TMI Blog1961 (2) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out in the ordinary way some years ago and reassessment was carried out by the Income-tax Officer, A Ward, Jodhpur, after notice under section 34(1)(a), the date of these assessment orders being January 18, 1954. It may here be mentioned that up to the assessment year 1950-51 the position of the company was recognized by the income-tax authorities as non-resident in British India, and although in these assessment orders it was mentioned that a considerable income had accrued to the company from sales to the Government of India and other parties in British India, the income of these sales was held not to be taxable in Jodhpur and the figures relating to these sales to British India were only taken consideration for fixing the total world income of the company for the purpose of determining the rate of taxation. The company file appeals against the assessments made on January 18, 1954, but while these appeals were pending the Commissioner of Income-tax for Delhi, Ajmer, Rajasthan and Madhya Bharat, issued a notice to the company on January 9, 1956, under section 33B of the Act and after hearing the objections of the company passed an order on January 17, 1956, canceling t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59, the appeal was pending before the Appellate Assistant Commissioner. In the case of the final assessment years 1948-49 and 1949-50 the petition was filed in January, 1958, and the stay of proceedings was ordered with the result that the assessment by the Income-tax Officer (respondent) under section 34(1)(a) for these years has not yet been carried out. In the petition although the jurisdiction of the Income-tax Officer, Jodhpur, who carried out the assessments under section 34(1)(a) in 1954 has been challenged, this plea has not been pressed, and the principal argument advanced on behalf of the company has been that the necessary circumstances did not exist to give the Income-tax Officer (respondent) jurisdiction to proceed on notices under section 34(1)(a). This section reads : 34. Income escaping assessment. - (1) If - (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of such notice : Provided further that the Income-tax Officer shall not issue a notice under this sub-section for any year, after the expiry of two years from that year, if the person on whom the assessment or reassessment is to be made in pursuance of the notice is a person deemed to be the agent of a non-resident person under section 43 : Provided further that the tax shall be chargeable at the rate at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be : Explanation. - Production before the Income-tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section. It is contended on behalf of the company that in order to invoke the provisions of section 34(1)(a) it was necessary that any under-assessment of taxable income for the years in question should be the result of some omission or failure on the part of the company to disclose fully and truly all material facts necessary for the assessment for the years in question, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so fail and the petition under article 226 was dismissed. The appeal of the company was, however, accepted by the learned judges of the Supreme Court, who went very exhaustively into the question whether the first ground regarding conditions precedent to a notice under section 34 existed, or, in other words, whether the Income-tax Officer had reason to believe that there had been some omission or failure to disclose fully and truly all material facts necessary for the assessment. It appears that the report on which the Income-tax Officer obtained the sanction of the Commissioner to initiate proceedings was disclosed to the court and it read : Profits of ₹ 5,48,002 on sale of shares and securities escaped assessment altogether. At the time of the original assessment the then Income-tax Officer merely accepted the companys version that the sales of shares were casual transactions and were in the nature of mere change of investments. Now the result of the companys trading from year to year show that the company has really been systematically carrying out a trade in the sale of investments. As such the company had failed to disclose the true intention behind the sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say, for example - I have produced the account books and the documents. You, the assessing officer, examine them, and find out the facts necessary for your purpose. My duty is done with disclosing these account books and the documents. His omission to bring to the assessing authoritys attention those particular items in the account books, or the particular portions of the documents, which are relevant, will amount to omission to disclose fully and truly all material facts necessary for his assessment. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclose other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessees duty to disclose all of them - including particular entries 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. Dos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied as to whether these were trading transactions or not. It was also held that no duty lay on the company to admit that these transactions, were by way of trade, and the fact that on behalf of the company a representation had been made that the company was not a dealer in shares and securities did not amount to an omission to disclose fully and truly any material fact. It was consequently held that the Income-tax Officer who issued the notices had not before him any non-disclosure of a material fact and so he could have no material before him for believing that there had been any material non-disclosure by reason of which an under-assessment had taken place. Incidentally the point was also raised that the question whether the Income-tax Officer had reason to believe that an under-assessment had occurred by reason of non-disclosure of material facts should not be investigated by the courts in an application under article 226, but this contention was rejected and, since the company had challenged the jurisdiction of the Income-tax Officer to proceed under section 34 at an early stage, it was held to be quite a proper case for relief under article 226. As far as the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt works out to be more than one lakh of rupees in the aggregate, the Central Board of Revenue is requested to accord the necessary sanction for starting proceedings under section 34(1)(a) for the assessment years 1944-45 to 1946-47. The reasons given in relation to the three later years read : Sales of cloth and yarn and waste effected in Part A and C States amount to rupees ten lakhs. Particulars have not so far been furnished by the mill. Profits are deemed to have accrued or arisen to the assessee as a result of purchases or sales effected in Part A and C States. As the element of profit (sic) within the two operations income estimated at rupees one lakh requires assessment in the hands of the assessee as a Part A State income. It does not seem to me that either of these statements of reasons contains any indication that the Income-tax Officer had reason to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, profits or gains chargeable to income-tax had escaped assessment. There is no such suggestion at all in the first statement relating to the period 1944-47, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eave the decision thereon to the Income-tax Appellate Tribunal from which in due course a reference could come to this court under section 66 of the Act. The state of affairs, however, only exists in relation to that particular assessment year, and I should still have to deal with the points raised in relation to the other years covered by these petitions, and in the circumstance there appears to be no point at all in refraining from giving my decision in all the cases now before me. Another point raised by Mr. Hardy related to the three earliest assessments for the period from 1944-47. It was pointed out that under section 34(1)(a), although so far the discussion had centred on the alleged failure of the assessee to disclose fully and truly all material facts, reassessment can be ordered in the case of an under-assessment on the ground of omission or failure on the part of an assessee to make a return of his income under section 22. It was stated that when the company was originally assessed for these years no returns had been filed by the company. This fact is not apparent from any of the documents filed in this court, but in the absence of any contradiction I may presume it t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
