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TMI Blog1964 (1) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ad appeared in response to a notice under section 23(2) and stated before the Income-tax Officer that he had been doing business on a moderate scale and kept no accounts for his business at all. On such a statement being made, the case was enquired into by the Income-tax Officer and, in the absence of any accounts or evidence in support of the return, the assessment was made under section 23(3) on the basis of the enquiries made by the Income-tax Officer. Against the order of the Income-tax Officer the assessee appealed to the Appellate Assistant Commissioner and contended that the substance of the enquiry made by the Income-tax Officer should have been disclosed to enable him to meet the case against him and the assessment made by the Income-tax Officer. The Assistant Commissioner found that the order of the Income-tax Officer was justified and that the estimate of profit at 7? per cent. on the turnover of ₹ 4,00,000 (four lakhs) was correct. The next chain of events towards the second assessment for the same assessment year 1948-49 started on the 4th December, 1951, when the assessee made a voluntary disclosure under the Tyagi Scheme stating that he had more money than wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was taken in appeal before the Appellate Assistant Commissioner. Accordingly, it was not open to him to protest against the rate being applied now. The finding made by the Appellate Assistant Commissioner was upheld by the Appellate Tribunal. The relevant portion of the decision is quoted below: "Having regard to the default under section 22(2) and putting the department on the wrong track as regards the existence of bank accounts and the dealings with the Bombay party, the assessee has, in our opinion, put himself within the pale of section 34(1)(a). So far as the voluntary disclosure scheme is concerned, we are not concerned with it, that being a matter solely within the purview of the revenue. But it is strange that even in a disclosure made ten months after the Appellate Assistant Commissioner had passed his order in February, 1951, the assessee kept silent about this Bombay transaction. There is also no doubt that the source for the payment of ₹ 7,340 out of ₹ 37,645 paid as income-tax has not been properly explained. In other words, he was content to have the turnover put at ₹ 4,00,000 though he knew very well that in any event it had exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner. In view of the order passed by the Income-tax Officer, it is contended by Mr. Roy that the Income-tax Officer accepted the position that there was no bank account of the assessee and in fact no accounts were kept. According to him, this position does not in any way warrant a conclusion that there was failure on the part of the assessee to make any disclosure of his assets and, as such, it could not give rise to initiation of the second proceeding under section 34(1)(a) by the Income-tax Officer. It will appear from a letter addressed to the assessee on the 14th August, 1957, that the Income- tax Officer proceeded on the footing that the initiation of the proceeding was commenced on some information that the assessee had purchased goods worth ₹ 6,49,000 (rupees six lakhs and forty-none thousand) from Messrs. Parameswari Prasad Nandlal of Bombay alone, during 2003-4 Diwali. On this fact he had reason to believe that the assessee's income for the assessment year 1948-49 was under-assessed and, accordingly, the proceeding under section 34(1)(a) was started. It has been urged that the expression "information" as used by the Income-tax Officer in his letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odest income and had no bank account or any other dealings there was an end of the matter. On a careful consideration of the order dated November 30, 1950, it appears that it is an innocuous or a colourless one and does not in any way show that he had accepted the position that full disclosure was made, within the meaning of section 34(1)(a) of the Act. Mr. Roy has tried to make out a strong case for his client as the word "information", which appears in clause (b) only, has been used by the Income-tax Officer and the appellate authorities in their orders under section 34(1)(a). This, according to Mr. Roy, shows a blatant irregularity in the procedure adopted by the said authorities. We do not think that this contention is correct. What appears from their order is that they were not oblivious of the fact that there was failure or omission on the part of the assessee to disclose material facts at the time of the first assessment and when they were apprised of the factum of non-disclosure regarding the Bombay transaction, reasonable grounds arose for initiating a case under section 34(1)(a) of the Act. This being the position, the word "information" has been used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact at the time of first assessment, viz., of the Bombay transaction referred to before, which could have a material bearing on the question of "under-assessment". Mr. Roy has referred us to a decision in M.O. Thomakutty v. Commissioner of Income-tax [1963] 47 I.T.R. 872. The Kerala High Court has reiterated the principle of law decided in the Calcutta Discount case [1961] 41 I.T.R. 191 ; [1961] 2 S.C.R. 241 stated above and has decided, inter alia, that if the assessee does not disclose his entire income, but only returns a part, there is an omission on his part to disclose fully and truly the material facts of his total income and section 34(1)(a) is attracted. There is, however, a distinguishing feature in this Kerala decision which is absent in the instant case. It has been observed by their Lordships that there is merit in the final contention that was raised on behalf of the assessee. There is nothing to indicate that at the time the assessee filed his return, his accounts relating to his Cochin business had been completed and that he knew exactly what his income was from that business. In the return he had only estimated that income to the best of his belief. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings that can be taken to reopen the assessment whether by way of assessment or reassessment, computation or recomputation. The next contention, as urged by Mr. Roy, is that this court should interfere, as on the following matters the findings of the Tribunal were based on no evidence at all: (a) There was default in filling the return under section 22(2). (b) The department was put on a wrong track by the assessee with regard to the bank account and dealings with the Bombay party as aforesaid. (c) There was an outright purchase and sale regarding the Bombay transaction and such a transaction is not in the nature of a brokerage transaction. (d) There was no account and, therefore, the rate of profit was ₹ 7? per cent. According to Mr. Roy, as the word "the assessment" used in the question embraces the element of initiation, continuation and termination of proceedings under section 34(1)(a), and as it starts with the all-comprehensive words "whether, on the facts and circumstances of the case...", this court can enter into the question whether the Tribunal's finding is based on evidence. It may be said at the outset that routine expressions li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pears from the questions suggested by the assessee that all of them refer only to the initiation of proceedings under section 34(1)(a) and nowhere, in the suggested questions, it has been made out that the factum of continuation and termination of the proceeding under this section is also sought to be challenged on the ground that there is no evidence for a finding on all these points against the assessee. The Tribunal, on the above materials, found that only the question referred to us is relevant for this court's decision. On a consideration of the question referred to us and the above facts, we can come to the only conclusion that justifiability or otherwise as to initiation of proceedings under section 34(1)(a) was aimed at. The matter bearing upon this aspect of the question has already been dealt with by us. In the absence, however, of specific questions directed against the findings of fact as stated before, there is no reasonable ground for holding that they should be interfered with by this court. Some questions were, however, sought to be raised by the assessee on factual aspects in his application for reference but, as they have been specifically refused by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the High Court could not be allowed to be raised before it. Consequently, any constitutional question in regard to discrimination under article 14 of the Constitution could not be raised before the Supreme Court in the appeal. In view of the latter decision, however, we must hold that, in our advisory jurisdiction, we cannot enter into the evidence for a decision that the findings of fact made by the Tribunal was erroneous in law. In support of our findings made in the foregoing paragraphs, reference may be made to the relevant portion of the Supreme Court decision in Guru Estate v. Commissioner of Income-tax [1963] 48 I.T.R. (S.C.) 53. At page 58, their Lordships have observed as follows: "At the hearing of the reference the High Court addressed itself to a question which was not referred by the Tribunal. The High Court on the assumption that a trust was intended to be created by the pilgrims by giving annadan proceeded to hold that the trust was a private trust. In so holding the High Court attempted to exercise not the advisory jurisdiction in respect of the decision of the Tribunal which alone is conferred by section 66(2) of the Indian Income-tax Act, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court to start by looking at the facts found by the Tribunal and answer the question of law on that footing. Any departure from this rule will convert the High Court into a fact-finding authority which does not come under the advisory jurisdiction. This decision in our opinion does not also help the assessee's contention as in the reported decision it appears that a specific question was raised as to whether there was material on the record to show that the decision of the Appellate Tribunal was based on no evidence and in that context the above decision was made. Such is not the case here and, therefore, the last contention raised by Mr. Roy must also fail. Our conclusion may, therefore, be summarised as follows: (1) The Income-tax Officer was justified in initiating a proceeding under section 34(1)(a) of the Act in view of the facts and circumstances of the case and that the Appellate Tribunal did not commit any error of law in coming to such a finding. It can nowhere be found that a proceeding under section 34(1)(a) was started in the garb of a proceeding under section 34(1)(b), and, consequently, it was not barred by limitation. (2) The second proceeding under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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