TMI Blog1973 (5) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... For all these years the first question referred to this court is: "Whether, on the facts and in the circumstances of the case, the income from the house properties at 53A and 53B, Gariahata Road, Calcutta, was rightly included in the total income of the assessee under section 16(3)(a)(iii) of the Indian Income-tax Act, 1922 ?" In appears that the said question had also been referred for the assessment year 1956-57 in Income-tax Reference No. 42 of 1963. This court has answered the question in the affirmative and in favour of the revenue. In view of the aforesaid decision in Income-tax Reference No. 42 of 1963 the question No. 1 has to be answered in the affirmative and in favour of the revenue. For the assessment years 1954-55 and 1955-56 another question being question No. 2 has been referred to this court in the instant reference. The said question is as follows: "Whether, on the facts and, in the circumstances of the case, the Tribunal could in law uphold the assessments for the assessment years 1954-55 and 1955-56 on the notices under section 34(1)(a) with reference to the powers under section 34(1)(b) of the Indian Income-tax Act, 1922 ?" In order to appreciate this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on merits that the properties in question had been constructed in the name of the assessee's wife with the funds provided directly or indirectly by the assessee and as such section 16(3) was applicable. Following the aforesaid decision of the Tribunal for the assessment years 1947-48 to 1949-50, the Tribunal held that the assessments for the years 1950-51 to 1953-54 could have been reopened only under section 34(1)(b), and as the period of limitation of four years had expired these assessments were bad in law. As regards the assessment years 1957-58 and 1958-59 which were assessments under section 23(3) the Tribunal held that the Income-tax Officer had correctly applied the provisions of section 16(3) of the Indian Income-tax Act, 1922, and the inclusion of property income in the assessee's total income was proper. As regards the assessment years 1954-55 and 1955-56 the Tribunal observed that the proceedings under section 34 were commenced and completed within four years from the end of the relevant assessment year. Though the Income-tax Officer had acted under section 34(1)(a) the Tribunal supported the assessment as having been made with reference to the powers available under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that section 34(1)(a) of the Indian Income-tax Act, 1922, and section 34(1)(b) of the said Act gave two different jurisdictions to be exercised in two different contingencies and one was exclusive of the other and if the Income-tax Officer had initiated proceeding under one jurisdiction the Tribunal had no power to convert that proceeding into a proceeding under a separate jurisdiction. In support of this contention reliance was mainly placed on a decision of the Supreme Court in the case of Johri Lal v. Commissioner of Income-tax. There the Supreme Court observed that where the Income-tax Officer himself had proceeded on the basis of section 34(1)(b) of the Indian Income-tax Act, 1922, and not on the basis of section 34(1)(a), in the absence of material on record to show that the Income-tax Officer had formed the requisite belief, recorded his reasons for taking action under section 34(1)(a) and had obtained the sanction of the Central Board or the Commissioner, as the case might be, it was not open to the Appellate Tribunal to justify the proceedings taken by the Income-tax Officer under section 34(1)(a). It was further observed that the formation of the required belief by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the proviso to section 34(1) of the Act but action under clause (b) has to be taken within four years from the end of the relevant assessment year. The proviso to section 34(1) contains certain other limitations for a notice under clause (a) of sub-section (1) of the said section and one of the important limitations is that the Income-tax Officer before taking action should record his reasons for so doing and in certain cases should obtain the sanction either of the Commissioner or of the Central Board of Revenue, as the case may be. Under sub-section (3) of section 34 the reassessment under clause (b) of section 34(1) has to be completed within four years from the end of the year in which the income, profits or gains were assessable. The said conditions of the proviso to section 34(1) do not apply to the notice under clause (b) of section 34(1). An examination of different ingredients of clause (a) and clause (b) of section 34(1) indicates that under clause (a) it is essential for the Income-tax Officer to have reason to believe: (i) that there was omission or failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income provided it is within four years of the completion of the original assessment and the belief to that extent is reasonably formed then action under clause (b) of sub-section (1) of section 34 can be taken. In the case of P. R. Mukherjee v. Commissioner of Income-tax a Division Bench of this court observed that it was not necessary or imperative that notice under section 34 must specify under which of the two Clauses of the section, clause (a) or clause (b), the notice was issued. The main notice, it was observed, to be issued in a case under section 34 was the notice under section 22(2). Section 34 merely authorised the issue of such a notice. In that case it was held that the words with which clause (b) of section 34(1) opened should be taken as contemplating both a case where there was no actual omission or failure to mention all material facts and also the case where there was an omission or failure in fact but such an omission or failure was not in respect of facts known to the assessee at the time and, therefore, was not deliberate. It was observed by the court that action which was purported to be taken under section 34(1)(a) of the Indian Income-tax Act, 1922, cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (b) can be issued and assessment has to be completed do not indicate that clause (a) or clause (b) deal with two separate jurisdictions. It is true that there are separate limitations prescribed for different contingencies but some of the conditions are common and provided the conditions which are common are all fulfilled and the other limitation of the other clause is also fulfilled, then action taken in respect of one might be justified with reference to the powers under the other clause. In the aforesaid decision Manchanda J. observed that even though the Income-tax Officer might have chosen to make the assessment under the more stringent and onerous provisions of section 34(1)(a), there was nothing to prevent the appellate court from invoking section 34(1)(b) provided the pre-requisite conditions were satisfied and these were found on record. The learned judge further observed that section 34 was not a charging section. It merely provided a machinery whereby an income which had escaped assessment or had been under-assessed in the relevant assessment years could be brought into the network of taxation. With respect, we are in agreement with the aforesaid view expressed by Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r subsequent to the original assessment. The objection to the action in this case seems to be that the Income-tax Officer had, however, formed the belief that such an escapement of income was due to the conduct of the assessee. The expression used in clause (b) does not exclude a situation where if on the materials the Income-tax Officer thought that there was an omission but the materials were not such to justify that belief but there were materials to show that the income had escaped assessment and such information came subsequent to the original assessment provided action is taken within four years from the end of the relevant year. It is true that action taken under section 34(1)(b) by the Income-tax Officer could not be justified by the appellate authority if these essential conditions are not fulfilled. But the situation is different where action is taken under clause (b), then the Income-tax Officer has to fulfil the conditions of clause (a) in order later to sustain action under that clause and if these are not fulfilled the Tribunal cannot validate the assessment in such a case. If, however, these conditions for action under clause (b) had been fulfilled, as it appears fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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