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TMI Blog1990 (12) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 profit of Rs. 15 lakhs which was assessable as capital gains but was not shown by the assessee in his return. The transfer of the business was stated by the assessee to have been made on March 31, 1956, and, as such, the amount of capital gains was not liable to taxation, it was claimed by the assessee, since capital gains was not subjected to taxation in the assessment year 1956-57. But from information now available it appears that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 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 part of the Assessee to disclose fully and truly all material facts necessary for that assessment year. The sum of Rs. 15,00,000 received by the respondent was consideration for the transfer of the goodwill of the business as an ongoing concern. The Income-tax Officer had no, reason to believe that income had escaped assessment for that year. The findings of the courts below that the respondent failed to disclose the material fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequently, 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-tax Officer, subsequently, came into possession of this information through the Director of Mines by letter dated June 29, 1965. On the basis of this information, the aforestated proceedings to reopen the assessment have been drawn up by the Income tax Officer. Section 147(a) of the Act postulates two conditions, namely, that the Income-tax Officer must, on the basis of material facts on record, prima facie, be satisfied that the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 show that the Income-tax Officer had applied his mind to the facts on record and was prima facie satisfied that the reopening of the assessment for the assessment year 1957-58 was needed due to those stated facts. Thus, though ex facie the notice does not disclose the satisfaction of the requirement of section 147(a), from the record and the averments in the counter affidavit, it is clear that the Income-tax Officer had applied his mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness 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 Rs. 15,00,000 was received towards consideration for sale of goodwill of the on going mining business. The Division Bench, therefore, has committed an illegality in reaching the above conclusion. Whether assets and goodwill together were transferred or the goodwill alone was transferred as an ongoing concern of the mining business is a matter yet to be gone into by the Income-tax Officer. It is open to the respondent to place all the nec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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