9911796707
TMI Blog1967 (7) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... part. The Appellate Assistant Commissioner held that, out of the sum of Rs. 30,000 assessed by the respondent as income from other sources, Rs. 26,722 alone related to the assessment year 1958-59, and that this amount should be added as undisclosed income from business. Accordingly he deleted the whole sum of Rs. 30,000 assessed by the respondent as income from other sources, and determined the total income of the petitioner from business as Rs. 35,947. The petitioner filed an appeal from the order of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal. The Tribunal further reduced the assessment, and fixed the petitioner's business income at Rs. 13,201 by its order dated 2nd April, 1962. The result was, whereas the petitioner made a return of Rs. 9,302 as income from his business, the Appellate Tribunal finally fixed it at Rs. 13,201, the addition being only Rs. 3,899. The Income-tax Act, 1922 (hereinafter referred to as the 1922 Act), was repealed and re-enacted as Income-tax Act, 1961 (hereinafter referred to as the 1961 Act). Clause (d) to section 297(2) of the 1961 Act reads as follows : "297. (2) Notwithstanding the repeal of the Indian Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 1957-58. The reasons for his belief are best stated in exhibit P-3 itself. He states in exhibit P-3 : "In appeal the Appellate Assistant Commissioner held that the Income-tax Officer's finding regarding income from undisclosed sources was substantially correct, but reduced the quantum to Rs. 26,772. The Appellate Assistant Commissioner also correlated the income of Rs. 26,772 from undisclosed sources in the addition made in the business income. So there was no separate addition under 'other sources'. The total income as fixed by the Appellate Assistant Commissioner was Rs. 35,947. The Appellate Assistant Commissioner also found that the investment of Rs. 26,772 was made in the earlier part of the Malayalam year 1132 M. E. i. e., before April, 1957. However, he did not give any direction to consider this income for 1957-58 assessment. Instead, he telescoped this in the business income. The assessee further went in appeal before the Appellate Tribunal which reduced the total income to Rs. 13,916. But it did not express any opinion on the Appellate Assistant Commissioner's finding that there was concealment of income to the tune of Rs. 26,772. In view of the Tribunal's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not explained in the counter-affidavit that, in view of the fact that the accounting year 1132 was the previous year of the petitioner for the assessment year 1958-59, how the amounts said to have been invested by him during the accounting year 1132, could be assessed as escaped income for the year 1957-58. The learned counsel appearing for the respondent has explained the position. He referred to section 69 of the 1961 Act, and submitted that this section deals with unexplained investments, which are not recorded in the books of account of an assessee, if any, maintained by him for any source of income, and about the nature, and source of which the assessee offers no explanation or the explanation offered by him is not satisfactory, and that it provides that such investments may be deemed to be income of the assessee of the financial year in which such investments were found to have been made. It was, therefore, contended by the learned counsel that the sum of Rs. 26,772 was assessable for the assessment year 1957-58 by virtue of above section 65. As explained in exhibit P-3, a sum of Rs. 3,899 out of the aforesaid sum had been included by the Appellate Tribunal in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar)." This section has two explanations ; and they are omitted here, being not relevant to the controversy. Sub-section (1) of section 149 of the 1961 Act reads as follows : "149. (1) No notice under section 148 shall be issued, (a) in cases falling under clause (a) of section 147 - (i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-clause (ii) ; (ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year ; (b) in cases falling under clause (b) of section 147, at any time after the expiry of four years from the end of the relevant assessment year. Admittedly, this is not a case falling under section 149(1)(a)(ii). According to the respondent, the case falls under section 149(1)(a)(i) ; and according to the petitioner, it falls under section 149(1)(b). There is no controversy that if the case does not fall under section 149(1)(a)(i), exhibit P-1, the notice issued under section 148, is time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment of the said income. It is also true that, as mentioned in exhibit P-3, a sum of Rs. 22,873 out of the above amount escaped assessment for the said year. But this alone is not sufficient to attract the application of section 147(a) ; it is also necessary, as I stated above, that this income must have escaped assessment by reason of the omission or failure on the part of the petitioner to make a return of his income or to disclose fully and truly all material facts necessary for its assessment. It is clear from the facts of the case that the escape of assessment of this income for the year 1958-59 was not by reason of any such conduct on the part of the petitioner. In spite of the petitioner's failure to disclose this income the Income-tax Officer discovered it and assessed it. In fact, he assessed a much larger amount. The Appellate Assistant Commissioner also confirmed the assessment. The only reason why this income escaped assessment was that the Appellate Tribunal did not take it into account, when determining the petitioner's total income under business, which it fixed at Rs. 13,201. As pointed out in Rao Thakur Narain Singh v. Commissioner of Income-tax, the proper cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer issued notice under section 34(1)(a) of the 1922 Act to reassess the said income. The question arose whether the income thus proposed to be assessed fell under clause (a) of section 34 or clause (b) of the said section. It was held in that case that the income fell under clause (a) of section 34. The learned counsel contended that, in that case as in this case, the income was wrongly assessed for one assessment year, but it was subsequently held that it was assessable for a different year, and such an amount was held to be an income which escaped assessment within the meaning of clause (a) of section 34(1), which corresponds to section 147(a) of the 1961 Act. But the difference between that case and the case in hand is that it was a case where the income was not disclosed nor considered in respect of the assessment year in which it should have been assessed. As I have pointed out earlier, in this case there cannot be any suppression of income as regards the assessment year 1957-58 ; because, according to the law then in force, this income could not have been returned nor assessed for the year 1957-58. It is only by virtue of section 69 of the 1961 Act that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. Again the expression 'reason to believe' in section 34 of the Income-tax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith ; it cannot be merely a pretence. To put it differently, it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law." If, on the facts, it is a clear case, to which section 147(a) is not attracted, as I have already held, the proceedings taken by the respondent is without jurisdiction, and the petitioner is entitled to a writ prohibiting the respondent from pursuing the said proceedings. Therefore, the respondent's contention that this court is not entitled to interfere with the respondent's action at this stage cannot be accepted. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
