TMI Blog1990 (12) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... DIP SINGH. and K. RAMASWAMY. JUDGMENT The judgment of the court was delivered by K. RAMASWAMY J.- By a proceeding dated January 21, 1959, the respondent was assessed to income-tax for the assessment year 1957-58 ending with the financial year March 31, 1957. On transfer on point of jurisdiction, the Income-tax Officer, Special IV Circle, Cuttack, had drawn his proceeding on July 2, 1965, to reopen the assessment under sections 147(a) and 148 of the Income-tax Act, 1961 (for short "the Act"), and obtained the approval of the Commissioners of Income-tax, Cuttack, Bihar and Calcutta, thus : "The assessee sold his mining business during the relevant accounting year to a company named Messrs. B. Patnaik Mines P. Ltd. and earned profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power under section 147(a) of the Act, held that the income derived by the respondent was towards sale of goodwill and that, therefore, the income was not liable to capital gains tax and the impugned notices were quashed. The High Court granted leave under article 133(1)(a) and (b) of the Constitution. Thus this appeal. The contention of Dr. Pal, learned counsel for the respondent, is that the Income-tax Officer merely communicated the notice without complying with the provisions of section 147(a) read with section 148 of the Act. The Income-tax Officer must have reason to believe that the income for the relevant assessment year had escaped assessment and that the escapement of the income was on account of the omission or failure on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered judgment of the learned single judge. Section 12B of the Indian Income-tax Act, 1922, making capital gains liable to tax had come into force with effect from April 1, 1957. Therefore, for the assessment year 1956-57, i.e., financial year ending with March 31, 1956, capital gains were not liable to tax. It is not also in dispute that the respondent claimed that the income of Rs. 15,00,000 was received before March 31, 1956. Consequently, the Income-tax Officer did not assess Rs. 15,00,000 to capital gains tax. By agreement dated November 3, 1956, the assets and goodwill of the mining business of the respondent were transferred to Messrs. B. Patnaik Mines P. Ltd. for a consideration of Rs. 15,00,000 payable in instalments. The Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer, but was not available at the time of the original assessment, disclosed that the date of transfer of the business under law fell during the accounting year ended on March 31, 1957. Hence, it was necessary to reopen the assessment for the year 1957-58. This finding was affirmed by the Division Bench. It is undoubtedly true that the notice does not prima facie disclose the satisfaction of the two conditions precedent enjoined under section 147(a), but in the counter-affidavit filed by the Income-tax Officer in the High Court, he stated all the material facts. The respondent had inspected the record and the record also bears out the existence of the material facts. The proceedings drawn up which are abstracted earlier also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 15,00,000 was excluded from consideration in the assessment. The subsequent information in the possession of the Income-tax Officer discloses that the assets were transferred on November 3, 1956, by which date section 12B came into force. It is true that the Division Bench has stated in the judgment that it repeatedly enquired of counsel for the Revenue whether the income was towards the transfer of goodwill of the mining business as an on-going concern or a capital receipt and that no satisfactory reply was given by counsel. We are afraid that it is not correct to reach a conclusion or to record a finding on the basis of indecisiveness of counsel for the Revenue to make a positive statement or a wrong concession that the sum of R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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