TMI Blog1969 (1) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner. Jaishi Ram in his individual capacity was a partner of a firm known as Walaiti Ram Jaishi Ram. There were several other partners in that firm, but none of them was a brother of the petitioner. Jaishi Ram (Hindu undivided family), with which assessee alone we are directly concerned in this case, was disrupted by an award dated September 12, 1960, registered with the Sub-Registrar, Amritsar, on January 5, 1961. It is stated by the petitioner that a complete partition of the Hindu undivided family property was effected. By an order dated August 24, 1965, passed by the Income-tax Officer under section 25A of the 1922 Act, the disruption and partition was accepted by the income-tax authorities. Jaishi Ram died on October 23, 1961. The income-tax assessment of the Hindu undivided family in respect of the assessment year 1943-44 was completed on the 3rd February, 1944. The assessment of the Hindu undivided family for the assessment year 1944-45 was made on the 26th June, 1946. The assessment of the partnership firm in respect of the assessment years 1943-44 and 1944-45 was made by the orders of the Income-tax Officer, Amritsar, on January 18, 1944, and June 26, 1946, respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) which was stated to have been already disclosed in notice dated February 19, 1963, issued under section 23(3) of the Act. The notice dated February 18, 1963 (copy annexure "RB") disclosed the basis for starting the impugned proceedings in respect of the assessment year 1943-44 in the following words: "There is a deposit of Rs. 27,996 in the books of M/s. Walaiti Ram Jaishi Ram which is alleged to represent the sale proceeds of gold belonging to Shri Kishen Das, deceased. The source of this gold has not adequately been explained." The same notice (annexure "RB") discloses the basis for starting proceedings under section 34(1)(a) in respect of the assessment year 1944-45 in the following words: "The family made investments of Rs. 6,00,000 in Jagdish Trading Company, Srinagar, as per details given below: (i) 20-6-43 2,00,000 15-8-43 1,00,000 28-8-43 50,000 20-9-43 1,00,000 10-10-43 1,50,000 (ii) Rs. 28,425 deposited in the books of Walaiti Ram Jaishi Ram, Amritsar. (iii) Rs. 85,060, cash, alleged to have been recovered from Kishen Das's box on his death as noted in the account books of the firm, M/s. Walaiti Ram Jaishi Ram, Amritsar. (iv) Rs. 25,000, estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion or failure on the part of Jaishi Ram Mehra (Hindu undivided family) to disclose fully and truly all material facts necessary for assessment of the Hindu undivided family for the assessment years 1943-44 and 1944-45 which might have resulted either in under-assessment or an escapement of income from assessment. It was, in the above circumstances, that the petitioner prayed in this case for the issue of a mandamus directing the Income-tax Officer to refer the question of jurisdiction to the Commissioner of Income-tax and also directing the Commissioner to decide the reference and for a writ in the nature of certiorari for quashing the impugned notices dated November 16, 1960 (annexures "B C"), and February 10, 1966 (annexure "D"). A writ in the nature of prohibition for restraining respondent No. 1 from taking any assessment proceedings in pursuance of the notices referred to above was also prayed for. As already stated, the question of issue of mandamus to respondents Nos. 1 and 2 in terms of the prayer referred to above does not now arise; and the only question which calls for decision is whether, in the circumstances of the case, as admitted before me, it can or cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed,......." In S. Narayanappa v. Commissioner of Income-tax, it was held that the existence of the belief requisite under section 34(1)(a) can be challenged by the assessee but not the sufficiency of the reasons for the belief. It was further held that the expression "reason to believe" in section 34 does not mean a purely subjective satisfaction on the part of the Income-tax Officer and that it is open to a court to examine 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, held the Supreme Court, 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. In Kantamani Venkata Narayana and Sons v. First Additional Income-tax Officer, Rajahmundry, the same, position of law was reiterated by their Lordships of the Supreme Court and it was further added that in proceedings under article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material on record or from the facts disclosed thereby or from other enquiry into facts or law but were not in fact obtained though the information must have come into possession of the Income-tax Officer after the previous assessment. The last case to which reference may be made in this respect is the judgment of the Supreme Court in Sowdagar Ahmed Khan v. Income-tax Officer, Nellore. In that case it was held should that the Income-tax Officer had jurisdiction under section 34(1)(a) to issue the impugned notice as on the facts of the case there was some material in possession of the Income-tax Officer on which he formed the prima facie belief that the assessee had failed to disclose fully and truly all material facts and in consequence of such non-disclosure income had escaped assessment. It was contended by Mr. Bhagirath Dass that the material which is said to have been not disclosed must be relevant for the purposes of assessment it of the particular year in respect of which the proceedings are sought to be reopened under section 34. For this proposition also, counsel relied on the judgment of the Supreme Court in the case of Kantamani Venkata Narayana and Sons. It was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 34 would be valid only if the facts or figures on the non-disclosure of which the requisite belief is based: (i) either admittedly relate to the assessee concerned or are at least alleged to relate to him; and (ii) the non-disclosed facts or figures have relevance to the income of the accounting period in respect of which the assessment proceedings are sought to be reopened. It is in this background of the legal position that I am called upon to decide about the validity of the two notices. In respect of the assessment year 1943-44, the solitary basis of the belief which has prompted the issue of the impugned notice (annexure "B") is that there is a deposit of Rs. 27,996 in the books of the partnership firm, Messrs. Walaiti Ram Jaishi Ram, and the said deposit is alleged to represent "the sale proceeds of gold belonging to Kishen Das, deceased". The alleged basis of the requisite belief is that the source of the said gold has not been adequately explained. It is significant that the impugned notice has not been sent to Messrs. Walaiti Ram Jaishi Ram in whose books the relevant entry has been found; nor was any notice sent to Kishen Das, the sale of whose gold is allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shi Ram) made investment of six lakhs of rupees in Jagdish Trading Company, Srinagar, as per details in annexure "RB". It is stated in the noted annexure "RB" that the sum of six lakhs of rupees belonged to the Hindu undivided family of Jaishi Ram. It is not disputed that the said credit item had not been shown anywhere in the return of income-tax for the assessment year 1944-45 though all the deposits totalling six lakhs of rupees referred to in the said item were placed in the Jagdish Trading Company during the accounting year relevant to the assessment year, i.e., year ending March 31, 1944. Mr. Bhagirath Dass has emphasised that no belief requisite under section 34 could be formed validly on the above said ground, as it was no part of the duty of the assessee Hindu undivided family to disclose its investments in income-tax return under the 1922 Act till the enforcement of the Wealth-tax Act, with effect from April 1, 1957. Return of income under section 22 of the Act is intended to contain all information relating to income of the assessee but not relating to the capital investment, movable property or wealth of the assessee. Counsel has also referred to the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equisite belief under section 34 of the Act, the impugned notice (annexure "C") cannot be struck down as one of the grounds (recited in item No. 1) is valid and germane to the forming of the requisite belief. Nothing stated by me in this judgment would, however, amount to an expression of opinion as to the allegation of the respondents about the various disputed items referred to in the notice (annexure "RB") being or not being of the Hindu undivided family or having or not having relation to the income of the Hindu undivided family during the relevant year. These are matters which the authorities under the Act will have to adjudicate upon in accordance with law. Mr. Awasthy submitted that the income-tax authorities may possibly understand that I have debarred them from holding that the amounts mentioned in items Nos. 2 to 4 of the notice (annexure "RB") do really represent the property or income of the Hindu undivided family assessee though it is expressed to be benami in the name of Kishen Das. The apprehension of Mr. Awasthy is misconceived as I have expressed no opinion about the merits of the controversy. It would be for the authorities under the Act to decide whether in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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