TMI Blog1970 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... 1953. He determined the assessee's business profits of the year ended on March 31, 1952, at Rs. 33,096, subject to the assessee's claim of unabsorbed depreciation brought forward to the extent of Rs. 42,000 and odd. After setting off the unabsorbed depreciation to the extent of Rs. 33,096, he determined the assessee's total income for the assessment year 1952-53 at "Nil". In the course of the assessment proceedings, the assessee-company informed the Income-tax Officer by its letter of July 2, 1953, about the sale of the assessee-company to the Amalgamated Electricity Co. (Belgaum) Ltd. (to be hereinafter referred to as the "Belgaum Co."). It also brought to the notice of the Income-tax Officer the following documents : (a) Appropriate extract from the minutes of the meeting of the board of directors of the Belgaum company held on April 16, 1951, agreeing to purchase the assets of the assessee-company ; (b) Resolution passed on September 19, 1951, by the board of directors for the assessee-company deciding to sell the concern to the Belgaum company : (c) Agreement dated September 19, 1951, between the said two companies. Later on, in response to a letter from the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held that the assessee had a statutory duty to submit a return showing all profits including the deemed profits under section 10(2)(vii). On a further appeal to the Tribunal, the impugned assessment was challenged on various grounds. It was urged before the Tribunal on behalf of the assessee that no portion of the price realised by the sale of its assets came within the scope of section 10(2)(vii) and further even if any portion of that price can be considered as deemed profits under section 10(2)(vii), it was impermissible for the Income-tax Officer to initiate proceedings under section 34(1)(a) as the assessee had placed all the primary facts before the Income-tax Officer and, therefore, it cannot be said that it had not fully and truly disclosed all material facts. On behalf of the revenue, it was urged before the Tribunal that the part of the price realised by the sale of the assets should be deemed as profits under section 10(2)(vii) ; those profits had not been included in the return of the assessee nor had the assessee placed all the material facts necessary for determining its tax liability ; therefore, the Income-tax Officer was justified in initiating proceedings und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully and truly all the material facts necessary for its assessment for that assessment year ? (2) Whether, where as a matter of fact, action for reassessment proceedings had been initiated on the belief that the provisions of section 34(1)(a) were properly applicable to the facts of the case the department was precluded from sustaining the validity of the reassessment made on the grounds that the reassessment fell as well within the scope of section 34(1)(b) ?" The High Court answered both these questions in favour of the revenue. Hence this appeal. In our judgment the Tribunal erred in declining to decide the question whether any portion of the sale price came within the scope of section 10(2)(vii). That question should have been examined at the very outset for the purpose of considering whether the assessee had placed before the Income-tax Officer truly and fully all materials facts necessary for the purpose of its assessment. If it is found that any portion of that sale price are profits then in our opinion the High Court was right in holding that the assessee had failed to place before the Income-tax Officer during the original assessment truly and fully all material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the price realised by it by sale of its assets was more than the written down value of those assets or at least the written down value of those assets amounts, in our opinion, to a failure on its part to disclose fully and truly the material facts necessary for its assessment. From the cryptic statement of the Income-tax Officer in the original assessment order that "no adjustment is necessary" the Tribunal was not justified in drawing the inference that the Income-tax Officer had considered all the relevant facts. In support of his contention that the disclosure made by the assessee was true and full in all material particulars and hence no proceedings could have been taken under section 34(1)(a), Mr. A. K. Sen, learned counsel for the assessee, relied on the decision of this court in V. D. M. Rm. M. Rm. Muthiah Chettiar v. Commissioner of Income-tax. In that case the question that arose for decision was whether the assessee's failure to include in his return the income of his wife and his minor sons admitted to the partnership of which he was a partner assessable in his hands under section 16(3)(a)(ii) can be considered as a failure to disclose truly and fully all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences--whether of facts or law--he would draw from the primary facts." In that case the question for consideration was whether the assessee had a duty to inform the Income-tax Officer with what intention the shares concerned in that case were sold. We do not think that the decision in question is of any assistance to the assessee. For the reasons mentioned above, we are of the opinion, that the High Court should not have and we in our turn will not answer the questions referred under section 66(1) of the Act because in our opinion those questions cannot be answered without first deciding whether the part of the sale price received by the assessee amounts to profits under section 10(2)(vii). The Tribunal must first decide that question and thereafter decide the other questions of law arising for decision on the basis of its decision whether there was any profits falling within section 10(2)(vii). In the result we allow this appeal and in place of the answers given by the High Court we enter a decision to decli ..... 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