor despite the sale of the charged properties and the loss of debenture scrips. The doctrine of substituted security, as per Section 73 of the Transfer of Property Act, was applied, indicating that the charge attached to the sale proceeds of the charged properties. Thus, the appellant continued to hold the charge and retained the status of a secured creditor. The court disagreed with the company judge's view that the appellant's inability to produce the debenture scrips affected his status, emphasizing that the appellant's status as a secured creditor did not depend on the possession of the scrips but on his entry in the company's register and the consideration paid.
2. Entitlement to Payment:
The court addressed whether the appellant, who could not produce the debenture scrips, was entitled to payment. The law of insolvency, which applies to winding-up proceedings, does not insist on strict adherence to rules if it results in injustice. The court referred to Section 45A of the Negotiable Instruments Act, 1881, which allows for the issue of duplicate instruments upon loss, provided security is given to indemnify the issuer. The appellant's offer to execute an indemnity bond and furnish a guarantee from a scheduled bank was considered sufficient. Thus, the appellant was entitled to payment upon providing such security.
3. Applicability of Section 230, Indian Companies Act, 1913:
Section 230(2)(b) of the Indian Companies Act, 1913, gives priority to certain debts over claims of debenture holders under a floating charge. The court affirmed that the debts listed by the official liquidator were covered under Section 230(1) and had priority over the appellant's debentures. The court rejected the appellant's contention that the debenture trust deed created a hybrid charge, concluding that it constituted a floating charge. The court also dismissed the argument that a floating charge could not be created over immovable property, referencing Palmer's Company Law, which supports floating charges over all company property.
Judgment:
Special Appeal No. 826 of 1962 was dismissed, affirming that the appellant, though a secured creditor, was postponed to the creditors mentioned in Section 230(1). Special Appeal No. 525 of 1962 was allowed in part, remanding the matter to the company judge with directions to allow payment to the appellant upon execution of an indemnity bond and furnishing a bank guarantee. The guarantee should cover potential claims on the debentures and last for a period fixed by the court. The parties were directed to bear their own costs for both appeals.
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1964 (1) TMI 5
Construction of the proviso to sub-section (3) of section 34 of the Indian Income-tax Act, 1922, as amended by Act 25 of 1933 questioned
Held that:- tion was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-section (3) of section 34, which deals with completion of an assessment, but would have been added to sub-section (1) thereof.
The said proviso would not save the time-limit prescribed under sub-section (1) of section 34 of the Act in respect of an escaped assessment of a year other than that which is the subject-matter of the appeal or the revision, as the case may be. It follows that the notice under section 34(1)(a) of the Act issued in the present case was clearly barred by limitation. Appeal dismissed.
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1964 (1) TMI 4
Whether the view of the High Court was that the provisions of the second proviso to section 34(3) would not apply to a case where the escaped assessment is of an amount less than a lakh of rupees and more than eight years have elapsed?
Held that:- Apparently, the High Court has overlooked the fact that the second proviso to sub-section (3) of section 34 was amended first by Act 25 of 1953 and then by Act 18 of 1956. By the amendment of 1953, for the word " sub-section ", the words " section limiting the time within which any action may be taken or any order, assessment or reassessment may be made " were substituted. By the amendment of 1956 it now stands as already quoted by us. If the proviso in its present form applies here it would govern the whole of section 34(1) and would consequently include even an escaped assessment with respect to which limitation is provided in clause (ii) of the first proviso to section 34(1). The result, in our opinion, would be the same even if the case were to fall to be governed by the Amending Act of 1953, though not by that of the Amending Act of 1956. We may add that the amendment of 1953 took effect from April 1, 1953, and that of 1956 from April 1, 1956.
For the reasons stated above, the decision of the High Court is clearly wrong.Appeal allowed. Case remanded.
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1964 (1) TMI 3
Issues:
1. Misconceived petition challenging excise duty levy on "M. G. White Poster Paper."
2. Validity of demand notice issued by Deputy Superintendent of Central Excise.
3. Finding of Collector of Central Excise regarding classification of paper under entry 17(4).
4. Allegation of ignoring communication from Central Board of Revenue.
5. Competence of Central Excise Authority to levy additional duty retrospectively.
Analysis:
1. The petitioner, a paper manufacturer, challenged the excise duty levy on "M. G. White Poster Paper" from 1959 to 1961 under the Central Excises and Salt Act. Authorities claimed short-levy under entry 17(4) instead of entry 17(3), leading to a demand notice for additional duty. The petitioner appealed to higher authorities and eventually approached the High Court under Art. 226 of the Constitution to quash the initial intimation by the Deputy Superintendent of Central Excise.
2. The High Court noted that the impugned letter was not a judicial order affecting the petitioner's rights but a mere intimation of the authorities' opinion on the classification of the paper. The actual grievance was the demand notice issued subsequently, which was not challenged in the petition. Therefore, the Court held that the intimation could not be quashed under Art. 226.
3. The Collector of Central Excise had determined that the paper fell within entry 17(4) after examining samples and evidence. The Court emphasized that this finding was a matter of fact supported by valid reasons, and there was no apparent error in the Collector's order. The correctness of this factual finding could not be re-evaluated in the present proceedings.
4. The petitioner's counsel argued that the authorities ignored a communication from the Central Board of Revenue, but since the letter was not presented, the Court could not consider this contention. The Court suggested that if there was merit in this argument, the petitioner should have pursued revision under Section 36 of the Act.
5. The petitioner contended that the Central Excise Authority lacked the competence to levy additional duty retrospectively. However, the Court pointed out that Rule 10 of the Central Excise Act allowed for such levies, and the petitioner did not challenge the validity of this rule. Therefore, the Authority was deemed competent to impose the additional duty, irrespective of the manufacturer's inability to pass on the duty to customers.
6. In conclusion, the High Court dismissed the petition, emphasizing that the grounds raised were not sufficient to challenge the excise duty levy on the "M. G. White Poster Paper." The petitioner was also directed to bear the costs of the proceedings.
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1964 (1) TMI 2
Issues Involved:
1. Admissibility of statements made to Customs authorities.
2. Applicability of Sections 24 and 25 of the Indian Evidence Act to statements made before the Collector of Customs.
3. Impact of Section 186 of the Sea Customs Act on subsequent criminal prosecution.
4. Satisfaction of the ingredients of Section 167(81) of the Sea Customs Act.
Issue-wise Detailed Analysis:
1. Admissibility of Statements Made to Customs Authorities:
The appellants contended that the statements made to the Customs authorities were inadmissible as they were not properly proved. The argument was based on the fact that the lawyer who signed the statements was not produced to prove them. However, the Court held that the statements were signed by both the appellants and their lawyer. The appellants admitted in court that they signed the statements, although they claimed ignorance of the content. The courts did not believe this claim, and the Supreme Court agreed. Since the appellants admitted their signatures, the statements were considered properly proved without the need for the lawyer's testimony. Thus, the contention failed.
2. Applicability of Sections 24 and 25 of the Indian Evidence Act:
The appellants argued that the statements made before the Collector of Customs were inadmissible under Sections 24 and 25 of the Indian Evidence Act. The Court referred to the precedent set in *State of Punjab v. Barkat Ram*, where it was held that customs officers are not police officers, making Section 25 inapplicable. Section 24, which deals with inducement, threat, or promise, was relevant. However, all courts found that the statements were not made due to any inducement, threat, or promise. Consequently, the statements were deemed admissible under Section 24.
3. Impact of Section 186 of the Sea Customs Act:
The appellants argued that after the award of confiscation and penalty under Section 167(8) of the Act, further criminal prosecution under Section 167(81) was barred by Section 186 of the Act. Section 186 states that the award of confiscation, penalty, or increased duty does not prevent punishment under any other law. The Court clarified that Section 186 is an enabling provision allowing prosecution under other laws despite penalties under the Act. It was not intended to bar prosecutions under the Act itself. The introduction of clause (81) in Section 167 allowed for prosecution even after penalties by Customs authorities. Thus, Section 186 did not bar the prosecution in this case.
4. Satisfaction of the Ingredients of Section 167(81):
The appellants contended that the prosecution failed to prove the intent to defraud the Government of duty or evade prohibition or restriction on the gold. The Court held that once it was established that the gold was smuggled, it implied that it was brought into the country without paying duty or violating prohibitions. Anyone dealing with such gold, knowing it to be smuggled, is presumed to have the intent to evade duty or prohibition. Therefore, the ingredients of Section 167(81) were satisfied.
Conclusion:
The Supreme Court dismissed the appeals, finding no merit in the contentions regarding the admissibility of statements, the applicability of Sections 24 and 25 of the Indian Evidence Act, the impact of Section 186 of the Sea Customs Act, and the satisfaction of the ingredients of Section 167(81). The Court also saw no reason to interfere with the sentences imposed, despite the appellants' request for a reduction in their substantive imprisonment.
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1964 (1) TMI 1
Reassessment notice - two conditions that (a) that the ITO must have reason to believe that the income, profits or gains chargeable to income-tax has escaped assessment or have been under-assessed, and (b) that he must have also reason to believe that such under-assessment of the income has occurred by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the particular year - above conditions not satisfied - appeal dismissed
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9911796707
