TMI Blog1986 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... and it filed its return under protest. During these reassessment proceedings, the Income-tax Officer, vide his order dated March 22, 1971 (annexure P-4), came to the conclusion that the word " public " as occurring in section 2(18) of the Act was confined to the Indian public and not to the entire mankind and thus even if it were to be accepted that O.C.M. Ltd., London, was a widely held company in which the public were substantially interested, that would not entitle the petitioner to be given special treatment or to be assessed at the reduced rate of tax. This order of the Income-tax Officer was primarily based on another order of assessment pertaining to the petitioner for the assessment year 1966-67. The petitioner successfully impugned these orders of the Income-tax Officer before the Appellate Assistant Commissioner, who, disagreeing with the above-noted reasoning of the Income-tax Officer, cancelled the said assessment orders. Still later, the petitioner was served with the present impugned notice, annexure P-1. It has been issued on the ground that the authorities under the Act have reasons to believe that the income of the petitioner for the assessment year 1967-68 had es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fixed for hearing on November 25, 1979. " While disputing the fact that the above said correspondence could lead to an adverse inference against the O.C.M., London, that it was not a widely held company or that the petitioner had suppressed any information revealing the nature of the shareholdings or that the petitioner had wrongly enjoyed any benefit of lower rate of tax, it impugns the notice, annexure P-1, on the following grounds: (i) that the impugned notice has been issued after more than four years from the end of the assessment year 1967-68 ; (ii) that such a notice could be issued only if it fulfilled the precondition that the Income-tax Officer had reason to believe that by reason of omission or failure on the part of the assessee : (a) either to make a return under section 139 for any assessment year, or (b) to disclose fully and truly all material facts necessary for the assessment, income chargeable to tax has escaped assessment. According to the petitioner, the facts in the instant case do not justify any such It reason to believe " with the Income-tax Officer ; (iii) that in any case, the reasons disclosed to the petitioner for the contemplated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... don) Ltd. are bearer shares poses a great difficulty in regard to evidence which will establish that that company is itself a company in which the public are substantially interested within the meaning of section 2(18) of the Income-tax Act. The Income-tax Officer may well call for such evidence and if this evidence cannot be produced, it will make a complete end of your case for taxation at the lower rate of tax applicable to a company in which the public are substantially interested. We are giving this matter our earnest consideration and we shall write to you separately thereon as we do not want to delay our present letter. We note that you have given the Income-tax Officer only an extract of a part of Messrs. Gardiner, Hunter Co.'s certificate. If you consider any documents, paper or letter to be privileged or confidential as against the Income-tax Officer, we strongly advise you not to give him any extract therefrom because he will then be entitled to call for the entire text and to enforce its production by recourse to section 131. " A true copy of this letter is annexure R-1 to the written statement. Another letter (annexure R-2) relied upon by these authorities in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had wrongly been accepted as a public company. After obtaining the approval of respondent No. 3, which was granted by him in the light of the exhaustive note put up by the Income-tax Officer for the purpose, dealing therein with the whole background of the case and his tentative conclusion that the assessee had failed to fully and truly disclose all the facts necessary for the assessment of its income, the present notice was issued. It is also the case of these authorities that respondent No. 3 was fully aware of the entire developments as he was in the picture throughout since the year 1974 when the Director of Inspection (Investigation) had made his first report dated June 11, 1974, dealing with the whole matter. Having heard learned counsel for the parties at length, I feel that the submissions mentioned at (i) and (iv) above deserve to be summarily dismissed in the light of the detailed narration of the facts recorded above. It is patent in the light of the phraseology of section 147 of the Act that the power to take proceedings under this section is not confined to cases where the assessee had concealed his income. It also extends to cases where though there was no co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion and the petitioner cannot be accused of having failed to disclose fully and truly all material facts necessary for the assessment of its income. In support of this stand, it is further contended that even the Appellate Assistant Commissioner, vide his order dated March 6, 1972 (annexure P-5), against the orders dated March 22, 1971, to which reference has been made in the earlier part of the judgment, had conclusively held that O.C.M. (London) Ltd., was a company in which the public were substantially interested within the meaning of section 2(18) of the Act. According to the petitioner, the Income-tax Officer or the authorities under the Act cannot now ignore this conclusion of the Appellate Assistant Commissioner, the same having assumed finality. Taking up the last mentioned contention first, it may be stated that what confers jurisdiction on the Income-tax Officer to issue a notice like the impugned one, is that he has reason to believe in consequence of certain information in his possession that income chargeable to tax has escaped assessment for any particular assessment year and the fact at what level the assessment had earlier been finalised-may be at his level or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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