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TMI Blog1972 (7) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in regard to notices issued under section 148 of the Act for reassessment as envisaged by section 147 of the Act. At the time the learned judge heard the case, assessment orders had been passed and appeals had been filed by the assessee and those appeals were pending. It was, therefore, urged on behalf of the revenue that the petition should be dismissed as the assessee had right to have the matter decided by the Appellate Assistant Commissioner and had a further right in second appeal and even on a reference to this court. Counsel for the assessee relied on the decision of the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District, Calcutta and contended that this court has not only jurisdiction but that this is a fit case where this court should interfere if it is satisfied that there was no material available before the Income-tax Officer on which it was reasonably possible to infer that the income of the requisite amount had escaped assessment as detailed in section 149 of the Act. We shall deal with this question first. The circumstances under which this court will have jurisdiction to deal with applications of this nature have been deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there had been such non-disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. Therein, it was observed that the expression 'reason to believe ' in section 34 does not mean 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. It is open to the 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, 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." The above observations were made after referring to an earlier decision of the Supreme Court in S. Narayanappa v. Commissioner of Income-tax. We may extract a part of the judgment in 63 I.T.R. 219 at page 221 : " . . . . if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, subject to the provisions of sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1. -For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: -- (a) where income chargeable to tax has been under-assessed ; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax, Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed. Explanation 2.-Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section. 148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under section 147, the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, namely, 1954-55. In such cases, section 149 of the Act is attracted and reassessment proceedings can be commenced only if the Income-tax Officer had reason to believe that the income chargeable to tax which had escaped assessment amounted or was likely to amount to rupees fifty thousand or more for that year. Under section 142, the Income-tax Officer is obliged to record his reasons before issuing the notice under section 148(1) of the Act and from section 15(1) it is clear that the Board has to be satisfied on the reasons recorded by the Income-tax Officer that the case is a fit one for issue of notice under section 148. The assessee, the petitioner before us, had filed returns for the year in question and had also furnished material before the original assessment orders were made. It is admitted that those assessment orders were sought to be reopened for the reason mentioned in section 147(a) ; the latter part of section 147(a) which speaks of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year as a consequence of which income chargeable to tax had escaped assessment for that year. We would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s suppressed by the assessee. The 1st respondent is now coming to a different conclusion on the same materials placed before the assessing authority at the time of the original assessment. This is not to be treated as a ground for reopening the assessment. Another ground which weighed with the 1st respondent for reopening the assessment is that the petitioner did not disclose in his wealth statement as on December 31, 1953, an amount in fixed deposit in Indian Bank, Matunga, Bombay. The deposit matured in the year 1953 and was received back by the petitioner in, October, 1953, itself, and so this was not stated in the wealth statement as on December 31, 1953, as an item of wealth of the petitioner. There are no materials available before the Income-tax Officer on which be can come to a conclusion that this deposit was still a wealth available with the petitioner as on December 31, 1953. So also payments towards chitty with the Cochin Nair Bank, where the chitty itself matured or terminated in the year 1952 is treated by the Income-tax Officer as an item of wealth available as on December 31, 1953. There are similar patent mistakes in the proposal for reassessment which on a scrutin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the years. Reasons were recorded by the Income-tax Officer before the decision to issue notice under section 148. These reasons had not been produced. Counsel for the revenue later produced the reasons. A glance at those reasons would show that money expended for the purchase of lands and other property from the year 1946 to 1948, both inclusive, had been taken into account in reaching the figure of Rs. 2,54,740. Items 1 to 7 at pages 4 and 5 of the document containing the reasons recorded by the Income-tax Officer which was produced before us amount to Rs. 30,578, all pertaining to purchase or acquisition of other property before the earliest of the accounting years, namely, 1949, relating to the corresponding assessment year 1950-51. These are completely extraneous and irrelevant considerations and could never form the basis of any material which can supply information to formulate reasonable belief. Similarly, page 7 of the document which we have marked exhibit " x " shows that a capital gain is said to have been earned by the assessee by the sale of a property of his in Bombay in 1947 for Rs. 1,25,000. The capital gain is said to be Rs.56,000 plus what the Income-tax Officer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1950-51 to 1954-55, income in excess of Rs. 50,000 had escaped assessment. This is also not seen from the records that were made available. There was no material it appears before the Income-tax Officer which would enable him to say that in any of the five years 1950-51 to 1954-55 income to the extent of Rs. 50,000 or more had escaped assessment or was likely to have escaped assessment. In these circumstances we have to come to the conclusion that the require ments of section 147(a) read with section 149 had not been satisfied and the Income-tax Officer had no jurisdiction whatever to initiate proceedings for reassessment of the petitioner for the five years 1950-51 to 1954-55. We have already referred to the question whether we will be justified in interfering in view of the assessment orders having been passed for the five years after we issued notice on this petition. We think the procedure adopted by the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer will have to be followed by us. Any assessments completed during the pendency of this writ application, we consider, must depend on the decision that we take in this case and if there was no jurisdiction to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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