TMI Blog2001 (12) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bengal Public Demands Recovery Act, 1913. The petitioner purchased the said premises subject to prior encumbrances for a total price of Rs.2,27,250. The auction under the Bengal Public Demands Recovery Act, 1913, was for recovery of sales tax. The petitioner took possession of the said premises and the same had been mutated in the name of the petitioner in the records of the Calcutta Corporation. On April 3, 1957, the Hongkong and Shanghai Banking Corporation, Calcutta, filed a suit against the original owner of the premises as well as the petitioner for recovery of a sum of Rs.35,34,063.11.6 on the ground that the premises had been mortgaged by the original owner to the bank. The interlocutory application filed by the bank in the said suit was disposed of by an order dated April 29, 1957. The said order in so far as it is material provides as follows (wherein the petitioner is referred to as the defendant firm and the bank as the plaintiff-bank): "It is ordered by and with the consent of the plaintiff-bank and the said defendant firm and without prejudice to the rights and contentions of the parties that the said defendant firm shall collect the rent issue and profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,40,000 on account of interest. This has been done by the bank. In the meantime a series of notices under section 148 of the Act were issued to the petitioner. These notices have been separately challenged in different proceedings as noted below: ------------------------------------------------------------------------------------ Year Notice Proceedings ------------------------------------------------------------------------------------ 1. 1970-71 30-3-1987 Matter No. 2429 of 1987; Rule nisi and interim order issued; 2. 1971-72 29-3-1988 Matter No. 3389 of 1988; 3. 1972-73 31-3-1989 Matter No. 622 of 1990; 1974-75 -- Interim order issued; 4. 1975-76 -- 1976-77 -- Appeals pending before the Tribunal; 5. 1977-78 -- Proceedings dropped. ------------------------------------------------------------------------------------ The reasons recorded for issuing the impugned notices have been disclosed by the respondents. The reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6'." A reading of the statement of the plaint and the judgment of the Calcutta High Court suggests that the payment of Rs.2,10,000 was never towards the interest. Hence, the assessee failed to disclose fully and truly in the original return all the primary facts necessary. I have, therefore, reason to believe that the assessee's income to the extent of Rs.2,10,000 chargeable to tax has escaped assessment for the assessment year 1970-71 due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Pursuant to the impugned notice the petitioner filed a return in respect of the assessment year 1970-71. As per the case of the writ petitioner the said return was filed under cover of a letter in which it was made clear that the same was being filed without prejudice to the petitioner's rights and contentions. The petitioner offered to settle the proceedings between the parties. Several letters were written. The last letter written ultimately on March 9, 1989, was to the following effect: "(a) We will have also no objection if the sum of Rs.9,02,292 received from Hongkong Bank during the previous year relevant to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer as a result of which the income had escaped assessment justifying reopening of the assessment for the assessment year in question under section 147(a) of the Act as it stood at the material time. The learned judge refused to accept any of the contentions raised by the Revenue and allowed the writ petition filed by the writ petitioner. Being aggrieved by and dissatisfied with the impugned order passed by the learned judge the instant appeal has been preferred by the Revenue as the appellants alleging, inter alia, that the learned judge erred in not holding that the conditions precedent to exercise of jurisdiction under section 147/148 of the Income-tax Act existed in this case before the issue of notice under section 147/148 of the Income-tax Act, that the learned judge should have held that the income of the assessee escaped due to non-disclosure of material fact by the writ petitioner at the time of the original assessment and the learned judge erred in law in holding that all material and primary facts were disclosed by the writ petitioner at the time of the original assessment. It has been further alleged by the appellants that the learned judge oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year; or ... he may, 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 underassessed; 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 necessari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in account books, particular portions of documents, and documents and other evidence which could have been discovered by the assessing authority, from the documents and other evidence disclosed. The duty however did not extend beyond the full and truthful disclosure of all primary facts. Once all the primary facts were before the assessing authority, it was for him to decide what inferences of facts could be reasonably drawn and what legal inferences had ultimately to be drawn. It was not for anybody else--far less the assessee--to tell the assessing authority what inferences, whether of facts or law, should be drawn." In the said case the alleged non-disclosure of material facts fully and truly was the failure of the assessee to disclose "the true intention behind the sale of the shares". The assessee had stated during the assessment proceedings that the sale of shares during the relevant assessment years was a casual transaction in the nature of mere change of investment and the Income-tax Officer found later that those sales were really in the nature of trading transactions. The Revenue contended that the assessee ought to have stated that they were trading transactions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises were purchased by the petitioner subject to the liability of Rs.35 lakhs to the bank had been disclosed to the Income-tax Officer. It is significant to note that the nature of payment of Rs.17,500 per month, i.e., whether on account of interest or by way of capital expenditure to the bank could not be ascertained from the order itself which was passed as far back as on April 29, 1957. The said interim order was already quoted. The suit was decreed in 1976. It has rightly been held by the learned judge that it was only when the decree was passed in 1976 that the payment could be said to have been towards the payment of the principal claim of the bank and as such there was no question of the petitioner (presently the respondent) failing to disclose any fact at the time of assessment or misrepresenting any fact. No question of misrepresentation arose in such case. It can in no way be assumed in a justifiable manner that the respondent/writ petitioner could have disclosed other facts at the material time which could have led the Income-tax Officer to the conclusion that the payment of Rs.17,500 per month was on account of capital expenditure. While dealing with this aspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year had escaped by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. It has been further held in the said case that the Income-tax Officer had all the material facts before him when he made the original assessment and as such he could not subsequently take recourse to section 147(a) to remedy the error resulting from his own oversight. In the case on hand after carefully going through the materials on record we are clearly of the view that all the primary facts were disclosed by the assessee-firm before the Income-tax Officer concerned at the time of the original assessment and as such there was no omission or failure on the part of the assessee respondent to disclose fully and truly all material facts. In such event, the income-tax authority cannot now take recourse to section 147(a) of the Act. The learned advocate for the appellants has cited the following rulings: (1) Sri Krishna Pvt. Ltd. v. ITO [1996] 221 ITR 538 (SC), 539, 546 to 549; (2) Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC); (3) Indo-Aden Salt Manufacturing and Trading Co. Pvt. Ltd. v. CIT [1986] 159 ITR 624 (SC); (4) Praful Chu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direction for payment of Rs.17,500 per month which was made at the interlocutory stage of the suit. This order was duly produced and had been shown in the accounts of the particular assessment year in question and also was duly produced by the assessee before the Income-tax Officer. They claimed that such an amount was paid on account of interest. In this connection, we may also refer to the original order of assessment from which it would be evident that the Income-tax Officer had considered such payment and also considered whether the claim of the assessee that this payment was made on account of interest was justified or not. After hearing the assessee and after examining the entire materials on record which clearly disclosed the amount claimed by the assessee on account of interest the Income-tax Officer came to a legal inference in his original assessment order to the extent that such amount was paid or deposited in lieu of interest. Therefore, in our view, the writ petitioner/respondent had disclosed fully and truly in its original return all facts, which were necessary for assessing the assessee for the assessment year in question. That being the position we are of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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