TMI Blog1969 (2) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Rohatgi on the 31st January, 1934, under which Mr. Rohatgi was appointed the managing director, at an annual remuneration or a commission whichever might be higher. Until the assessment year 1943-44 the assessee-Hindu undivided family included the remuneration of Sri Rohatgi as managing director in its total income and was assessed accordingly. For the assessment year 1943-44 it was contended by the assessee that the remuneration earned by Rohatgi was his personal income and was not liable to be included in the assessable income of the family. This contention was rejected by the Income-tax Officer and the Appellate Assistant Commissioner. On appeal, the Tribunal held that a part of the remuneration was attributable to the personal services rendered by Mr. Rohatgi and as such was his personal income and the balance was assessable as income of the Hindu undivided family. On a reference, this court held that the managing director's remuneration was earned by Mr. Rohatgi under contract of service and should not be treated as the income of the family. The decision of the High Court was pronounced on the 8th September, 1955. The assessments of the assessee-Hindu undivided family for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereupon preferred appeals to the Tribunal. The Tribunal came to the conclusion that all the material facts, namely, the payment of the remuneration by the company and receipt of the same by the assessee, were in the possession of the Income-tax Officer at the time the original assessments were made. There was according to the Tribunal, therefore, no failure or omission on the part of the assessee to disclose any material fact which could attract the provisions of section 34(1)(a) of the Indian Income-tax Act, 1922. The Tribunal further held that the escapement of income was due to the change in the judicial decision. The Tribunal, in the premises, came to the conclusion that there was no valid reason for issuing notices under section 34(1)(a) of the Indian Income-tax Act 1922. The Tribunal further observed that, inasmuch as the reassessment proceedings were started beyond 4 years from the end of the respective assessment years, they were barred and the Tribunal was of the opinion that this bar of limitation could not be saved under the second proviso to section 34(3) of the Income-tax Act as the order of the Supreme Court was not, according to the Tribunal, an order under section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally states that it has been left out because of the decision of the High Court. In the decision of Calcutta Discount Co. Ltd. v. Income-tax Officer, Calcutta, the Supreme Court, analysing section 34(1)(a) of the Indian Income-tax Act, 1922, observed as follows : " It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed or otherwise, the assessing authority has to draw inferences as regards certain other facts ; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. " It is clear, therefore, that even though t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction to the Income-tax Officer to issue notices under section 34. " In view of the facts mentioned in the original assessment, where the Income-tax Officer has clearly stated that this income of Mr. Rohatgi has been excluded from the assessment of the Hindu undivided family in view of the decision of the High Court, it is clear that the escapement, if any, has taken place due to the decision of the High Court and not due to any omission on the part of the assessee. In that view of the matter the second condition necessary for attracting the provisions of section 34(1)(a) of the Indian Income-tax Act, 1922, is not present in this case. As was observed by the Supreme Court in the case of S. Narayanappa v. Commissioner of Income-tax, that in order to attract jurisdiction for the issue of notice under section 34(1) two conditions must be satisfied - (i) the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to income-tax had been under-assessed or escaped assessment and (ii) he must have reason to believe that such under-assessment or escapement had occurred by reason of either (a) omission or failure on the part of the assessee to make a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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